Test before sealing success

The raising income of average Indian has resulted in a high consumption level in the market, which has further led to increase the product launch capacity of the FMCG players in the market. According to a McKinsey estimate, average household income in India is set to grow from Rs 113,744 in 2005 to Rs 318,896 by 2025. The raising competition among brands to extend their product range to almost all categories has flooded the market with frequent product launches. But a new product launch not only demands innovation in product composition and packaging, but also market testing before its full fledged launch nationwide. The pre-testing of product and its packaging help manufacturer sense the acceptability of the product in the market, thereby evading a major loss.

 

The concept: test marketing

Accessing the new opportunities into the market is the first stage in any product development. Second important parameter in test marketing is the selection of potential market for test marketing. Dolly Kumar, Director, Gaia, says, “In test marketing, the test market should be as representative of the entire market as possible. The area of the test market should be small enough to control and contain so that it does not negatively impact the brand in the long term in case of a failed test-market.”

 

Parameters taken into consideration while launching a new product

• Existence of unmet or under-fulfilled consumer needs
• It is a growing category
• It is not too crowded with several players
• Have a differentiated product proposition
• The product can be distributed widely

Pricing strategy

The planning and processing of the products take about six months to a year before they arrive on the shelves of super markets. Price positioning of a new product is a critical decision. Pricing too high as per market standard can lead to loss of the market opportunity or pricing too low can lead to loss in business. Pricing of a new product should be decided keeping in mind the cost of the product, available substitute in the market and buying power of the consumers. “A PESTILE analysis that includes factors such as, Political, Economic, Socio-cultural, Technological, Legal and Environmental, can help in determining the price sensitivity of new product,” says the spokesperson from Nielsen India.

 

The price of a new product can vary according to its launch cost – cost of production, promotion and distribution. On an average, the typical launch cost of a new product can be as high as 50-100 per cent of revenue in the first year. For established brands, advertisement expenditure varies from 5-12 per cent, depending on the categories. The launch cost also covers investment made into research trials, promotions and marketing budgets. A great difference in launch cost depends on whether mass media advertising is being used at the time of launch or not.

 

Whether the price of a product should be high or low depends upon the target consumers of the product. If a product is made for the niche segment of the population, it will be priced higher than the threshold of the mass market consumers. In this pricing strategy, which is called skimming pricing strategy, once the target group has fulfilled their needs to purchase, the brand will then lower its price to the next consumer segment, but again, not necessarily for the entire mass market. The new technology, electronics, such as HDTV, iPhone, etc comes into this kind of pricing.

 

Speaking over the same, Kumar says, “If the product category represents a high health or an image risk, the consumer will be willing to pay a premium price, especially if the brand is highly differentiated. If not, it is a good idea to benchmark the price against successful competitors or markets or segment leaders.” Though the final validation of the pricing can be only done after full market research.

Second is penetration, pricing strategy which is used by most of the FMCG players to gain faster entry into the marketplace and capture higher market share. Here the cost of new product is priced low to get more customers, such as low priced pouches of shampoos introduced by most of the brands to gain the market share of the rural market.

 

Stages of test Marketing

The planning of test marketing of a product lasts between 9-18 months, from conception to launch. In this phase, market testing of product is done through beta testing. Beta testing is done when all the 4 Ps – product, place, price, promotions – have been fixed after the initial test results. In this stage, the testing of the product and its packaging is done in typical usage situations, and adjustment is made in the product feature or packaging where it is necessary. Then, an initial run of the product is done and the product is introduced in a test market area to determine customer acceptance. The consumer acceptance of the product is determined by looking at the sales results, especially by tracking repeat purchase. Other factors to be kept in mind include estimated sales, estimated costs and estimated margins. The catchment profiling of an area is basically done through a retail survey. “To assess the shopping behaviour of the consumers, we estimate a number of customers in the area and their purchase behaviour patterns like frequency of buying, average bill size, etc.,” says Kumar.

 

Factors influencing new product pricing

• Production cost
• Market value of the product
• Product positioning and consumer acceptance of competitor brand

Selection of a retail partner       

While selecting a retail partner for the distribution of the product, the focus is on product placement. It is ensured that the product is prominently kept and displayed. Also, the placement is supported by maximum point-of-sale promotional materials and other collaterals. Usually a new product at a retail store is launched as a free trial pack or as a freebee to induce initial trials among the consumers. Sometimes, the product comes with an introductory discount offer or in small packaging, usually priced low. The product display on the shelf is also important to provide the maximum visibility to the product. “The promotion of such a product is based on maximum branding and imaging, like sending out emailers, SMSs, standees, etc,” informs Anuj Jodhani, Director, Maido Enterprises Pvt Ltd.

 

Parameters considered while selecting a retail partner

• Turnover of a retailer
• Location of a retailer
• Type of clientele
• Distributors’ recommendations

 

Consumer profiling: a winning edge for brands

Consumer profiling helps in collection of valuable information about consumer buying behaviour which will help brand in better targeting and marketing strategy. Consumer profiling is generally done by selecting a specific geographic area. Specific demographic features, such as age, gender, income, occupation, socio-economic class, etc is taken into consideration to access the buying pattern of consumers. Some of the psychographic factors, such as attitudes, lifestyle and believes of the consumers, should be collected on a continuous basis in order to make it relevant. In this era of high competition, customer profiling can prove to be the winning edge for brands. At the end, it is the consumer, who will decide the sustainability and future of any brand in the market.

