Why You Should Test Market a New Product

Products don't just appear on shelves around the world and start flying off of them. It's a long and scientific process to get to that point. It takes a lot of ideas, or tweaking of previous ideas. Large amounts of money are almost never made out of thin air. They come from small marketing tests, and later expanded into big campaigns. Most people don't know that everything now big, was once very small. When it was small, it's owners did not know that it was going to be big. They ran market tests to see if it was going to be profitable or not.

If the small tests don't work, the owner knows the big roll-out won't work. In Claude Hopkin's book "Scientific Advertising," he says "When we learn what a thousand customers will cost, we know almost exatly what a million will cost." If it costs more than you made to get one thousand customers, this product either needs better marketing, or modified. Or more likely, to be scrapped. So you can start again...

I would guess that you have to run 10 product tests before you find one that will be profitable! Successful products are tough to identify. This is not easy. This takes time and energy, both valuable commodities in today's crazy world. You have to identify a market, determine whether that market spends money or not, conjure a product (or service) for that market, create the product, and market the product. That's a lot of work for something that may fail miserably. But, it's the only way to know for sure...

How do you run a market test on a new product?

To run a market test on a new product, the idea is to spend only as much money as it takes to reach a market large enough to provide valid data. Your objective is to get the word out and measure the response. All good advertising is keyed so you can measure the return that it provides, but this is especially important (and very closely watched) when running a market test.

For online testing, Google adwords is a common vehicle these days. You can easily put up a small web site for your product, with a way to measure response (like signing up for a free e-book) and throw up a few adwords. You can measure the spend, measure the response, and determine the success of the test.

For offline testing, you place some space ads (newspaper, magazine, newsletter) and do the same thing. You can also send mail to a portion of a good list. This is generally a more expensive but solid testing means. Offline also provides an easier path to ramping up the marketing effort later in the process.

What is a statistically valid sample size to determine the success or failure of a test?

Gary Halbert says that you need at least 200 replies to have a sample size big enough to rely on. I tend to think that 100 sales/replies is sufficient.

What determines a successful test?

A successful test is determined only by the amount of money generated. If you didn't make enough to cover the advertising cost, then your test failed. Now, it's time to evaluate why it failed, and whether it's worth the time to move forward.

What do you do after a successful test?

After a successful test, you don't just roll out the big guns and start firing away. No way. You perform a bigger test to verify the success of the small test. If you sent mail to 1,000 people the first time, you would send mail to 25,000 people the second time. If the second test is successful, then you start firing your cannons. And that's where the big money comes from.

Conclusion

There really are a lot of things to think about, and execute on before you've got a successful product.

People with a lot of money or passion for a certain product can take one idea and over time make it work - no matter the first tests results. But I would venture a guess to say that most people don't have a lot of money to blow on tweaking and modifying, and most people aren't married to their product forever. Even Donald Trump quits when something isn't working. He just published an article on knowing when to quit.

But, once you've found that special market that has an appetite for your special flavor of product, you're ready for success.

My standard disclaimer: Get off your lazy back-side and make something happen. Go fail miserably. Research a market. Write a sales letter. Test a new product. And fail spectacularly. For God's Sake Do Something!! Without the first nine failures, you'll never know enough to make that tenth idea into a million bucks. Go for it!