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Chapter 9 In-Market Test Marketing

“Following the launch of a business, product or service,

you need customers to begin pushing and shoving their
way in through your door”
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Learning Objectives:

After completing this chapter, the students should be able to:

1. Learn how to conduct test marketing.

2. Develop the skills in managing beta tests, trial runs, and simulated markets.

3. Learn and apply the knowledge on test marketing and other market tests in
the proposed business as reflected in the revised business plan.

Test Marketing

Test marketing plays a similar role to concept testing. Its goal, like concept testing, is
to assess how well a product will perform in its market.

However, test marketing has a broader scope. Instead of focusing solely on the
concept or product, test marketing aims to evaluate your entire marketing plan. It takes into
account advertising, distribution, sales, and many other components of your overall
strategy, but it does this without actually fully launching the product and taking on all the
associated risks.

In product test marketing, you basically run a mini launch for your product in a selected
market and see how it performs. It’s like a crash run of a product launch.

Neither the launch nor the test market is big enough that you would suffer greatly if
the product were to fail. The goal is to trial run your entire strategy to get an idea of how it
would fare on a bigger scale. This allows you to pinpoint any errors and make any changes
in a relatively low-risk way.

Advantages of Test Marketing

 You get real insights into how the product would perform in a natural marketing
environment. There are many things you simply can’t predict or anticipate and the
only way to highlight these issues is with a real test in a real-life environment.

 You can gain an idea of how well the product will sell. This allows you to extrapolate
predictions to the wider market, build more realistic budgets, gain buy-in from other
members of the company, and make any changes needed.

 It helps you determine the most suitable and effective channels for marketing. A
small-scale test, as long as it isn’t too small, can give you a solid idea of the
marketing channels your target customers respond best to, helping you allocate your
resources and effort more wisely when the product launches for real.
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 It helps you identify the best distribution channels and build a data-driven distribution
strategy for when the product launches.

 Any weaknesses or flaws in your strategy will be exposed without any disastrous
consequences. This way, you can make any changes and ensure your entire plan
is on firmer footing when you launch for real. Failing during a test is far more
preferable to failing on a grand scale.

 You’ll see how customers react to your product, marketing, and other aspects of
your brand in real-life scenarios. This gives you real data to work with as opposed
to theoretical predictions and second-hand knowledge based on trends.
 You’ll get a heads-up if your product is going to fail. Sometimes, despite best efforts,
some products simply aren’t meant to be. If your product fails dramatically in your
test (due to lack of interest, for example) it may be a sign to cut your losses and
move on, avoiding a catastrophe.

Disadvantages of Test Marketing. Although test marketing can be useful, there are
also some major drawbacks. Anyone planning to carry out test marketing should make sure
they are aware of these potential cons before they begin.

 It’s expensive. Doing test marketing right involves a large-scale project which
measures multiple factors across your business. This means that if you want
reliable results from your test marketing, you need to be prepared to invest a
lot of money.

 It’s time-consuming. Again, test marketing is a big project with many different
layers. It takes time to set up your test, and you’ll need to run it for a while
before you get reliable results. This can delay your product launch, cause
frustration among the members of your project team and cost money.

 Test marketing can reveal your game plan to competitors. In a test-marketing

project, you are revealing not just your product but also multiple crucial
aspects of your marketing strategy in the real world. It’s very easy for
competitors to view this and simply copy it with their own product before you
even get close to launching.

 The results can be misleading. With test marketing, there is a lot you need to
get just right to yield useful results. If your sample size is too small and narrow,
you’ll end up with a one-dimensional view of your market which doesn’t reflect
reality. The channels you use to market your product and collect data might
exclude certain demographics, too.

Beta Testing

Once you are comfortable that your product is ready to introduce to the customer
market, the next step is the Beta Test. The Beta test is where you introduce the product to
a limited number of customers. Unlike in the Alpha test, the test subjects do not have prior
knowledge of the product or special expertise in the field. Think of it as a test run for the
product. The customers should receive the product in the same manner as if it were being
offered to the public at large. You observe or the customer records his or her impression
and input about the product. You will use this input in making certain that the product is
ready for the consumer market and for putting the final touches on the product.

