Test marketing is a marketing technique aimed at investigating consumer reactions to a product or marketing campaign, making it available on a limited scale before it becomes widely available. Consumers using a product or participating in a campaign may not know they are part of a test group.
Table of Contents:
- What is Test Marketing?
- What is the purpose of test marketing?
- Types of Test Marketing techniques
- Test Marketing of industrial products
- 10 Ways Companies Can Benefit From Test Marketing
- How to do test marketing
- The need for test marketing
- There are two reasons for the test marketing
- Disadvantages of test marketing
What is Test Marketing?
In software development, a common example of test marketing is the beta test. Beta testing, also known as user acceptance testing (UAT) or end-user testing, involves making the product available to a limited number of eligible users in an initial version. Beta testers are invited to provide feedback on products that can help them improve their products for full launch. If the testers are enthusiastic about the product, they also generate enthusiasm for the product and increase the chances of success.
Test marketing of retail products involves sales at stores, placement, and predicting the market reaction to the product, and driving ROI towards full launch. Test marketing is often initiated locally and the product is only available in a limited area. Nevertheless, it is substantial to ensure that the test marketing techniques are reliable and verifiable forecasters of the whole market, as products and services that are wanted and sold in one part may not in the other.
Test marketing is used for online marketing campaigns where promotion targets a specific audience and makes it relatively easy to collect data about the reaction to the campaign.
For example, marketers use A/B testing to send one ad to one user and other to another. Test marketing is a technique that organizations use to test the feasibility of newly launched products and new marketing campaigns in the market at a much larger scale. It is used throughout the business world to find out what consumers want and need in their daily lives. It's like an experiment in a field that covers a real store or a real shopping situation. This is done without knowing that the customer is participating in the evaluation exercise.
What is the purpose of test marketing?
Test marketing helps in identifying and assessing different utilities of a product, and various segments of target audiences, and promoting users or buyers. This helps organizations assess the nature of the general competitive situation, the latest trends in demand, and more. This test is conducted to assess consumer behavior related to:
- Test: When a potential customer has tried the product at least once
- Repeat: Whether the consumer buys it back after the trial period
- Assumption: Whether the customer is willing to accept the product and buy it again
- Frequency: How often a customer buys a product
Types of Test Marketing techniques
The following tests are run to determine these variables.
- Sales-Wave Research: This test provides consumers with products repeatedly for free. This is done to determine the customer's willingness to use the product each time it is offered
- Simulated Test Marketing: This is a strategy in which few consumers are invited to a store in which they can purchase anything. New products are placed alongside old or competing products, and consumer preferences are determined by product selection. If no new product is selected, a free sample will be provided to the customer, and a few weeks later, they will be called to ask about their product experience
- Managed Test Marketing: In this test, the company selects specific stores in different regions and encourages them to store new products in stores for a fee. The company manages shelf locations, displays, promotions, and prices
- Test Marketing: The company selects representative cities with full launches of new products, from advertising campaigns to final sales. If this is successful, the company will go nationwide
Test Marketing of industrial products
There are two types of market testing:
- Alpha test (in-house)
- Beta test (with external customers)
Alpha test: Alpha test is performed in-house by a test engineer or employee who reviews the marketing mix of a new product and fixes any problems that occur during its implementation.
Beta testing: Beta testing is conducted on customers who request the use of the product and provide feedback on its use. Another way to test business goods is to show them off at a trade fair and observe the customer's reaction to it. In addition, these products can be tested at retail stores and showroom retailers to get the customer's attention.
Amazon founder, Jeff Bezos said focusing on customers is the key to a successful business as they buy the company's products. Also, when a brand launches a new product or service, test marketing can generate positive and negative feedback to minimize the risk of the first launch failing.
10 Ways Companies Can Benefit From Test Marketing
Let's take a closer look at the benefits of test marketing.
1. It allows the product to sell itself:
A good product sells itself. A good product can serve as a marketing tool. Over time, customers depend on the product they use and choose to keep it. In this case, the company turned the free trial into a paid customer who loved the product and returned in search of more.
2. Competitive advantage over similar competing products:
In some industries, offering free product trials may not be considered common practice. Free and robust products help keep customers up to date. But it works the other way around. If consumers in the industry are expecting a free product trial for everyone else to be, it can't damage the company's reputation. Much of this depends on how the company can present its functionality.
