TEST MARKETING

Before launching a marketing campaign or new product on a broad scale in the market, business utilizes a
tool called Test Marketing to see whether it will be successful.

● Test Marketing is a tool used by the companies to check the viability of their new product or a
marketing campaign before it is being launched in the market on a large scale.
● The market test is generally carried out to ascertain the probable market success in terms of new
product’s performance, the level of acceptance of the product, customer satisfaction, and the
efficiency of the marketing campaign.
● Through test marketing, a marketer may ascertain the success ratio of the new product and the
marketing campaign and can design a marketing mix (viz. Product, Price, Place, Promotion) very
well before its launch.

Types of Test Marketing

1. Consumer-Goods Market Testing

This test is conducted to know the consumer behavior in terms of:

● Trial: Whether a consumer will try a product, at least once.

● Repeat: Whether the consumer will repurchase it after the trial.
● Adoption: Whether the consumer accepts the product and will purchase it again.
● Purchase Frequency: How often the consumer will buy the product.

To ascertain these variables the following tests are conducted.

Sales-Wave Research

- Under this test, the consumer is offered the product, again and again, free of cost.
- This is done to determine the willingness of the customer to use the product every time it is
offered.

Simulated Test Marketing

- Under this test, 30-40 customers are selected and are invited to a store where they can buy
anything.
- The new products are placed with the old or competitor’s product and then consumer’s preference
is ascertained through their selection of the products.
- In case, the new product is not chosen by them, then the free samples are given to the customers
and are inquired telephonically about their product experience after some weeks.

Controlled Test Marketing

 - Under this test, they select certain stores in different geographic areas and ask them to keep its
new product into their stores in return for a fee.
- The company controls the shelf position, displays, point of purchase promotions and pricing.

Test Markets

- Under this., the firm chooses the representative cities where the full-fledged launch of the new
product is done starting from the promotion campaign to the ultimate sales.
- Once it is successful, the firm goes for the national launch.

2. Industrial-Goods Market Testing

Alpha testing (within the firm)

- Alpha Testing is done within the firm by test engineers or employees who check the marketing
mix of a new product and fix the issues arising in any steps of launch.

Beta Testing (with outside customers)

- The Beta Testing is done with the customers where they are asked to use the product and give
their feedback on its usage.
- The other way to test the business goods is to introduce it to the trade shows and observe the
reaction of customers to it.
- Also, these goods can be tested at distributors and dealers showrooms and the attention of the
customers can be gained.

There are a number of advantages to test marketing. Before making a major investment in a mass
production or extensive distribution to a national market, it enables firms to obtain direct customer
feedback on a product or campaign from the real-world. This can assist in preventing potentially
expensive errors if the product’s performance is poor or it is not well appreciated. Furthermore, customer
feedback can offer insightful, reasonably priced data on various areas of consumer behavior and
preferences that can be used to optimize the finished product or campaign. In order to increase interest
and demand when a new product or campaign is eventually launched. Test marketing also aids in creating
buzz and excitement about it.

DEMAND FORECASTING

Demand Forcasting

Demand forecasting is the process of estimating how much demand there will be for a product in the
future. Demand is typically measured in sales, so the goal of demand forecasting is to predict how many
units of a particular product you will sell in a given period of time.
Types of demand forecasting techniques

Macro-level

Macro-level demand forecasting looks at general economic conditions, external forces, and other broad
things disrupting commerce. These factors keep a business in the know around portfolio expansion
opportunities, market research intel, and other shifts in the market.

Micro-level

Demand forecasting at the micro-level can be specific to a particular industry, business, or customer
segment (e.g., examining demand for a natural deodorant for millennial customers in Chicago, IL).

Short-term

Short-term demand forecasting looks to predict demand within a short period of time, usually less than 12
months. These demand forecasts often inform a brand’s day-to-day operations and inventory management
(e.g., planning production needs for a Black Friday/Cyber Monday promotion).

Long-term

Long-term demand forecasting is looks to predict demand over a longer period of time, usually a year or
more. Long-term forecasts help a brand identify and plan for seasonal patterns, may influence its growth
trajectory, and informs its overall business strategy. For instance, if a brand forecasts high demand for the
next five years, stakeholders may feel more comfortable opening a new facility, expanding internationally,
or launching new channels.

