Product Launch Strategies: Test Marketing, Rollouts, and Management

Understanding Test Marketing and Rollouts

What is Test Marketing?

Test marketing involves introducing a new product or service into a limited, representative market to gauge its potential success before a full-scale launch. Key characteristics include:

• Several test market cities are selected.
• The product is sold through regular channels in those cities.
• Advertising is conducted at representative levels in local media.

Advantages of Test Marketing:

• Risk Reduction: Minimizes financial and strategic risks.
• Monetary Risk: Reduces potential losses from a failed national launch.
• Channel Relationships: Allows for testing and strengthening distribution partnerships.
• Sales Force Morale: Builds confidence and experience for the sales team.
• Strategic Improvement: Provides data to refine the overall marketing strategy.
• Marketing Mix Optimization: Helps fine-tune product, price, place, and promotion elements.
• Production Facilities: Offers insights into production scalability and efficiency.

Disadvantages of Test Marketing:

• High Cost: Can exceed $1 million.
• Time-Consuming: Typically takes 9-12 months or more.
• Competitive Disadvantage: May delay market entry, allowing competitors to react.
• Competitor Monitoring: Rivals can observe and learn from your test market.
• Competitor Action: A competitor might launch a similar product nationally before you.
• Market Disruption: Competitors can actively interfere with your test market results.

What is a Rollout? How Does it Differ from Test Marketing?

A rollout, also known as limited marketing, involves launching a product sequentially into different geographic areas, expanding based on initial success. Key aspects include:

• A limited area of the country (e.g., one or several cities or states, or a specific percentage of the market) is selected.
• Sales are monitored in this initial area. If successful, the product is then launched in the next area, and so on.
• Starting areas are not necessarily representative of the entire national market, unlike test markets.

Effective Product Launch Management

Steps in the Launch Management System:

1. Spot potential problems.
2. Select which problems to control, considering their expected impact or damage.
3. Develop contingency plans for problem management.
4. Design the tracking system:
   • Select variables to measure.
   • Devise a measuring system.
   • Select trigger points for action.

Methods to Spot Potential Problems:

• Review the "Problems" section from the situation analysis.
• Role-play competitor reactions after they learn about the new product.
• Examine all data in the new product's "file" (e.g., concept tests, use tests).
• Consider the Hierarchy of Effects needed for a satisfied customer: Awareness, Knowledge, Liking, Preference, Conviction, Purchase. Also, consider A-T-A-R (Awareness, Trial, Availability, Repeat).

Criteria for Problem Control:

When deciding which problems to control, consider two main criteria:

• Potential damage or impact.
• Likelihood of occurrence.

Developing Contingency Plans:

After identifying which problems to control, the next step is to develop contingency plans for their management. Base your contingency plan on the type of problem:

1. Company Failure: If the problem stems from an internal company issue (e.g., inadequate distribution), plan special promotions, offer better margins for distributors, etc.
2. Consumer Failure: If the problem is related to consumer behavior (e.g., low awareness or trial), plan increased advertising, more sales calls, etc.

Purpose of a Tracking System:

The purpose of a tracking system is to determine if the product launch progress is following the planned trajectory.

Essentials for Designing a Tracking System:

Three essential elements are involved in designing an effective tracking system:

1. You must be able to lay out the planned trajectory.
2. There must be an inflow of actual data indicating progress against the plan.
3. You must be able to forecast the outcome based on the data.