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The majority of all start-ups fail - this is no longer a secret. Many start-ups develop products or services that eventually no one buys or books. The reason for this is very often the lack of the product-market fit. To avoid this, early market tests are absolutely essential. Learn why market tests should not be dispensed with and what such a market test can look like in concrete terms.
What makes start-ups differ from classic foundations in particular is the high degree of innovation in the business idea. For example, if you open a furniture shop, an Italian restaurant or an online shop for hair care products, you can assume that there is interest from a large target group and that the business model works, since the customer solution fit has already been provided by numerous other established companies. Here, success is more dependent on factors such as the implementation, product design, service quality and marketing, as well as location and other environmental factors. Start-ups, by contrast, try to convince with innovative ideas that have not yet been tested on the market. The situation is similar for innovation departments of large companies that want to develop new, innovative products or services and bring them to market in addition to their regular business. And with that, questions such as "Does our idea really have potential?", "Is the market big enough?", "Who would be the target group?" or "What would this product be worth to customers?” arise.
The means to success is market testing in an early phase. This helps to find answers to such questions and should be part of every well thought-out market entry strategy. Let us tell you why you should rely on early market tests and what they can look like.
A lot of time and resources are often invested in the development of new products even before the potential of the idea has been established. Testing an idea on the market early on can save a lot of time and money by determining whether there is a basic interest in a product and whether the development is going in the right direction, or if you are in fact hitting a dead end and should take the idea back to square one.
Although people are oftentimes interviewed about a new product idea relatively early on, to gather initial feedback, these (usually qualitative) data are only of limited value. Popular methods are individual interviews or focus group interviews, where potential customers are introduced to a new product and then asked questions about it. Unfortunately, there are many influences that distort the validity of these data – e.g. the influence of the interviewer or the tendency of interviewees to give answers that they believe are desired. In addition, interviewees often lack imagination and express interest while they would not buy the product under real conditions. With a market test in which, for example, a landing page is used stating that a product actually already exists and is for sale, the interest and willingness to buy can be concretely checked and proven by means of KPIs such as click-through rates (CTR) or conversions.
Through customer and market insights , a market test provides a good set of basic guidelines on how a product should be marketed. If the interest in a product is tested via a social media or a Google Ads campaign, for example, different advertising messages can be sent out to different target groups and the performance can be analysed via KPIs such as the click-through rate. These results provide good indications as to which advertising messages work well with the target group and which sales arguments are not convincing. Visual components such as colours, or the visual language can also be tested. All of this will come in handy when it comes to developing a marketing strategy. In addition, the suitability of different channels for the product or brand can be tested.
The results mentioned in the previous section can of course also provide valuable information about the target group itself – in terms of age, gender, or interests, for example. After an initial market test, it is usually easier to narrow down the target group, and new hypotheses or new considerations about channels and advertising messages appropriate to the target group can be made.
The real data generated by market tests as well as validated or rejected hypotheses often serve as a basis for convincing decision-makers of an idea, or at least making their decision easier. Based on real market feedback, they can better assess the potential of a business idea and whether it should be further developed, implemented or discarded.
The goal of the market test must be clear from the beginning. Therefore, hypotheses, or assumptions – e.g. about the problem or solution, value proposition, target groups, price, distribution channels, etc. – should be developed first. These hypotheses must then be validated or discarded through the market test. It must therefore be possible for the hypotheses to be validated, and the parameters as to when a hypothesis is considered validated or disproved must be determined in advance.
While offline market tests such as pop-up stores with real products in an appealing location often require months of preparation, online market tests can usually be implemented within a few days or weeks, depending on the complexity and the extent of the hypotheses to be tested.
The basis for most online market tests is an attractive landing page on which a fictitious product or service can be realistically explained in detail. For example, by means of social media ads, Google Ads or e-mail campaigns, the product or service can be placed with an appropriate target group and thus bring traffic to the landing page.
Depending on which hypotheses are to be tested or how detailed the results should be, one must consider how to validate these hypotheses. If, for example, you only want to get a basic idea as to whether a product will appeal to a certain target group in a very early phase of product development, a simple social media campaign with a low budget or a Google Ads campaign and a simple one-page landing page for information purposes can already be sufficient to test the interest by means of click rates on the ad and dwell time on the landing page. The whole thing can be set up within a few days and over a test period of about two weeks, meaningful results can be achieved.
If, however, you want to test the willingness to buy and pay for a new product, a little more effort is required. For example, you can use A/B tests to play out ads with different prices via a Facebook or Instagram campaign. The click rates on the ads already show an initial tendency, while the willingness to buy and pay can be tested even more realistically via different landing page variants with corresponding calls-to-action. Since we usually test fictitious products or services that can’t actually be bought yet, there are various tricks that can be applied here. Probably the simplest and safest option is to be transparent and openly admit that the product is still in development and that one can register for it with an e-mail address via a waiting list. Another possibility would be to display an error message during the ordering process and thus ensure that the customer cannot complete the process. Another, more elaborate option is to let the customer complete the order and then inform him or her via e-mail that the product is unfortunately not available at the moment and that the customer will be refunded his or her money (which should of course be done as quickly as possible).
Companies that already have a customer base and, in the best case, newsletter subscribers, can also opt for an email campaign to validate a new product idea quickly and easily. For example, if you want to test a new product in different variants that differ in certain characteristics, you can also carry out an A/B test with different newsletter variants and test tendencies with clicks or even a short survey embedded in the newsletter.
There are numerous possibilities for online market tests, which differ considerably in terms of effort and in the quality of the results. In any case, it is necessary to consider exactly which hypotheses are to be tested and which results are expected first. Only then you can decide which type of market test is most feasible.
