Costs and Benefits of Pilot Testing for Product Development

This study explores costs and benefits of pilot testing products. Although pilot testing is a significant component of new product development, it is often ignored by MFIs, because they believe that pilot testing costs far outweigh its gains. Financial costs associated with pilot testing include the cost of meeting to agree on protocol, monitoring and tracking performance, evaluation of the pilot and deciding whether to roll out or not. Non-financial costs include opportunity costs, psychological costs and reputation risk. MFIs cited the following benefits of pilot testing:

• Useful for assessing real product demand;
• Provides better understanding of internal capacity;
• Leads to fewer and less expensive mistakes;
• Promotes organizational buy-in;
• Makes product roll-out faster, smoother and cheaper;
• Ensures that products are attractive to clients.

The study states that in general, pilot testing should be done if its outcome will influence future course action for the tested product. Finally, pilot testing costs could be kept low by:

• Reducing the test's scale and limiting it to few locations;
• Narrowing the focus by having clear targets.