MarketTest

What is the market test?

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 

Therefore, before launching a new product or service it 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

Objectives of Market test

Objectives of market testing majorly depend upon whether the product is new or old. To understand product or service performance and the future potential of an existing product organization conducts 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’s potential and demographics of the product.

Also, here is a detailed explanation of each objective of the market test :

Understanding Demand

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

Product Distribution

The test market executes to understand and establish an effective product distribution channel. Moreover, it helps to understand the demographics, quantity, and product distribution channels.

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

Therefore, it 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 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 the 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. Moreover, in the case of new products knowledge about consumer expectations can help in improving the product or service design. 

For example, Some hotels’ objective in the market is to analyse rooms which will be designed for customers with babies or small children- The room will include the scribe, toys, diapers, plan for a hotel room.

In addition, 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 a 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. Therefore, it helps an organization to set its lower benchmark as a target.

Acceptable Price

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

Note: This objective is mostly kept secret from the customers.

Furthermore, 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 tests which were generally opted by the companies.

Types of market testing

It executes differently for different reasons as the reason for the tests will be different. As a result, types of market testing are broadly divided into:

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

Consumer Goods Test Marketing

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

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

As a result, to get answers to these variables, organisations can opt for different types. 

Controlled Test Market

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

In a controlled organization send the free sample to selected stores in selected geographical locations and ask them to sell the product for free. Moreover, 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 the consumer’s attention.

A controlled test market takes place to analyse consumers’ reactions and product potential. Besides, conducting these tests is 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 old or both products are kept together. Afterwards, customer choices are observed and the new product is given for free.

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

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, a few cities are selected to conduct the test market which represents the national markets.

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

As a result, 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, and 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 go to test marketing. To know their efficiency, productivity, and cost differentiation in products.

Therefore, these market tests are executed in two different ways: 

Alpha Testing

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

In addition, 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 executed outside the organization. However, in the case of the beta market, the organization gives the free sample or product to different vendors, and customers to use the product and give valuable feedback.

Also, vendors or consumers need to check each aspect of the product like value-added to the product, product quality and everything in-markettest.

Afterwards, customers create detailed feedback to improve the product.

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

MarketTest Process

The market test process has 7 simple steps. The organization’s market test process follows:

Set Test Objectives

At the very first step organization sets the objectives, and reasons for conducting the market. Therefore, as discussed above the different objectives like- product potential, price, risk, and determining the demand for the product.

Select Type Of Tests

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

Note: The type of test marketing depends upon its objective

As a result, it stimulates standard and control test marketing. A correct testing method should be suited to the organization’s objectives.

Setting The Budget

Different types of tests are executed 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.

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

Develop The Plan

Plan for the market testing includes the production of the product, distribution process, targeted places, targeted customers, promotion plans, and financial aids. Moreover, the plan also includes a 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 be 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 from manufacturing the product to shipping it to the right places/ stores and the right promotion to encourage people to make purchases and repurchase.

Analysing

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

Test marketing examples

Coca Cola- Sprite Zero

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

Therefore, this test marketing went on for two weeks and the company made the smaller size of the can-300ml for Rs30 only for the test market.

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

Google- Google+

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

Ford- Ford Fiesta Sedan

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

Ford management and agency partners had team meetings with families to understand customer’s lifestyles, and buying behaviours. 

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

Kaya Skin Clinic

It provides skincare, haircare and beauty solutions. They have clinics all over the country and to expand their business Kaya Clinic started creating their own products with services. So, the clinic started to test market their hair removal cream, 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 advertisements and one included sampling with an advertisement. 

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

Frequently Asked Questions (FAQs)

What is the meaning of a market test?

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.

How do you test a market?

Here are five steps you can follow to perform market testing:

1. Establish your goals. To create the best market testing strategy, it’s useful to begin by defining what you’d like to learn.
2. Create a prototype.
3. Determine a price.
4. Develop testing plans.
5. Perform testing and analyze results.

What are the three types of market tests?

Here are the different types of test marketing.

Consumer Goods Test Marketing
1. Controlled Test Market
2. Simulated Test Marketing
3. Standard Test Marketing
Industrial Goods Test Marketing
1. Alpha Testing
2. Beta Testing