3. People can invest time in a brand:
Money is valued more than time. However, from the perspective of marketing, the time that a business spends on testing products is quite valuable. When people spend their time in the company using their products, they naturally build relationships with the brand. Relationships create loyalty that further creates customers who come back for great products.
4. Important Product Feedback:
The overall idea of test marketing is to allow brands to see how their products react in a real consumer environment through product testing. Test marketing and simulation provide only a limited amount of data. Consumers are unpredictable and may use their products in ways that brands have never imagined. If each candidate uploads a photo, submits a report, or shares how the product is used, the brand can be incorporated into information resources to improve or improve the product over time.
5. Providing incentives:
Product test marketing provides an opportunity for brands to achieve better results when their customers are at stake. When a customer tries a product and thinks about buying it, they can be attracted by offering discounts and incentives. Referral discounts are another way to close deals and find new prospects who may be interested in what your brand offers.
6. Make Consumers Feel Important:
One of the benefits of trial marketing is the urgency that allows potential consumers to quickly assess the strengths and weaknesses of maintaining a product. Urgency is important because it enforces decisions. The end of the free trial creates a sense of urgency, but recognition of the missing product creates a sense of inadequacy. This combination usually leads to sales when the consumer feels the value proposition is genuine.
7. Match customer interests with corporate values
As soon as a trial version of a product is available, it helps companies set expectations for it. Brands can communicate clearly with each potential customer and let them know what to expect from the product and how to use it properly. In this way, brands can align their customers' interests with the company's values and help further strengthen the relationships they are trying to build by contacting the product.
8. Brands can recognize the seriousness of their customers
If a potential customer isn't interested in the product, providing a test version confirms that the lead is cold. Brands always come across people who do product samples without the intention of buying the product. However, many people try the product when they are interested in the results. This procedure permits businesses to create stringent follow-ups, evaluate leads in a better way, and extend marketing opportunities.
9. The data provided is from actual customer spending
By duplicating the samples selected for test marketing, brands can understand the trends that can occur after the product is sold. Purchasing patterns help brands optimize product prices, sizes, packaging, and more. All positioning decisions for these products are based on data collected from actual customer spending.
10. Complete Recruitment Risk Elimination:
Save huge manufacturing, branding, and marketing costs if your product does not pass test marketing. The pitfalls found during the implementation of the test can be resolved by the brand. You can make changes based on the feedback and data collected from the test marketing samples. If your product is defective or problematic, you can perform a recall immediately from the test. Canceling a product launch after conducting a test audience is surely better than launching it in the market and then canceling it. This protects the brand's reputation and saves money.
How to do test marketing
The first step in the new product sequence is to identify opportunities that do not need to be fully covered by currently available products. At this stage of research, we often use qualitative techniques borrowed from social psychology.
- Frequently used methods are focus groups or detailed group interviews. This is a two-hour discussion that asks eight to twelve people to share their experience with existing products and how to deal with specific issues.
For example, a pharmaceutical company may ask a group of young mothers how to treat a child's cold. These conversations reveal the mother's perception of the strengths and weaknesses of the products available. Such conversations that are interview-based give insights into the need for new products or reformulation of existing products. These concepts are hypotheses and can be tested using more quantitative methods such as research.
The number of product concepts ultimately selected is It depends on the company's resources and strategy for the new product. If most of that resource is in product research and development, you may experiment with concepts more than if your area of expertise is in marketing and communication.
- The next step in developing an ideal new product is to create a profit plan that estimates the payment period. This profit plan can discard product candidates on the basis of estimates from experienced marketers, that do not adhere to the minimum payment deadlines as prescribed by the management
- Test marketing is all about Product and Strategic Development - It consists of three pillars of communication development - ad development, availability of the product partially determines how it is tested and minimal equipment may be required to produce a real product for testing product expansion
- After completing these concepts and product testing, you can revise your profit plan to account for your findings
- These new data suggest the level of manufacturing cost and, therefore, the acceptance of the product. If the proposed product meets the minimum withdrawal period, it can enter advanced product usage testing
- Marketing strategies need to set new product goals, pricing strategies, and sales strategies. Price range estimates may be part of product testing
- If your company intends to leverage its current sales channels, a channel strategy may determine how your channel accepts new products
- Communication strategies comprise advertisement of text themes, package development, and selection of desired media mix. It is imperative that proper communication plans help in formulating marketing mix plans for the brand’s strategic development
The need for test marketing
If product and communication research already shows that your product and communication plan is successful, why sacrifice test marketing and delinquent revenue from successful items?
