Cost-Effective Market Testing – Time and Effort Well Spent

by | Sep 20, 2022

Cost-Effective Market Testing – Time and Effort Well Spent

Are they aware, do they care, will they respond, will they listen, will they change, will they pay, will they adopt, will they renew, will they advocate? 

What do most early and mid-stage B2B companies have in common? 

We have seen hundreds, and the most consistent challenge across the board is a lack of focus, either in the product suite or market segmentation. 

Worst case scenario, it’s both. 

Most companies cast too wide a net, particularly in light of limited resources. A “boil the ocean” approach doesn’t allow for the necessary depth to succeed in an effective go-to-market (GTM) strategy. 

Diversifying both offerings and/or breadth of market coverage usually feels like the right and safe approach. Grab any dollar you can, right? After all, it makes sense to look at successful companies and do what they do. 

What this approach misses is the understanding that successfully diverse companies are mature — companies that likely started with one product in one market. Having unfocused and varied offerings without complete validation can slow — and even kill — your growing business.

As Geoffrey Moore, the revolutionary marketing academic and author of the book “Crossing The Chasm,” famously said, “You can only do one good thing at a time.” 

At Altus, we are true believers in this maxim — especially for early-stage and developing companies. Hard as it seems, there are many reasons why your business has to bring a laser focus to both sales and marketing by doing one thing right before you begin to expand instead of following the shiny object.

To start and grow efficiently, companies must go through a rigorous process to develop and market their core offering and early target markets. It is also essential to validate your hypothesis before fully committing to a launch into a new segment. 

The Right Way to Think About Market Testing 

Speed-to-market has become very trendy with boards and investors alike, and the idea of “go fast and break things” has a few very notable successes. However, far less popular is the practice of actually testing your GTM strategy before pouring cash into a launch. Testing feels like lost revenues and potential market share. 

Shouldn’t companies just go for it? However, there is another trendy phrase out there: pivot. 

In our experience, this popular business phrase just translates as ‘Oops, trying another approach;’ We didn’t test. 

Of course, you could get lucky; but why take your whole company and budget down the path of a single strategic offsite decision and the bravado of a bullish management team? 

Doing a small market test is the prudent approach, where the loss of a few months is more than made up for with the learnings and iterations gained in testing. All of that good information gets integrated into the full launch, and far less money is put at risk.

“But we tested with beta customers.” Beta customers do not equate to a market test. Instead, beta sites are typically relationship-based guinea pigs that help you to develop an effective product.

Market testing, on the other hand, is the process of taking that product or full mock-up and introducing it (the value prop, benefits, and messaging) to non-relationship prospects to see if they bite. 

Are they aware, do they care, will they respond, will they listen, will they change, will they pay, will they adopt, will they renew, will they advocate? 

All of these critical questions only truly get answered and validated in a GTM strategy and campaign. Yet to get the answers and validation, you don’t need huge volumes. 

What you need are data and proof points vs. opinions and hope. Trust, but verify.

Some Examples of The Power of Market Testing

It’s easy to look at gigantic super-companies that have offerings as diverse as the sea and want to imitate what they’re doing. But let’s not forget that those behemoths were once small, well-focused companies. 

Amazon — The Greatest Success Story of Focus Before Expansion

Many don’t know, or have forgotten, what Amazon looked like before it became the internet giant it is today. However, its humble — and focused — beginnings are what created the effective culture behind its massive growth and breadth. 

Amazon began its history in 1994 as an online book store, mostly competing with local stores and Barnes & Noble. It wasn’t until Amazon was dominating the book market and earning its “world’s largest book store” brand four years later that the company began to slowly expand its offerings.

Focusing all its resources on offering just books allowed Amazon to dominate its competition. Diversifying too early and too quickly would have arguably stunted Amazon’s growth.

Like Amazon’s product focus, market segment focus is extremely important to get right, arguably even more. 

Docusign Reassessed, Tested, and Focused Their Offering

When Altus first met DocuSign, it was far from the widely recognized electronic agreement leader it is today. The initial strategy, launch, and efforts were based on the idea that the product was applicable to any contract in any industry. This caused Docusign to market to many different verticals — basically anywhere a contract might be involved. 

However, a lack of brand recognition coupled with an innovative product that created legal skepticism meant that this strategy spread the company’s resources too thin to achieve the expected traction.

True traction and success came only after stepping back and diving deep into the core factors of the leading industries and further committing to focus on the needs of one. The voice of the customer, the data, and the trends all revealed that real estate was their beachhead (or their “Books” in the new online retailer analogy). 

