STM - Simulated Test Marketing
Given the need to outsmart / outthink the market, here’s a way to improve the overall effectiveness of those ideas sans blowing a whole lot of time & fortune on it...
Let’s start with some STATs. The compilation here depicts the “percentage of the overall budget” allotted towards digital marketing across media agencies that are hired to market products on the behalf of the manufacturer / OEMs as of 2023 & that is a staggering 80%.
The processes followed by most organizations (although that’s changed to a large extent in product-first orgs. and the ones that swear by PLG) seems skewed towards channelizing all efforts towards marketing & build awareness POST the build stage.
Talking of some big corporates who may look to outsource / collaborate on & off with those big-brand marketing houses who specialize & focus entirely on building pitches, but that may not be everyone’s GOTO strategy. The one thing that it could all come down to is the “BUDGET”. And once there’s a mention of a budget there’s obviously someone in management who’d have a keen eye on and measuring the effectiveness of the operation in terms of the outcome - which is the “conversion rate”.
When that’s one side of the story, the other is from the SaaS world where some popular product orgs. are allotting and spending a sizeable percentage of their revenue growth towards marketing initiatives. (Refer graph below)
What’s the probability that an organization allotting 3 – 3.5 x the revenue growth as a marketing budget would actually be able to hit those estimated revenues thereof not only to offset expenses but to hit that green zone?
When that question demands a few estimates and forecasts, don’t you think it’d be much better if there was a way to identify and address few grey areas in terms of improving relevance & targeting better pockets of the markets, strengthening their semblance adding solidarity to the ideas intern improving that probability?
…which is where Stimulated Test Marketing (STM) would add value.
Simulated Test Marketing
Take a look at the world and the number of startups that wind up after functioning for a few months or years. There’s a discernible pattern in there for sure. The lack of clarity seems to loom large, is common across orgs & founders.
When some don’t seem to hit that minimalistic zone of comfort in dealing with the problem space (forget about having a stronghold over it), many seem flummoxed over prioritization of those opportunities / strategic initiatives owing to the multiple routes lying open and all of them looking like “THE MOST” prominent ones to hit next.
Hark back a bit on either of these problems and you’d see how they could all be rooted in research or the lack of it. Here’s one of our Facebook post emphasizing the very problem which happens to be the very stem of this article.
In a parallel vein, software development followed a waterfall model much earlier and then transitioned to Agile and extending that to product management we have a variety of LEAN methodologies that target one prime problem for the organizations adapting them:
“Optimizing the whole process of product development and getting something tangible either part or whole (although minimalistic) in front of the users ASAP so as to give it a decent run whilst gaining ample feedback ranging from attitudinal to behavioral parameters ultimately cutting back overall costs”
But still one ought to pour in money & time for the development & design however minimalistic that may be and also coming at a stage that perhaps considers “problem(s) validation” a sure shot & a given.
What if one could use some research method to weed out problems faced by the users of a target market and also gauge their willingness to adopt a certain product addressing some or all of those problems, if and when built?
Definition:
Simulated test marketing (STM) is a subset of qualitative market research that ventures out to help organizations and teams by practically simulating the actual environment so as to understand if users are willing to purchase / adopt a product into their ecosystem whilst also getting to understand nuances over their reasoning & decision making.
STM usually involves someone from the marketing / product teams essentially getting down to the field and hit who could be the users of the target market with a few questions 1:1. It could happen at a specific location but in public where there could be a lot of footfall.
CASE STUDY: Herbal toothpaste brand
Now here are a few things that a typical STM ought to be interested in tracking or measuring for this kind of a product:
The understanding / data thus obtained can then employed to build estimations working their way through to reaching those forecasts.
Orchestration of STM:
By now you realize that this type of market research would involve talking / interfacing largely with non-customers, as in an audience / sample space that could represent the target market but is yet to buy purchase something or is yet to sign-up for a digital product per se. And, there are 2 major ways to achieve this:
Online Survey – shot to whoever qualifies as an audience as aligned to a target market
In-person F2F – approach people F2F and pop questions while recording / gauging their reactions
We’d stick to the F2F survey part here over this section but if it is online surveys you are interested in and looking to design, make sure you go through this post “Strawman & Steelman” prior to doing that.
Combating Bias over F2F Interviews:
Come to conducting F2F interviews, many would be of the opinion that one ought to talk to 10 random people on the street, ask them for their choices / reservations / likes / dislikes about a product.
“How difficult can that really be? Right!?”
Well! If you’re of that opinion, you don’t know the half of it!
Turns out there are complications & many nuances as well. I’m sure the comment “Well! It’s nice” over that F2F survey has hit you like a thunderbolt later on when you looked at the ratings painting the exact opposite picture.
That right there could be enough to defeat the whole purpose of an F2F survey.
Which is why it is better for someone neutral and who has nothing whatsoever to do with a particular brand directly to get to handle the entire F2F process of gaining feedback. One could then be rest assured of receiving genuine unbiased feedback to say in the least. That’s where an agency who undertakes such work on the behalf of the brand could come in really handy.
The Process & The Result:
Although STMs are largely perceived as F2Fs conducted extemporaneously, in reality they are exactly the opposite
Given the fact that a typical market research firm / agency does take their time recruiting the target audience from a huge list of probable’s subjecting them to various data slicing techniques so as to improve the probability of landing useful and at the same time eclectic responses covering a wide array of parameters some known, some unknown, it hardly is extempore.
Here’s a 5-step process to achieving that:
Let’s elaborate each of the steps now.
Remember:
🎯 Going LEAN & building an MVP testing the product out with the user base of the target market is great as that serves a specific purpose. But, that comes only after validating the IDEA and doing it thoroughly. And something that comes prior to validating the “so-called” idea is RESEARCH & Simulated Test Marketing (STM) could be one of the frontrunners to consider when one talks of gaining an unbiased & fair consensus of the market.