Importance of demand forecasting for ecommerce

Without demand, there is no business. And without a thorough understanding of demand, businesses
aren’t capable of making the right decisions about marketing spend, production, staffing, and more.

Preparing your budget

When you know how much inventory you’ll need to meet demand, you can create a budget you’ll stick to.
Demand forecasting helps brands make strategic financial decisions that protect profit margins, improve
cost-efficiency, streamline inventory accounting, and decrease overall spend.

Demand planning and scheduling production

Nothing kills scalability (or your reputation) faster than being sold out for weeks on end. Proper demand
forecasting and inventory control can help you plan production correctly, so you have inventory on hand
when your customers want it.

any facility.

Storing inventory

The more inventory you have on hand, the more expensive it is to store. With accurate demand
forecasting, you can avoid accidental over-stocking, and the hefty holdings costs that come with it.

Developing a pricing strategy

Demand forecasting doesn’t just help you maintain ideal inventory levels – it can also enable you to price
products based on demand.

Factors influencing the customer demand life cycle.

Seasonality

Seasonality refers to changes in order volume throughout a specific period of time. A highly seasonal
brand may experience spikes and dips in demand around a particular time period, event, or season.

Competition

Competition affects demand as there are more options for your customers to choose from and more
companies vying for their attention.

Types of goods

Demand forecasting will be very different for different products and services, from perishable goods that
expire quickly to subscription boxes that come at the same time each month.

Geography

The geography of where your customers reside can greatly impact a demand forecast.
How to forecast demand in 4 steps

CONJOINT ANALYSIS

Conjoint analysis is a marketing research technique designed to help managers determine the preferences
of customers and potential customers—not to profile customers, but to analyze the product itself

Conjoint analysis seeks to determine how consumers value the dif­ferent attributes that make up a product
and the trade-offs they are willing to make among those different attributes or features. As such, it is best
suited for products that have very tangible attributes that can be easily described or quantified.

Types of conjoint analysis

Choice-based conjoint analysis (aka discrete choice conjoint analysis)-This is the most prevalent type
of conjoint analysis that market researchers use. Choice-based conjoint analysis (CBC)—or discrete
choice conjoint analysis—simulates the market and demonstrates how respondents value certain attribute
levels.

Adaptive conjoint analysis (ACA)-Adaptive conjoint analysis (ACA) is similar to CBC analysis. The
difference though, is that each question updates in real time and adapts to each respondent's choices.
Adaptive conjoint analysis is ideal for when respondents need to evaluate more attributes than in a
choice-based survey.
Full-profile conjoint analysis-This conjoint analysis technique requires a full description of each product
in a choice task.

Menu-based conjoint analysis-This allows companies to see how potential customers may value certain
combinations of attributes and levels.

CONJOINT ANALYSIS APPLICATIONS

1.Trade-Off Analysis

In a trade-off analysis, a researcher compares the overall value a consumer obtains—the utilities—from
two competing products to discover what an average customer would be willing to give up, in terms of
one attribute, to gain improvements in another

2. Market Share Forecasting-In order

to use conjoint output for this kind of prediction, two conditions must be satisfied:

a. The company must know the other products, besides its own offering, that a

consumer is likely to consider when selecting in the category.

b. Each of these competitive products’ important features must be included in the experimental design.

3. Determining Attribute Importance- Quantifying these attribute importances using the conjoint output
is straightforward and can provide interesting and useful insights into consumer behavior.

LOGISTIC REGRESSION

LOGISTIC REGRESSION: a data analysis technique that uses mathematics to find the relationships
between two data factors. It then uses this relationship to predict the value of one of those factors based
on the other.

BENEFITS OF USING LOGISTICS REGRESSION

Speed - Logistic regression models can process large volumes of data at high speed because they require
less computational capacity, such as memory and processing power.

Flexibility- You can use logistic regression to find answers to questions that have two or more finite
outcomes. You can also use it to preprocess data.