After testing with focused landing pages, collateral, and a target list of high-odds real estate companies, true predictable and repeatable sales started to happen. The shift to vertically focused sales and marketing, all vetted and prioritized based on test market engagement, allowed DocuSign to grow its revenue from <$1m to >$19m in 36 months. 

“The person with the best execution wins, not always the person with the best idea.” 

— DocuSign co-founder, Court Lorenzini

It’s been proven time and time again that it’s all about testing. The use of unbiased, focused strategies that are grounded in market need, coupled with an opportunity to test assumptions, allows for the validation of a good idea and helps you avoid costly and dangerous pivots.

Depth of Market Research vs. Depth of the Market Test

The phrase “pay me now, or pay me later” comes to mind. Successful products and launches typically come as a result of great market research and insight. If you invest in that effort up front with a comprehensive market analysis and segmentation, the depth of the testing phase can often be limited.

On the contrary, if the product and GTM strategy are mostly internal and opinion-based, the burden falls later. Therefore, diving deep into creating and executing market test scenarios becomes necessary.

For example, when Altus performs market research to select the best offering in the best market segment (what we call a Market-Driven Baseline), we analyze both quantitative and qualitative information from several discrete vantage points, each independently sourced and presented:

  1. Historical CRM data– traction, conversion, timing, volume, etc.
  2. Financial performance – margin, revenue, utilization, churn
  3. Customer satisfaction
  4. Buyer perspective – interviews with wins, losses, prospects
  5. Channel perspective – interviews for interest and fit with partners
  6. Market data – primary research: TAM, SAM, Needs, Volume, Growth, Trends
  7. Industry trends – expert interviews
  8. Competitive challenge – interviews with sales and marketing executives
  9. Selling challenge – assessment of prospecting, closing, and growth
  10. Delivery challenge – alignment and adjacency to core competence

Reviewing and analyzing this level of information with the management team creates a lot of consensus and conviction that may warrant moving straight to launch. Nonetheless, we typically still validate and iterate from key learnings in lower volume campaigns prior to full roll-out.

More common than the above approach is a product and market strategy defined from internal opinions, past experience, investor pressures, etc. It is unclear if this gut-driven foundation is due to a lack of resources, patience, or ego. 

Most simply do not know a better process, what data to collect, how to collect it, how to analyze it from a true sales and revenue perspective, or how to present the findings such that the whole company aligns behind the outcome. 

In those cases, the rigor of proper market testing is definitely warranted and always pays off. 

What is Market Testing the Right Way?

Market testing is about trying to replicate a full launch with less size, scale, and resources

The benefits of learning about challenges and issues at a smaller scale are obvious. You can iterate quickly with less cost and risk until you feel confident and ready.

The other goals for vetting new products and markets are to reduce team distraction and to avoid moving too many resources from current and core offerings. 

Too often, optimism or anxious necessity drives companies to move too big, too fast. Then when things don’t go smoothly, companies tend to move too many resources and attention to the unproven model, which consequently reduces momentum and traction from the core. Now, you have magnified your challenge.

Firms like Altus can provide proven processes, incremental resources, and an experienced and unbiased perspective, so the company stays focused until the new strategy is validated and improved.

Below is an outline of some solid steps that we suggest in order to allow you to learn before you launch. It’s mostly an outline for conducting an outbound and sales-driven test. 

Alternatively, you can do an online or marketing-driven test with ads, SEO, social media, etc., to see if the market responds to passive messaging.

Depending on your product and space, online can be effective. In most B2B and higher value products, the outbound process typically yields more direct feedback faster.

Step 1: Create a Dream Scenario and Mockup Outline 

The first step of enacting an effective market test is to mock up your dream scenario and create an outline of the proposed test. 

At a minimum, you should develop three components: 

    1. Define the offering. Knowing your offering is the creation of classic product management/marketing definitions coupled with Amazon’s process of PR-FAQ, where you “work backward” by writing a press release and FAQ relating to your offering before anything else. 
    2. Define the ICP or HOT customer profile. Without defining your ideal high-odds customer profile, your marketing efforts will likely fall flat. In as detailed a fashion as possible, define the niche, the personas, and all the target attributes. This process is essential for marketing as well as for gathering information during the test.
    3. Define your metrics for success. In any given market test, data is abundant; how you interpret that data will determine success or failure. Defining opens, engagement, interest, conversion, timing, etc., are all metrics you will need in order to decide go, no-go, or iterate. 

