December 13, 2017  
 
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Test Marketing

Written by Richard San Juan for Gaebler Ventures

Put yourself in an entrepreneur's shoes. You have a wonderful business idea that you think can be extremely profitable and you have already crafted a solid business plan. Before launching your company full-throttle with many investors pouring in money to your company, conducting a test market would be wise to get a preliminary estimation of demand for your product or service.

The most significant mistake that a hopeful small business owner or an entrepreneur can make is not accurately determining if there is enough potential demand for the product or service he or she is selling.
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Too often, people invest all their money on developing a new product and launching a company before testing the market.

As a result, many have failed in their business endeavorsólosing their life savings and become bankrupt. While that risk has always been inherent when you take the path of an entrepreneur, the risks can be strongly mitigated by conducting test marketing.

Perhaps testing a particular region can serve as a litmus test to determine if your business plan relating to your product or service is feasible to carry out your business. One should never assume what the consumer base's response will be to a product or service without an initial testing to see what the actual reaction will be.

The key to achieving early success through marketing your product or service is to do a carefully planned test marketing incorporating similar qualities of the target market segment.

As in anything you do, before starting the process of test marketing, know your objectives and what you hope to achieve by evaluating the results. For example, test marketing can provide details on various topics such as customer knowledge, product performance, distribution, and marketing requirements.

There are two popular types of test marketing. One involves conducting a test with select customers. The other type of test marketing deals with regional launches of a product.

Especially in computer software companies, it is commonplace to have a select group of knowledgeable customers that can evaluate and provide feedback regarding a soon-to-be-released product. This type of testing is often referred to as beta testing.

Beta testing is done to improve the functionality of the product or fix potential problems or glitches that customers may encounter. It is truly a valuable tool to utilize to prevent many dissatisfied customers during a mass release of the product or service.

The other type of test marketing involves releasing a product in a select location that shares the same target demographics that the product hopes to appeal to. A test launch should be carried out exactly the same as if it were a full launch to help determine expectations and predictions for the product.

Conducting a regional product launch before a full launch allows the product manager to see how a product performs in a test market and analyzes the effectiveness of the marketing strategy before going nationwide.

Obviously there are some risks of conducting test marketing. One risk is that potential competitors will learn something about your new product or service and will try to strategize ahead of time to minimize the effectiveness of the full launch of your product.

Failing to test a market, however, could result in far greater financial and personal loss if your product fails due to inadequate and inaccurate pre-launch research information.

In summary, before investing all of your savings and additional hard-earned money developing a new product and launching a new business venture, it should be ensured through test marketing that your product or service is something that the people would demand and want to buy.

Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.


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