Test Marketing

 

Regardless of the outlet chosen, test marketing a product in potential sales areas is essential. This is especially true if the product is new or different from what is already on the market. Producers must work with retail managers to  ecide how much advertising and promotion will be required to convince consumers to buy their products. A good way to begin test marketing  is to take samples to store managers and convince them the products will sell and make them money. Samples should be ready for consumers to test. Selling them at reduced prices or giving them away is a good way to entice consumers to try new products. It is important to seek immediate feedback about what consumers think of the products and any suggestions they may have for improvement. When doing test marketing, it is important to determine how the products are competing with other brands. Count the number of competing brands in the stores. Buy some and compare them. Do not forget that location within any store is very important. Certain

locations have “higher traffic” than others. This means more consumers will see products in those areas and will be more likely to buy. The highest exposure for new products in stores is at the ends of the aisles or at the checkout counter. There is a preferred height on store shelves where people can see your product without looking up or down.

 

Advertising

Advertising is controlled communication about a product. Through symbols and language, it tells what a product or service can do for the consumer. Advertising, when properly understood, is a powerful tool for management. It can be most effective with products that can be differentiated from similar products based on consumer-accepted quality differences. Consumer information is gathered by giving small samples to consumers in stores or retail businesses. This information can give a direct consumer response to a new product for that location.

Regardless of the quality of a product’s advertising, it is important to remember a product has to compete on its own. Brand preference cannot be established if the product fails to meet consumer expectations. A well developed overall advertising program can tell consumers what a product or service can do for them compared to similar products on the market. If consumers are convinced, they will buy the products. “Business is built best which

attracts the kind of customer and only the kind of customer it can best serve. Every business is qualified by its management’s beliefs to serve a particular segment of the total market, and by reflecting its essential character, its advertising can most effectively reach this segment and keep it a long time.”

 

Pricing Competitively

One question to ask is whether the product is priced similarly to other competing brands but above costs of production. For more information on this, see K-State Research and Extension bulletin Economic Analysis

of a New Business—Doing it Right, Once consumers have been identified, a retail outlet has been located and test marketing completed, producers need to determine at what price a product will sell and still be profitable. Price is the only means for generating income and profit for the producer. There is no one method of setting prices. It is imperative to keep in mind that costs of production do not determine the price of the product. Consumers are only interested in the lowest price they can get, and they do not care what it costs to produce the product.

If the consumer’s desire for the product is great, set the price high enough to ration the available supply for sale. As production increases, prices may have to be lowered to sell additional products. However, do not lower prices below the cost of production. Always know your cost of production, and never price your product below that if the goal is to remain in business. If the consumer’s desire for the product is not great, and if the product is in a competitive market, sales will depend on the success of convincing consumers to buy products for prices above total costs.

The marketing manager for a product must find a price that satisfies both consumers and producers. Consumers are always willing to pay lower prices for any product. Producers are always willing to offer products for sale at higher prices. A market price for long-term production is established when the price of any product is equal to or above the average total cost of production and at a price consumers will pay.

Frequency of Consumer Purchases

Frequency of consumer purchases is very important. Repeat purchases are the keys to a successful outlet selection.

Not all products are purchased at the same frequency, and marketing managers need to understand how often consumers will be purchasing their products when determining production rate, transportation, storage, etc. The most common purchasing patterns are as follow.

Daily

Some products – such as milk, bread, and doughnuts – might be purchased daily, meaning the producer

will have to deliver the product frequently. These products are usually quite perishable

Weekly

These are generally products with a 3- to 6-week shelf life. For these products, careful control of production inventory will be necessary. A producer must have the ability and capacity to store products between deliveries.

Monthly

These require a larger consumer territory if the consumer only buys one item per month compared to one per week. Delivery will be less often, and storage will have to be increased, either on the shelf or in the back room.

Seasonal

These are products that generally are associated with a specific growing season or holiday. These types of

products usually are sold only during one time period each year.

Packaging

The purpose of a package is to protect the product from spoiling and keep it clean until it is opened by the consumer. Many producers overlook the importance of product packaging, but this is the first thing consumers see.

When the package is appealing, consumers are more likely to buy it. As long as the anticipated quality is there, consumers will be satisfied. They will buy the product in the package they like and will not buy it in one they do not like – even though the product is the same

The consumer decides the size of package most suited to each product. The size and type of package will depend on knowing what the consumer will accept for each type of product. Consumers are more likely to buy smaller food packages of items that are used occasionally. They will buy large packages of items used frequently and in a relatively short time, if the product remains safe to use during this period. Most plant and animal products must

be packaged appropriately to be preserved: pickled, canned, smoked, cooked, dried, or frozen. The type of processing will determine the length of time the product can be safely used from the time processed.

