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BlogMarketingWhat is Test Marketing? Definition and Examples

What is Test Marketing? Definition and Examples

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. Today we are learning 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.

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 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 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 for customers to go through this entire flow:

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 prominent example is a free trial of new lipsticks, perfumes offered to exist customers, and feedback.

  1. Simulated Market test

This test is conducted to ascertain the customer’s preference and product selection. A group of people are invited to the stores and given 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 inquire about the product later on. An example is departmental stores where new products are placed, and consumer behavior is tracked.

  1. 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 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.

  1. Test Markets

Every brand has its market, they know the demographics and geographics of their 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 is representative of the entire market size of the company.

For example, many tech companies launch their new features in mainly selected areas based on sales, customer loyalty, etc.

Industrial Goods

All goods 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 user feedback. 

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

  1. Beta testing

The testing is done outside the firm with real customers, these tests are often conducted in events, shows, and exhibitions where a set of particular audience are gathered. These methods help you based on, customers 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 and 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 selecting an audience that is biased for any reason 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.

  1. 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.

  1. 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 entire cost of Test Marketing.

  1. 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 data points you need to measure are customer persona, distribution channels, consumer behavior, demand size, purchasing power, customer feedback, etc.

Honorable Mention

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.

To get insights into your business, you need to turn good data into great visualizations. I highly recommend you to 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 to check out our tool Conbi. It uses naturally asked questions to gather presentable data insights in a couple of clicks.

  1. Launch Product

This is the time you take big actions. If the test marketing campaign fails you will need to find the reasons for the failure and iterate your product and plan accordingly. If your test marketing was successful, that will give you the confidence that you are on the right track and will make those marketing strategies more viable.

Examples of Test Marketing

You might have noticed a lot of 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.

Summary

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.

Bonus tip!

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.
  • Make use of social media, you can even promote the Test marketing campaign online.

A data-driven professional with more than 10 years of experience in digital marketing, SEO, PPC, automation, and so on. Privately tea lover, gamer, tech nerd, and traveler. I love writing about marketing!

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