Step 2: Design and Create a Sales Campaign

The next step is to design and create a small-scale sales campaign for your test. This step encompasses three smaller steps:

  1. Set the parameters of your market test; 
    • TAM: Decide on the specific region, the number of companies, and the subset of your TAM (total addressable market.)
    • HOT/ICP: Properly identify and narrow down the specific HOT/ICP that you believe best exemplifies the larger space and opportunity.
    • Timeframe: Decide on your timing (i.e., when you will first check progress to see if your test is succeeding or failing.)
  2. Select (or hire) a small “tiger team” from inside or outside of the company to focus on the test. The goal is to distract as few resources and as little energy as possible from existing sales and the things that are already working.
  3. Source the companies and contacts that match the ideal profile. The number you target for your test depends a lot on the volume of your customer goal and price point (ie, big tickets and small customer base translates to smaller test and vice versa for high volume, transaction type offerings). You are not looking for statistical validity, simply enough data to feel confident in the outcome from a full launch.

Step 3: Mockup up the Sales Collateral

While testing, it is important to create low-cost social proofs in the form of one-pager infographic-type materials, blog posts, and simple landing pages that position your offering as credible, robust and already a success. 

These are the places where you direct today’s buyers who like to research before they engage. These materials and web-sandboxes remain off the mainstream site and resources until proven.

As your market test campaign continues, you will likely receive a level of positive feedback that you can incorporate and iterate into your main site and materials.

Step 4: Execute the Campaign

At this point, you need to arm a quality testing team with 1:1 sales tools and infrastructure. Typically, this involves creating a multi-channel sequence of touches designed to alert and compel your target prospects to engage.

The goal is live conversations to outline your value proposition and see what sticks. And while the ultimate metric is frictionless sales and conversion, the core of the test is to learn and understand what is really going on.

The best people to run these campaigns are renaissance vs. coin-operated type sales personalities and behaviors. While the tone of the outreach and campaign is largely sales and marketing, collecting the data and signal from that process is the most important part.

You may be selling, but you are mostly in a marketing research model.

Step 5: Track Against Metrics

While this step is rather self-explanatory — it’s important to track your progress against all metrics — it is most often the step that is poorly executed.

When tracking your progress, you must track all user behaviors to determine success or failure and where it is occurring as early as possible. In addition to all the qualitative feedback, it is also helpful to collect data such as:

  • Open rates
  • Click rates
  • Responses
  • Engagement
  • 1st meetings
  • Opportunities created
  • Pricing responses/ranges
  • Speed at each stage
  • And certainly closed deals

Another aspect of using these metrics vs. “closed” as the only true proof is time. One of the benefits of all our experiences is seeing patterns at the early stages so we can adjust or decide early.

If you believe the sales cycle is 6 months for the offering, we certainly don’t believe the test needs to be at least 6 months. There should be enough signal in the early rounds to make a lot of the adjustments or decisions needed.

A market test can only really be considered successful if you are properly tracking against every metric that signals success or failure.

Step 6: Meet and Discuss 

During and certainly after a test campaign, you should get together with all the stakeholders behind the strategy and discuss the findings. Show up with the tracking data and compare notes on any interactions with the prospects.

You should have enough feedback from this process to either feel confident and move to launch, abort, significantly change the strategy, or to continue to iterate as outlined below. The learnings and data from this process will be key to improving the success of the full initiative if it is implemented.

Step 7: Iteration Question

Not all market tests are a one-and-done process. 

Sometimes it is necessary to perform iterations of the test with specific modifications. After meeting and discussing the results, it may be apparent that there were specific aspects of the offering or test that needed to be tweaked or improved. 

When going about this, you should set barriers as to how many rounds of modifications and tweaks you will make to test the effort. 

This is where opinions and emotions can affect the testing effort. If someone overseeing the test wants it to succeed at any cost, they may continually want to tweak the test until it shows positive results. 

You must remain objective. Pushing products and markets uphill is simply too hard in today’s market —  and rarely cost-effective. 

It may also be good practice to kill the project and put it on the shelf to marinate for some months or quarters.

Conclusion: You Can Do It — Altus Can Help

Altus Alliance’s goal is always to help your business succeed by finding what works quickly without derailing what is already working. 

Still not confident about executing a market test? We’d be happy to chat with you about your current challenges and help you figure out your next steps. Contact us.