Storage and

Transportation of

Food Products

Products must be stored from the time they are processed until they are transported and sold to consumers. Various products require different types of storage and transportation facilities. Storage and transportation are critical to the marketing process. Obviously, different products require different types of storage and transportation facilities. For example, frozen products should not be allowed to thaw during storage and transportation. Keeping the product frozen requires additional expense. Part of the storage and transportation cost includes spoilage and breakage.

Fresh products have to move to consumers quickly. Dried products can remain in storage and be moved through marketing channels at a slower pace without lowering quality. They can be shipped further to reach different consumer areas. Regardless of the type of storage and transportation required for a product, it is imperative to maintain the same quality from the time the product leaves the processor until it reaches the consumer.

Plans must be made to store ingredients for processing and finished products until shipment. This is especially critical if you can buy large quantities of ingredients at lower prices.

Contracts

Contracts are legal obligations made between two or more business people for the sale and purchase of products.

Major points in a contract spell out price of the product, quality requirements, amount to be delivered, specific location and time of delivery. This ensures that buyers know when to expect the product and sellers know when and how much of the product has to be delivered at a specific time and place. Care should be taken when finalizing a sales contract that production can provide the product as specified in the contract. The risks of change in price and volume are eliminated until the next contract is negotiated. Whether completing a contract with buyers of products or sellers of inputs needed for processing, sound legal advice should be obtained to make these transactions simple to understand and clarify legal obligations of all parties.

Consumer Feedback

Consumer feedback involves having people try the product and then asking them their opinions of it. A first step

would be to ask friends and neighbors for help, and to establish options for testing the new product. It is vitally important to continue to seek consumer feedback as the product continues to sell. This process should be included in a marketing plan. Ask consumers the following questions.

• How do they view the product and company?

• Do they like the product?

• Will they buy it again?

• How soon?

Information should be gathered continuously in each location about sales volume and changes in competitors, life cycles of the product, new products, service to vendors, and competitors. Remember that general information will provide general results, and detailed information will allow for more detailed analysis and more accurate results. Each manager has to decide what type of information is needed and how much to collect to maximize usefulness. The more producers know about customers, the better chance they have of satisfying them.

Summary

Creating a marketing plan takes a lot of hard work. The benefits of doing this work before you start to market your product, however, are immeasurable. This groundwork will make it much easier to borrow the necessary capital to start a business. Because lenders are interested in accurate information about a potential investment, a well-done marketing plan demonstrates the management level for a company. If there is no plan, lenders will not look favorably on lending capital to someone who has no alternatives in mind for the future if changes occur.

A well-developed marketing plan demonstrating knowledge of production, how much capital will be required, cost of production, specific market location and an understanding of consumer purchasing activities will be beneficial in creating a profitable operation. The most difficult part of developing a marketing plan is estimating total marketing costs. Each marketing organization uses labor, management, land and capital resources in varying degrees of concentration. Each expenditure item should be included in a cost analysis. If any expenditure is not included in an analysis, it will be paid out of a private account, which could mislead the decision-maker concerning total costs.

Various marketing functions will have different costs, depending on how much of each is needed to move products from the place of production to consumers. Each entrepreneur has to evaluate information using estimates of cost and the pricing system to decide to continue operation. When a firm is in operation for a longer period of time, these estimates can be based on actual expenditures, which are more accurate. Total marketing costs per unit have to be paid by the consumer. The marketing system also has to be profitable for every marketing function and every stage along the system. Understanding the cost of each marketing function is necessary for every phase and has to be paid if all of the functions are to be continued. Consumers make final decisions about any product based on quality, price, disposable income, quantity and price of substitute products. By doing the research necessary to create a thorough marketing plan, a producer can more clearly understand the needs and demands of the consumer, can identify the best potential markets, and can find the most effective and efficient means to get products to those markets. It is important to remember that a marketing plan is only as good as the information it contains. If correct data are used, the marketing plan will be accurate. It is important to have a contingency fund available. This will provide a reserve in case any of the other estimates are incorrect. It will be impossible to accurately figure every item in the marketing plan, so this contingency fund provides extra cash in the start-up phase of your business. Of course, any money not needed in the contingency fund can be used for other purposes once the company is up and running. By following these guidelines, producers will be well on their way to success!