According to time, the average attention span of a customer is 8 seconds. So creating something unique and catchy is difficult. Jeff Bezos says that focusing on customers is the key to a successful business because, in the end, they purchase your product. Test Marketing helps you monitor the marketing strategy and adjust it to ensure you get the highest level of customer satisfaction.
In this article you will learn about Test Marketing – definition, objective, importance, test marketing types, advantages, and examples.
What is Test Marketing?
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.
Test marketing aims to find the product’s limitations and strengths 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.
Importance of Test Marketing?
Launching a product can be tricky. The level of product acceptance, customer satisfaction, sales, demand, marketing strategy, and everything needs to be taken care of. Test marketing helps you to get authentic results around every aspect listed above before spending all your marketing resources on building the finished product and hoping it works.
Now that you know 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 Three types of Test Marketing:
- Standard Test Markets:
- Controlled Test Markets:
- Simulated Test Markets:
1. Standard Test Markets:
Standard Test Markets are like a typical national marketing campaign except that they are conducted in a limited number of cities that represent the national market fairly. The marketer does everything in these test cities that it would do in the national market.
The sales force sells the product to distributors and retailers. Marketing mix strategies are devised and implemented. To measure the performance of the test market, the marketer tracks sales, conducts surveys of consumers and distributors, and tracks in-store activities. Results are then compared to the national campaign.
2. Controlled Test Markets:
Controlled test markets provide marketers with an artificial testing venue that is cheaper and faster than traditional test markets. Two companies offer regulated test markets: ACNielsen’s Scantrack and Information Resources Inc.’s BehaviorScan. Controlled test markets are used most often with new product introductions. With a controlled test market, the research supplier offers the marketer a panel of stores. Suppliers monitor the checkout scanner data to measure initial and repeat purchases and the sales of competitive products.
3. Simulated Test Markets
Simulated Test Markets: Like controlled test markets, simulated test markets were designed to overcome the drawbacks of traditional test markets. Fake test markets are not conducted in real-world needs; they are laboratory tests. A simulated test market is a staged or artificial marketplace where researchers expose subjects to advertising and other marketing mix variables to gauge the subjects’ purchase intent. Fake test markets are significantly faster and cheaper than traditional test markets because the marketer does not have to execute the entire marketing plan.
Types of tests are conducted in Test Marketing
This test is conducted to determine the consumption/acceptability of the product every time it is offered to the customer. Samples are often distributed free to analyze consumers’ willingness to accept the outcome. A prime example is the free trial of new lipsticks, perfumes offered to existing customers, and feedback.
Simulated Market test
This test is conducted to ascertain the customer’s preference and product selection. A group of people is invited to the stores and given discount offers to motivate them to shop in the store. The new product is placed alongside the old competitors, and customers are closely watched to know if the new product was picked up over other options.
The products are also distributed for free to acquire more customers for the test and inquire about the product later. For example, departmental stores where new products are placed and consumer behavior is tracked.
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 advocate – their production, 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.
Every brand has its market, and they know the demographics and geographics of its customers. A test market is a set of mainly selected areas or segments of the audience used for a launch (product launch on a small scale). This small test market represents the total market size of the company.
For example, many tech companies launch their new features in mainly selected areas based on sales, customer loyalty, etc.
All goods produced for further use to make the final good are considered industrial goods. They are divided into two major categories:
This is a cost-effective way to gather initial feedback about the product. Companies distribute their product growth within the organization and solicit user feedback.
Most telecommunication giants use it, such as Jio distributing most of the products to the employees to use as they would have a better take on the product not as a consumer but as business owners who will purchase the product.
The testing is done outside the firm with real customers, and these tests are often conducted in events, shows, and exhibitions where a set of the particular audience are gathered. These methods help you, based on customers, gain immediate feedback from potential clients and see their reactions to 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 five significant practical steps:
1. Select the Right Market
It is a crucial step because selecting a biased audience will completely change the data we will collect at the end. Always choose 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. Select a time duration based on the repurchasing period and state of competition. The time should be at least 1 or 2 months more than your repurchasing period.
3. Cost of Test
The marketing cost is directly proportional to the duration of the test campaign. Find out the cost per acquisition and the test duration to find the total price 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 accurate, credible data; therefore, we need to have a structured system to manage our data. Some data points you need to measure are customer persona, distribution channels, consumer behavior, demand size, purchasing power, customer feedback, etc.
5. Honorable Mention
Next is the Product launch but before that, let me emphasize analyzing the data because it is not what information you have. What you do with that data decides your next big move.
To get insights into your business, you must turn good data into great visualizations. I highly recommend that you read this article if you want to create better visualizations.
To create fantastic visualization without using complex commands to access the data insights, I recommend you guys check out our tool Combi. It uses naturally asked questions to gather presentable data insights in a couple of clicks.
6. Launch Product
This is the time you take significant action. If the test marketing campaign fails, you will need to find the reasons for the failure, iterate your product, and plan accordingly. If your test marketing were successful, that would give you the confidence that you are on the right track and will make those marketing strategies more viable.
Examples of Test Marketing
However, you might have noticed many brands providing free samples for their new recipes of food, cosmetics, perfumes, hair products, etc. That is nothing but an example of test marketing as they are collecting customer data.
Wendy’s- Black Label Burger
Wendy’s international was testing their new product called Black Label Burger. Before they launched it mainstream, they adopted the methods of test marketing. The test market selected was Columbia, Ohio. The state represents its entire market as there are all age groups, and due to the Ohio State University, there are also international students.
Coca-Cola Test Campaign
The soft drinks giant has tied up with Grofers, a mobile app specializing in grocery delivery, to enable consumers to order Sprite Zero, a low-calorie version of its popular Sprite carbonated drink, and have it delivered to their door. If you want to read more about the test, check out this article.
Hyderabad, India- as a Test Market
Lipton Ice tea, Kinley, coca-cola, and Nizoral anti-dandruff shampoo were all tested in this city. One of the significant reasons Hyderabad is suitable for test marketing is because IT hub people from all across the region come here. Therefore, it represents a national market. Read in detail here.
Advantages & Disadvantages of Test Marketing
- It removes the risk of large-scale commercialization of a new product without having any iteration, according to customer feedback.
- You can better understand your marketing strategy since you have tracked customers’ reactions and tested different marketing approaches.
- The authenticity of data is genuine, as you have gained feedback from real customers after using the product.
- It helps you to retarget the existing customers with an updated new product.
- Distributing products for free sometimes creates problems in evaluating the revenue model.
- The selected test market might not represent your total market size properly.
- There is a risk of competition tracking our new move and the product.
Lastly, I hope it was a fun ride for you to understand what test marketing is. Let us recap what we’ve learned. We started with the definition and the objective of test marketing- then we discussed the importance, types, and the entire process of test marketing in practical steps. At last, we ended it with advantages/disadvantages and examples that helped us to understand the concept with real-life examples.
If you find value in the blog, indulge the methods in your business, and you will see the results.
If you have mastered the steps above, here are two things you can do to take it to the next level.
- Combine test marketing with social credibility, collect testimonials of the people and market them.
- Use social media, and you can even promote the Test marketing campaign online.