All new products inherently carry some level of risk. The strategy behind product testing is to experiment and refine the product until it surpasses the decision threshold. For instance, conducting an advertising test can help reduce uncertainty and highlight more effective messaging. By doing this, the aim is to minimize risk and maximize the expected benefits.
Product tests are essential in identifying flaws that could lead to widespread failure. This testing strategy carefully balances uncertainty and cost through the use of a sequential approach. One major goal of testing is to reduce risk; another is to pinpoint the product and marketing variables that maximize the company’s profit at a given level of risk.
In essence, test marketing provides an accurate projection of national sales while generating valuable experimental data on price, advertising, and promotion levels, all of which are crucial for enhancing profitability.