The Beta test generally takes place or ends very shortly (sometimes just days) prior
to the general release of the product to the public. However, the Beta test itself can take a
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long time. You have to give customers sufficient time to use and provide input on the
product. Then you have to take that input and determine what modifications should be made
to the product. Sometimes you will note the input for future versions of the product. Other
times you will attempt to make the modifications prior to releasing the product. You may
need to run and second or third iteration to test the effect of any modifications made to the
product based upon an earlier Beta iteration. It is not uncommon for the Beta test to last for
several weeks.

The Beta Process - Attracting Beta Testers. The beta process involves several
steps and objectives. Initially you will have to convince the Betas subjects to test your initial
product. Often times you will seek to entice testers to purchase your product for testing.
This generally increases the expectations and criticality of the testers. You will have to deal
with the issue of delivering the produce, monitoring use, potentially customizing it to meet
the users specifications, and recording feedback. In any event, the beta tester is eventually
granted a discount on the final product. Of course, many product are the subject of free beta
testing.

Establishing the Scope of Expectations. Often times the Beta test is the subject of
a very controlled, limited testing environment. This may necessitate a user agreement
regarding use, communication, and feedback about the product? There may be
expectations by both the business and the tester. While the company demands information
and feedback, beta testers often require support for using the product (such as technology
updates).

Feedback - Product Quality. The business will specifically require information about
how well is product working and how easy is it to use? It will seek to obtain both qualitative
and quantitative information.

Quantitative Factors include:

 Who's buying the product (this may include diverse groups or types of
people)?
 What are the features attractive to each tester?
 What is the timing of delivery and capability of use?
 What was the testers priority for the product (i.e., what quantity did the tester
purchase)?
 What was the actual revenue from the sale and how much would the tester be
willing to pay?

Qualitative Factors include:

 What did the tester like best?

 What feature or attribute is missing?
 What needs improvement?
 Would the tester purchase the product again?

Simulated Test Markets

Simulated test marketing is a form of market testing where customers are exposed to
a simulated market situation to gauge the consumer’s reactions to a product, service or
marketing mix variations. It is used to forecast demand and do market analysis.

The average accuracy claimed for developed markets has reached ±9%.
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Simulated test marketing's usages go well beyond pre-launch planning and

forecasting demand. Marketers can also use this approach to improve the marketing plan
post-launch. Marketers can observe the current trajectory of a new product or service based
on the data for a month across the world. If they observe a big difference between the
product forecasts before the launch and post-launch forecasts of awareness, sales, and
profits, they still have the time to change the strategy and the marketing plan. This will also
help in maintaining the return on investment.

Although the number of marketers regularly using this technology to test different and
numerous versions of new products and services are increasing, we are hard pressed to
find so many that use it to formulate the marketing plan.

Here is the process for stimulated test marketing which the organization set up for test
and evaluation for a better understanding of what is test marketing.

Step1: Simulated test markets typically adopt one of two approaches to forecast
sales: purchase intent and/or preference. Purchase intent gauges respondents’ likelihood
of purchase. And, in the preferred approach, participants purchase a product from a
competitive set that includes the new product.

Step2: Afterwards, the organization conducts an interview called a concept stage

which yields information on the product’s appeal and trial rate.

Step3: Later on customers were asked to choose a product on a shelf with

competitors product in case of preference approach.

Step 4: In last in order to determine the consumer’s experience, a short interview or

telephone call conducts.

And, nowhere is the last differentiation in what is test marketing to understand different
types of market test.

Take a moment to complete the following activity.

Activity 9:

1. Conduct a small scale market test of the product or service you proposed in
your business plan submitted in ECC13 and get feedback from your selected
test market.

2. Conduct the same small scale market test but this time do it online.

Activity 9: Self-Assessment Questions

1. Did you observed any difference in the market acceptance of the prototype
product between the small scale market test and the online market test?

2. What are these differences and how will you reconcile this with your final
product/service?