Market TestingDefinition: To test multiple marketing scenarios and select the most promising for expansion.
Introducing a new product or service without first testing the market is like jumping off a cliff into the sea, blindfolded--unthinkable, life threatening, treacherous and unnecessarily risky. Many new ideas and products are successful because their creators identified an unmet need in the market and verified the viability of that concept.
Your time and money are extremely valuable to you--you can't afford to waste them by investing them in producing a product or service that fails in the marketplace. The more you test your product before you produce and sell it, the more likely you are to earn the sales and profits that you desire. Just remember, every dollar you spend in market testing will save you many dollars of losses later on in the marketing process.
Through correct and vigorous market research, you'll uncover the following vital information:
- Demand for a product or service in your market
- Sales figures within a market for a particular product or service
- Who your customers are
- What those customers think about your product or service and what they think about your competitors', so you can capitalize on your strengths
- Where and how customers buy your product or service, so you can establish the most effective distribution and marketing channels
- How much customers are willing to pay, so you can figure out a competitive price for them and realistic profits for you
- Who your direct and indirect competition is
- How to position your product or service so that you take advantage of its unique selling proposition
- Which governmental regulations your product or service will be subject to on a local, state, and federal level
- Which sales, advertising, display, and promotion method(s) are most effective
Here's how to begin:
Develop a prototype, model or description of the product or service that you can show to others. Most ideas for new products or services don't work the first time. With a model or prototype, you can photograph it or create a picture of some kind and demonstrate it to a prospective buyer. It also allows you to try it out for yourself to make sure it works. (Be sure to keep accurate notes of your research; you may come up with an even better idea later.)
Determine the price that you can sell the product for in the current marketplace. Get accurate prices and delivery dates from suppliers, especially if you're purchasing the product for resale. Determine all the costs involved in bringing the product or service to market: the costs of offices, equipment, shipping, loss, breakage, insurance, transportation, salaries, etc. Include your personal labor costs at your hourly rate as a cost of doing business. Ask your friends and family if they'd buy this product at the price you will have to charge.
Go to a potential customer with your sample or prototype and ask if he would buy it. Be sure to call on the individual who makes buying decisions. Then ask him how much he'd pay for this product. If people criticize your new product idea, ask them why. Ask how the product could be modified to make it more attractive.
Compare your product with other products on the market. Continually ask, "Why would someone switch and buy from me?" Solicit the negative opinions of others. Don't fall in love with your idea--be an optimistic pessimist by looking for the flaws in your marketing plan.
Visit trade shows and exhibitions--they're a terrific place to get immediate feedback on a new product. You can get into a trade show by signing up as either a manufacturer or wholesale buyer. Once you're in, find out what else is available that's similar or that performs the same function as your product. Other companies marketing similar products will have their products on display--take a good, hard look at what they have to offer. Then talk to product buyers--sophisticated buyers at the trade show can tell you immediately whether or not your product will be successful.
The only real test of a product is a market test, where you take your new product or service to a customer who can buy it to see if he likes it. As soon as you know your cost and price, make a sales call on a potential buyer. (The ability to sell the product is more important than any other skill--this will give you a chance to sharpen yours.) Listen carefully to the comments and objections of the buyer--their feedback is priceless.
Then once you've determined there's a large enough market for your product--at the price you'll have to charge to make a profit--immediately begin thinking of ways to improve both the product and the marketing. Continually tweaking your plans--instead of sticking only with your original ideas--will help ensure your product's success.