- The main objective of test marketing is to test all the elements of products together. The communication and product plan is tested separately before the test marketing is initiated and forms a base for the actual testing of the products
- A practical test marketing plan provides an estimate of the productivity of the marketing plan, suggestions for improving the productivity of the plan, and disaster checks
- The productivity test marketing plans measure consumer response to pre-tested items (products, prices, communication plans). It also measures industry acceptance of products, strategies, and communication plans. (In most cases, companies can rely on their trading experience to measure future recruitment)
- Test marketing measures consumer reaction, consumer awareness, product testing, repetitive purchases, market share, and sales volume
- By doing so, test marketing is an element of marketing planning. These measures are a decisive factor to understand if the product should be approved or not for a go-ahead. Such decisions can be made based on rules of thumb. For example, if the test rate is less than 60%, it is better to quit the launching of the product. This financial decision is incorporated in the profit plan of the business. The test market estimates consumer response more accurately than any pre-test
- Test marketing indicates whether the product launched will be a loser, a moderate success, or a great success. It will help you determine if you can reach the minimum
There are two reasons for the test marketing
- To determine how much the product is sold so that you can decide whether to sell it nationwide
- Another reason to test the market is to decide how to sell the product
Suppose a cosmetic company - ABC launches a completely new product in an unknown product category. As a company, ABC and the ABC sales team have built a solid reputation in the areas of health and cosmetology. However, in that case, you would move the ABC salesman to a new purchasing office. Soap buyers do not know the seller. Therefore, you need to see if your sales team can sell an unknown product to an unknown buyer. Therefore, acceptance of new products depends heavily on experience and a successful track record.
Experience in the product category ensures that researchers can assess trade acceptance.
Experienced researchers estimate that the effect of the additional focus on sales force in the test market will result in 15-17% higher sales levels than after the product's national launch.
Limited shelf space in stores limits distribution. In the grocery category, you are doing, getting a new product first is very important. When Gillette succeeded in launching The Dry Look, a men's hairspray, several other companies sought to take advantage of the success of their hairspray. Hairspray was in a much larger container than most men's hair supplements, so more shelving space was needed to store the same number of competing brands. Also, retailers tend to allocate fixed shelf space to specific product categories, so many companies that use products struggle to get acceptance in the transaction of copied items.
Disadvantages of test marketing
Test marketing is one of the most accurate ways to determine how well a product is performing in the market before it is released to the public, but there are some important drawbacks to consider.
1. It's expensive
Testing is a large-scale project that simultaneously measures different aspects of a business and a product.
Test marketing takes a lot of time to formulate, plan, implement, and finally to set up the campaign. After that the measurement, follow-up, and feedback time is additional.
3. The results can be misleading
The results can be biased or inaccurate. If the test group is too small or too narrow, the company will receive a one-dimensional view of the market that does not correspond to reality.
Test Marketing allows a company to determine if a product or service is popular in the market and avoid potential risks to the brand. Many test marketing methods can be incorporated into your business strategy. However, most importantly, the insights gained from the feedback collected, with the right reporting tools, organizations can facilitate data-driven decision making and save time on routine visualization tasks and data collection. Reporting tools allow test marketing professionals to provide test execution data in easy-to-understand visual reports so they can determine which marketing tool is most effective.
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- Test Marketing is used to validate the feasibility of a product or campaign before it is launched in the target or mass market
- Test marketing should be initiated only after a complete marketing plan based on extensive product and communication testing has been laid out
- Test marketing is critical to learn how to improve the productivity of the plan and avoid potential disasters
- You need to run a test market to learn the productivity of the marketing plan related to the reaction of consumers and retailers
- Test market results should be used to evaluate marketing plans, not to generate additional ideas or evaluate people
- Test marketing helps you build relationships between the product and its users. Therefore, test marketing creates market value for a product before it hits the market. This product collects excellent promotions with the help of test marketing strategies and increases the customer quota of the product in the market
- Therefore, test marketing is a special form of product advertising