managemnet company strategy managemanet Validating Product-Market Fit in the Real World

Validating Product-Market Fit in the Real World

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To test new products, most companies rely on creating “minimum viable products” and testing customer feedback, or conducting focus groups or marketing surveys. There’s another method companies should try: “heat testing,” or testing consumers’ reactions to online ads. Heat-testing is revolutionary because it takes place in the real world. Unlike focus groups or surveys, which rely on what consumers say, people who click or like an ad reflect real behavior and interest, which can be a more powerful form of feedback.

Since the invention of surveys in the 1930s, companies have used market research to gauge consumer needs. Focus groups generate inputs about behavior and attitudes. Tools like parallel analysis Examine the trade-offs consumers make when considering product purchases. Large panels estimate the market opportunity for a particular product.

What do all market research methods have in common?

None of them happen in a real-life environment. In each case, consumers know they are part of the research effort. What does this mean for a product marketer? They get a lot of data about how people behave picture their nature and character. What’s missing? Data and insights about actually attitude

There is an easily accessible way to solve this problem: online advertising as market research.

Responses to a digital ad — clicks, likes, email sign-ups — are more reliable indicators of purchase intent because they reflect how consumers behave when no one is watching. – well. Testing through advertising captures real-life data about how customers respond to new product concepts, rebrands, and other major strategic moves. We call this type of research “heat testing” – finding that spark between the offer and the audience that is the source of the product’s suitability in the market.

Here are three solutions that heat testing offers to marketers:

1. Proving the need for new product concepts

Let’s say you’re working on a new drink concept: a dissolvable tablet of different flavors like elderflower and hibiscus that enhance a glass of water. The product offers sustainability benefits – no bulk packaging, no shipping water – and the artisanal approach to the flavors makes it feel a bit luxurious. It is also customizable: the combination of flavors creates a personal combination.

There’s one question everyone wants answered before they launch a new product like this: Will anyone buy this thing?

Conventional market research has many shortcomings in answering this question: Loudmouths in focus groups eliminate important opinions, conditional questions abound in surveys (“If there was ___, would you buy it ?”), and the amount of time and work required for ethnography and the like does not fit the pace of innovation required to remain relevant.

Fortunately, ad platforms lend themselves to multivariate testing, making it straightforward to access data-backed insights. Platforms such as Facebook, Instagram, Twitter, LinkedIn, and Google have easy access to millions of consumers who can be divided into discrete audiences and targeted with multiple ads with new products. Some ads work and some don’t, providing data on where to retool the variables.

Test variables may include the definition and features of the new product; the positioning, branding, messaging, and creative style that brought it to life; target groups of consumers and calls to action to attract them; and other factors such as pricing make up the elements of a marketing campaign.

In the case of the beverage product, you can try three positions – Continuity, Luxury, and Personal Party – each animated by a couple of ads. (Ad creation alone doesn’t necessarily make a position a success or failure; using at least two creative techniques can reduce false positives.) And because your company wants to develop a younger customer base, you can target three discrete audiences ages 25–34 — let’s call them Planet People, Holistic Hipsters, and Spirits-Free Spirits — with ad.

Just like a regular marketing campaign, ads, landing pages, and supporting content are integrated into a cohesive user experience. But some elements are not like a regular marketing campaign: a) The presence of “in progress” or “coming soon” to show the status of the product concept, b) the lack of previous customer data, and, of course, c) the fact that there are many marketing strategies that have been tested in parallel.

How do you know if there is a demand for your beverage concept? If a potential customer gives your company their email address for a product that doesn’t exist yet, you’re on to something. In an age where privacy is more valued, email is a currency; a high email sign-up rate is the best possible validation of demand without actually building the product.

2. Finding new customers for an existing product

Heat testing can also identify growth opportunities for existing products. Repositioning a legacy product for new audiences is risky: The new message or imagery may alienate an existing customer base.

Testing the new position on a small scale with new audiences indicates the suitability of the product market, which gives brands the opportunity to open additional streams of income without significant investment. Further testing of winning positions with core audiences – again on a small scale – can point to any risks presented by the new message.

3. Learn how target audiences respond to offers

The purpose of heat testing is to find heat – the match between product and customer – and the marketing elements to make that match. Heat-testing is not A|B testing, which takes place in environments where there is already traffic and where users are automatically directed to variations of existing web pages to guarantee randomized sampling.

The testing strategy is different through heat-testing. Because the product and/or audience is new, traffic to landing pages must be generated, often in areas where a brand lacks existing mechanisms to attract potential customers.

Generating that traffic for new product concepts isn’t a chore — it’s a learning opportunity. Will the audience of “spiritless” Millennials respond more to the Personalized Party position or the Sustainability position? What combination of positioning, creative style, and audience works best to generate sign-ups for each concept? What proportion of people sign up to learn more when they get to the landing page? What is the cost of each email sign up, and what can we learn about the cost of customer acquisition? Does the ad platform behave differently? Answering these big, important questions can de-risk expensive new marketing initiatives.

. . .

Heat-testing is revolutionary because it takes place in the real world. Every click on an ad is data. Every save or like is data. Every landing page view — yes, data. And when you compare the performance of each campaign variable, you learn a lot about how to position a new product. More importantly, those learnings are statistically valid.

Our innovation approach takes Eric Ries’ minimum viable product (MVP) concept to a new level. In his book The Lean Startup, Ries highlights the benefits of launching an MVP and improving the product after launch based on real user feedback. The heat-testing means that the MVP may be smaller than Ries thought – that is, not even a product, but still something that consumers can respond to.

Finding the market suitability of the product through the heat test requires the reconciliation of many variables, so following scientific principles is essential for a valid result. But getting insights based on real-world behavioral data about purchasing decisions makes it worth the effort. The end product? A “heat map” that shows the most responsive audience segments and the most efficient ways to engage them.

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