 

The raising income of average Indian has resulted in a high consumption level in the market, which has further led to increase the product launch capacity of the FMCG players in the market. According to a McKinsey estimate, average household income in India is set to grow from Rs 113,744 in 2005 to Rs 318,896 by 2025. The raising competition among brands to extend their product range to almost all categories has flooded the market with frequent product launches. But a new product launch not only demands innovation in product composition and packaging, but also market testing before its full fledged launch nationwide. The pre-testing of product and its packaging help manufacturer sense the acceptability of the product in the market, thereby evading a major loss.

 

The concept: test marketing

Accessing the new opportunities into the market is the first stage in any product development. Second important parameter in test marketing is the selection of potential market for test marketing. Dolly Kumar, Director, Gaia, says, “In test marketing, the test market should be as representative of the entire market as possible. The area of the test market should be small enough to control and contain so that it does not negatively impact the brand in the long term in case of a failed test-market.”

 

Parameters taken into consideration while launching a new product

• Existence of unmet or under-fulfilled consumer needs
• It is a growing category
• It is not too crowded with several players
• Have a differentiated product proposition
• The product can be distributed widely

Pricing strategy

The planning and processing of the products take about six months to a year before they arrive on the shelves of super markets. Price positioning of a new product is a critical decision. Pricing too high as per market standard can lead to loss of the market opportunity or pricing too low can lead to loss in business. Pricing of a new product should be decided keeping in mind the cost of the product, available substitute in the market and buying power of the consumers. “A PESTILE analysis that includes factors such as, Political, Economic, Socio-cultural, Technological, Legal and Environmental, can help in determining the price sensitivity of new product,” says the spokesperson from Nielsen India.

 

The price of a new product can vary according to its launch cost – cost of production, promotion and distribution. On an average, the typical launch cost of a new product can be as high as 50-100 per cent of revenue in the first year. For established brands, advertisement expenditure varies from 5-12 per cent, depending on the categories. The launch cost also covers investment made into research trials, promotions and marketing budgets. A great difference in launch cost depends on whether mass media advertising is being used at the time of launch or not.

 

Whether the price of a product should be high or low depends upon the target consumers of the product. If a product is made for the niche segment of the population, it will be priced higher than the threshold of the mass market consumers.

 

In this pricing strategy, which is called skimming pricing strategy, once the target group has fulfilled their needs to purchase, the brand will then lower its price to the next consumer segment, but again, not necessarily for the entire mass market. The new technology, electronics, such as HDTV, iPhone, etc comes into this kind of pricing.

 

Speaking over the same, Kumar says, “If the product category represents a high health or an image risk, the consumer will be willing to pay a premium price, especially if the brand is highly differentiated. If not, it is a good idea to benchmark the price against successful competitors or markets or segment leaders.” Though the final validation of the pricing can be only done after full market research.

 

Second is penetration, pricing strategy which is used by most of the FMCG players to gain faster entry into the marketplace and capture higher market share. Here the cost of new product is priced low to get more customers, such as low priced pouches of shampoos introduced by most of the brands to gain the market share of the rural market.

 

Stages of test Marketing

The planning of test marketing of a product lasts between 9-18 months, from conception to launch. In this phase, market testing of product is done through beta testing. Beta testing is done when all the 4 Ps – product, place, price, promotions – have been fixed after the initial test results. In this stage, the testing of the product and its packaging is done in typical usage situations, and adjustment is made in the product feature or packaging where it is necessary. Then, an initial run of the product is done and the product is introduced in a test market area to determine customer acceptance. The consumer acceptance of the product is determined by looking at the sales results, especially by tracking repeat purchase. Other factors to be kept in mind include estimated sales, estimated costs and estimated margins. The catchment profiling of an area is basically done through a retail survey. “To assess the shopping behaviour of the consumers, we estimate a number of customers in the area and their purchase behaviour patterns like frequency of buying, average bill size, etc.,” says Kumar.

 

Factors influencing new product pricing

• Production cost
• Market value of the product
• Product positioning and consumer acceptance of competitor brand

Selection of a retail partner       

While selecting a retail partner for the distribution of the product, the focus is on product placement. It is ensured that the product is prominently kept and displayed. Also, the placement is supported by maximum point-of-sale promotional materials and other collaterals. Usually a new product at a retail store is launched as a free trial pack or as a freebee to induce initial trials among the consumers. Sometimes, the product comes with an introductory discount offer or in small packaging, usually priced low. The product display on the shelf is also important to provide the maximum visibility to the product. “The promotion of such a product is based on maximum branding and imaging, like sending out emailers, SMSs, standees, etc,” informs Anuj Jodhani, Director, Maido Enterprises Pvt Ltd.

 

Parameters considered while selecting a retail partner

• Turnover of a retailer
• Location of a retailer
• Type of clientele
• Distributors’ recommendations

 

Consumer profiling: a winning edge for brands

Consumer profiling helps in collection of valuable information about consumer buying behaviour which will help brand in better targeting and marketing strategy. Consumer profiling is generally done by selecting a specific geographic area. Specific demographic features, such as age, gender, income, occupation, socio-economic class, etc is taken into consideration to access the buying pattern of consumers. Some of the psychographic factors, such as attitudes, lifestyle and believes of the consumers, should be collected on a continuous basis in order to make it relevant. In this era of high competition, customer profiling can prove to be the winning edge for brands. At the end, it is the consumer, who will decide the sustainability and future of any brand in the market.