Market Test

What is the market test?

In the world of advertising and business, a market test can be defined as a short-term geographical area or demographic grouping used to evaluate the profitability of a particular product or service in a specific market before a broad scale roll-out.

This enables businesses to plan their:

  1.  pricing
  2.  marketing strategy 
  3. advertisements 

before launching a new product or service that may have a high margin of success in a particular market segment, but which may fail to capture the attention of the target audience when introduced to the broader market.

Product Testing Vs Market Test

Product Testing Market Test
Product testing is done to determine the products:
1. Feedback
2. Performance
3. Improvement requirements 
Whereas, a market test is only done for limited products (whose performance is difficult to judge)As it is costly to have a test for each product.
Product testing helps in:
1.Determining threats 
2.Updating product
3.Determining the reason for purchase 
It helps in:
1. Making Comparison with competitors
2. Understanding actual demand 
3. Improving product launch 
Product Testing can be done by:
1. Meta Testing
2. In-home usage test
It can be done by:
1. Controlled Test Market
2. Simulated Test Marketing
3.Standard Test Marketing
Product Testing involves direct communication with consumers Market testing does not involve direct communication with consumers
Product testing is only used to improve product or product strategy It is used to develop multiple product and market  
It does not happen in the market  It takes place in the market as the name suggest.
Product Testing Vs Market Test

Objectives of Market test

Objectives of market testing majorly depend upon whether the product is new or old. In order to understand product or service performance and future potential for an existing product organization conducts a test marketing.

Note: an objective of a market test needs to be defined in the beginning.

In the case of the new product, it tells the organization potential, demographics of the product.

Objectives of Market test
Objectives of Market test

Here is the detail explanation of each objectives of market test :

Understanding Demand

One of the primary objectives is to analyse the demand product. Mostly, an organization’s launching new product set this objective, in order to determine its relative demand. Moreover, it helps in understanding the production capacity requirement as well.

Product Distribution

The test market is done to understand and to establish an effective product distribution channel. Plus, it helps to understand the demographics, quantity, channels of product distribution.

Like, some products have big e-commerce sale than on the retail or the physical markets.

Which makes the companies improve their supply chain management system.

Lower the Risk

Market testing for a new product helps to understand the product potential in the market, which helps the organization to evaluate the risk involved in the investment of the new product. So, knowing the product potential helps in knowing the investment and risk involved with the product.

Changes in Product

A test for market of the new or existing product helps in gathering customer feedback, which helps in creating new features or to improve their product or services. And, in the case of new product knowledge about consumer expectations can help in improving the product or service design. 

For example, Some hotels objective of the market test to analysis rooms which will be designed for customers with babies or small children- room will include the scribe, toys, diapers. plan in for hotel room.

Plus, the changes can be made in the product hierarchy as well, it will develop a strong product structure.

Test Alternative Level

One other objective of market testing is to create the backup. To analyze the next best levels which will be acceptable in the market in terms of the marketing mix- product, price, product distribution, promotion. It helps an organization to set its lower benchmark as a target.

Acceptable Price

One of the major objectives of market test is to analyze the acceptable price for the product to the customer.

Note: This objective mostly kept secret from the customers.

Price acceptance is one of the basic things which an organization wants to do to make the product or service successful.

These were the basic objectives of market test which generally opted by the companies.

Types of market testing

It can be done differently for different reasons as the reason for the tests will be different. Types of market testing are broadly divided into:


Consumer Goods Test Marketing
Controlled Test Market
Simulated Test Marketing
Standard Test Marketing
Industrial Goods Test Marketing
Alpha Testing
Beta Testing

Let’s discuss all types of market testing and their different types in both consumer and industrial goods.

Types of market testing
Types of market testing

Consumer Goods Test Marketing

In the case of consumer goods market testing, an organization have four different variables and question which they desire to get an answer for:

  • Trial- Consumer will try the product once?
  • First, repeat- After trial consumer will purchase the product?
  • Adoption- Will consumer accept the product and purchase it again and again? 
  • Purchase frequency- How often the consumer is willing to buy the product?

To get answers to these variables there are different types which organization can opts. 

Controlled Test Market

A controlled test market is a set of conditions, which are pre-set and agreed upon before any testing takes place. Plus, all the variables are in control of the testing team.

In controlled formed organization send the free sample to selected stores in selected geographical location and ask them to sell the product for free. Plus, the organization controls the promotion, pricing, self-position, point in-store, display etc.

For Example Controlled test markets mostly take place for consumer products like soaps or shampoos. A new or free sample is kept on catchy display, self to get consumers attention.

A controlled test market takes place to analysis consumers reaction, product potential. Besides, conducting these tests are inexpensive and easy to establish.

Simulated test marketing

Simulated test marketing is a classic example of a laboratory experiment. Where an organization selects the customers. So, the predefined customers were asked to select the product from the given number of products.

