Test Marketing

 

Test Marketing

 

What is Test Marketing? Definition

Test Marketing is a controlled experiment conducted by companies in a carefully selected market to test the viability of their new product and marketing strategy. It provides you an opportunity to learn, adapt and refine your product.

The objective of test marketing is to find the limitations and strengths of the product based on customers’ reactions. It also helps us to structure the marketing strategy of that product.

A test marketing campaign aims to predict the revenue model (sales, profit, pricing). It shows you the efficiency of the product and the promotional message.

What is the importance of Test Marketing?

Launching a product can be tricky, the level of acceptance of the product, customer satisfaction, sales, demand, marketing strategy everything needs to be taken care of. Test marketing helps you to get authentic results around every aspect listed above before spending all your resources on building the finished product and hoping it works.

Now that you’re aware of what test marketing is and what you can expect while conducting a test marketing campaign. Let us talk more about test marketing and its types.

Types of Test Marketing

 

 

There are two types of Test Marketing:

1. Consumer goods Market testing
2. Industrial goods Market testing

The Consumer goods market testing explains all the goods that are used by consumers directly, this test is conducted to know the consumer behavior towards the product. The companies aim customers to go through this entire flow:

Trial —> Repeat —>Adoption —-> Purchase

To attain all these stages following types of tests are conducted:

1. Sales-wave Research

This test is conducted to determine the potential of the product to be consumed/accepted every time it is offered to the customer. The samples are often distributed for free to analyze the willingness of consumers to accept the product. One major example is a free trial of new lipsticks, perfumes offered to the existing customers, and feedback.

2. Simulated Market test

This test is conducted to ascertain the preference of the customer and their product selection. A group of people are invited to the stores and are given some discount offers to motivate them to shop in the store. The New Product is placed with the old ones or the competitors and customers are observed closely, to know if the new product was picked up over other alternatives.

The products are also distributed for free to acquire more customers for the test and they are inquired about the product later on. The example is in departmental stores where new products are placed and consumers’ behavior is tracked.

3. Controlled Market test

In this test new products are introduced to the chain stores and the presentation of the product is controlled by the brand- their presentation, sales, pitch, introduction, etc. It is not distributed for free to make people try the product for the price they will get in the future. In cafes, you are pitched by the waiter for their new recipes and they even ask you to share the feedback multiple times.

4. Test Markets

Every brand has its market, they know the demographics and geographics of their customers. A test market is a set of particularly selected areas or segments of the audience used for a launch (product launch on a small scale), this small test market is representative of the entire market size of the company.

For example, many tech companies launch their new features in particularly selected areas on the basis of sales, customer loyalty, etc.

Industrial Goods

All the goods that are produced for further use to make the final good are considered industrial goods. They are divided into two major categories:

1. Alpha Testing

This is a cost-effective way to gather initial feedback about the product. The companies distribute their product increments inside the organization itself and ask for feedback from the users. 

Most of the telecommunication giants use it, such as Jio distributes most of the products to the employees to use it as they would ahave a better take on the product not as a consumer but as a business owner who will purchase the product.

2. Beta testing

The testing is done outside the firm with real customers, these tests are conducted often in events, shows, exhibitions where a set of the particular audience are gathered. These methods help you based on, customer’s gain immediate feedback from potential clients and see their reactions to the product.

Advantages:

• It removes the risk of large scale commercialization of a new product without having any iteration according to the customer feedback
• You can have a way better idea of your marketing strategy since you have been tracking customer’s reactions testing different marketing approaches.
• The authenticity of data is real, as you have gained feedback from real customers after they have used the product
• It helps you to retarget the existing customers with an updated new product

Disadvantages:

• Distributing products for free sometimes create problem in evaluating the revenue model.
• The test market selected might not be the right representative of your entire market size.
• There is a risk of competition tracking our new move and the product.

How is Test Marketing done?

Till now we know every theoretical knowledge about the topic but your study is never completed without practicals. Let us jump on to how to do test marketing? It has 5 major practical steps:

1. Select the Right Market

It is a very important step because if we select an audience that is biased due to any reason that will completely change the data that we will collect at the end. Always select a market that is representative of your entire market size. Generally, the cities/online platforms/demographics that give you the most business are the ones that fit best in this category.

2. Duration of Test

We need to select a set duration for the campaign. Based on the repurchasing period and state of competition select a time duration. The time should be at least 1 or 2 months more than your repurchasing period.

3. Cost of Test

The cost of marketing is directly proportional to the duration of the test campaign. Find out the cost per acquisition and the duration of the test to find the entire cost of Test Marketing.

4. Collecting Data⋆

This is the most crucial step in the test marketing process because all of this is done to collect authentic, credible data therefore we need to have a structured system in place to collect our data. Some of the data points you need to measure are customer persona, channels of distribution, consumer behavior, demand size, purchasing power, feedback from customers, etc.

Analyzing the Data

Next is the Product launch but before that let me put some emphasis on analyzing the data because it is not what data you have it is what you do with that data that decides your next big move.