A shelf where the new product, competitors or old or both products are kept together. Afterwards, customer choices are observed and the new product is given for free.

For Example, customers have given a set amount of money and specific ads are shown to all the selected customers and asked them to purchase from given options.  

In order to determine the consumer’s experience a short interview or telephone call is conducted.

Simulated test marketing is a qualitative research method. This method helps in understanding the customer’s reasons and behaviour while picking-up the product.   

Standard Test Marketing

Standard test marketing is like a normal market campaign. This test marketing is widely popular before a new product launch. Accordingly, few cities are selected to conduct the test market which represents the national markets.

Afterwards, the company distributes the product to retailers, wholesalers and perform every marketing mix variable to make the sale.

Sales, customer feedback, the reaction is analyzed to make a comparison to the national campaign to make an informed decision about the product.

For Example, Hindustan Liver’s Lipton Iced Tea, Kinley, Coca-Cola, Sunfill, Johnson, Nizoral anti-dandruff shampoo all faced the standard test marketing in Hyderabad

Standard test marketing provides the real-world performance of the product.

Industrial Goods Test Marketing

Industrial or business goods also goes to test marketing. To know their efficiency, productivity, cost differentiation in products.

And these market test can be done in two different ways: 

Alpha Testing

Alpha testing is done within the organization. In this type of market test engineers, management employees analyses all the variables of marketing mix related to the product and they fix every issue before the launch of the product.

Usually, this can be considered as an ongoing process related to the product as it takes place again and again even after the launch.

Beta Testing

Beta testing of the product is done outside the organization. In the case of beta market test organization gives the free sample or product to different vendors, customers to use the product and give valuable feedback.

Vendors or consumers need to check each aspect of the product like value-added to the product, product quality and everything in-market test.

Afterwards, customers create detailed feedback to improve the product.

Note: Companies also creates seminars to conduct the market test.

Market Test Process

It can be performed in 7 simple steps. Organization market test process follows:

Market Test Process
Market Test Process

Set Test Objectives

At the very first step organization sets the objectives, reason for conducting the market test. As it is discussed above about the different objectives like- product potential, price, risk, determining the demand of the product.

Select Type Of Tests

After determining the objectives of market test now an organization has to select its type which will be most suitable to achieve the goal behind the objective. 

Note: Type of test marketing depends upon its objective

It can be simulated, standard and control test marketing. A correct testing method should be suited to the organization’s objectives.

Setting The Budget

Every type of test can be done on different scales- financially. So, the organization needs to lay down the budget which clarifies and explains the scale on which the test marketing will be conducted.

The budget of this process must include the cost of production of products, marketing, research, promotion, placement costs.

Develop The Plan

Plan for the market testing includes the production of the product, distribution process, targeted places, targeted customers, promotion plans, financial aids. Plus, the plan also includes the follow or a backup plan as well. 

Finalize The Markets

After laying down the plan or structure a company needs to ensure that they select the target market for testing. It should geographically have a wider area and it should also a good representation of the national market. 

And a test should at least take place for 6- 12 months, and even it can go for a long period for long purchase cycle products.

Execution

As the name suggests the next step is to execute the test marketing form manufacturing the product to shipping to right places/ stores and right promotion to encourage people for making purchase and repurchase.

Analysing

The last step of the process is to analyze the results and to analyse the entire process of test market and to interpret the results and comparing the standards from the actual performance and to analyze the results and benefits.

Test marketing examples

Coca Cola- Sprite Zero

In the year 2015 Coca Cola tied up with grocery delivering app called Groffers to market testing their new product Sprite Zero.

This tets marketing went for two weeks and the company made the smaller size of the can-300ml for Rs30 only for test market.

Later on, insights from on-demand sale, customer’s post purchase preferences and feedback on Grofers became findings for Coca Cola.

Google- Google+

Google+ is not one of the successful product of Google and in order to improve the product company is monitoring consumer behaviour and feedbacks about the different social media platforms and they are trying to bring changes in their platform.

Ford- Ford Fiesta Sedan

Before launching Ford Fiesta Sedan company Ford conducted the test marketing in Delhi. The company wants to know about the target market in Delhi. 

Ford management, agency partners had team meetings with families in order to understand customers lifestyles, buying behaviours. 

Afterwards, Ford used those findings to modify/ update the prosuct.

Kaya Skin Clinic

It provides skincare, haircare and beauty solutions. They have clinics all over the country and in order to expand their business Kaya clinic started creating their own products with services. So, the clinic started to test market their hair removal creams, botox.

Afterwards, they rollbacked and launched their product  Saffola Rice and Hair & Care to make changes as per their feedback.

Vaseline- Vaseline Intensive Care

Vaseline conducted the test marketing in three different markets two with straight advertisement and one included sampling with an advertisement. 

sampling with an advertisement campaign gained huge success that company took the program across the nation.

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