Visibility- Logistic regression analysis gives developers greater visibility into internal software processes
than do other data analysis techniques. Troubleshooting and error correction are also easier because the
calculations are less complex.
MOVING AVERAGE

MOVING AVERAGE

Moving Average is utilized in marketing analytics as a statistical technique used to smooth out data
fluctuations and identify trends over time. Useful for analyzing sales performance, website traffic, or any
other metrics that experience short-term variability. It is called a “moving” average because it is
continually recalculated based on the latest price data.

TWO TYPES OF MOVING AVERAGE (SMA)

1. Simple Moving Average - straightforward technical indicator that is obtained by summing the
recent data points in a given set and dividing the total by the number of time periods. Gives equal
weight to all values.

2. Exponential Moving Average - Is a weighted moving average that gives more importance to
recent data changes than the historical data. This makes the EMA more responsive than SMA.

SIMPLE MOVING AVERAGE VS EXPONENTIAL MOVING AVERAGE

NAIVE METHOD

Naive Method

In this method of forecasting, the future values are set to be values of the last observation. When data is
not enough to create a predictive model, this method is used to supplement forecasts for the near future.

Example of how naive forecasting method perform in excel:

Formulas to create naive forecasts for each month:

● Mean absolute percentage error

● Mean absolute deviation
How to calculate mean absolute percentage error:

The mean absolute percentage error turns out to be 9.9%.

How to calculate mean absolute deviation:

 The mean absolute deviation turn out to be 3.45.

The naive method can be useful in some situations, such as:

Planning next week's work

Allocating staff to tasks

Predicting the number of staff available to perform activities in the next reporting period

LEAST SQUARE METHOD

The least squares method is a form of mathematical regression analysis used to

determine the line of best fit for a set of data, providing a visual demonstration of the
relationship between the data points. Each point of data represents the relationship
between a known independent variable and an unknown dependent variable. This
method is commonly used by statisticians and traders who want to identify
opportunities and trends.
Pros:

Easy to apply and understand

Highlights relationship between two variables

Can be used to make predictions about future performance

Cons

Only highlights relationship between two variables

Doesn't account for outliers

REGRESSION METHOD

Regression is a statistical method. It’s used for analyzing different factors that might influence an
objective such as the success of a product launch, business growth, a new marketing campaign
and determining which factors are important and which ones can be ignored.

How does regression analysis work?

Regression analysis starts with variables that are categorized into two types: dependent and
independent variables. The variables you select depend on the outcomes you’re analyzing.

Dependent Variable:

The dependent variable is essentially the "outcome" you’re trying to understand or predict. It’s
the focus of your study, whether you’re looking at quarterly sales figures, customer satisfaction
ratings, or any other key result. Think of it as the result of the influence of other factors. To
identify the dependent variable, ask yourself whether it’s the end result of your analysis, whether
it relies on changes in other variables, and whether it’s measured after those changes have been
made.

Independent Variable

Independent variables are the "factors" that might influence or cause changes in the dependent
variable. These are the variables you manipulate or observe to see their impact on your outcome
of interest.

Types of Regression Analysis

Simple Linear Regression

Purpose: Simple linear regression is used to model the relationship between two variables, where
one is considered the independent variable (predictor) and the other is the dependent variable
(outcome).

Business Application: It's frequently used to identify how a change in one variable will affect
another. For example, predicting sales based on advertising expenditure or estimating employee
productivity based on hours worked.

Multiple Linear Regression

Purpose: Multiple linear regression extends simple linear regression to model relationships
between multiple independent variables and a single dependent variable.
Business Application: Businesses use it to understand how multiple factors influence outcomes.
For instance, predicting home prices based on features like square footage, number of bedrooms,
and neighborhood.

Non-linear Regression
Purpose: Non-linear regression is used when the relationship between the dependent and
independent variables can take various functional forms.

Business Application: It is applied when modeling complex business processes, such as

predicting customer satisfaction scores based on multiple factors with non-linear relationships.

DECOMPOSITION METHOD

Decomposition involves breaking down a time series into its basic components: trend, seasonality, and
irregular patterns.

Key Components of Time Series Decomposition:

 Trend - This represents the long-term progression of the series. It captures the overall movement
of the data over an extended period.

Seasonality - This refers to the repeating fluctuations or patterns that occur at regular intervals
during a specific period, such as daily, monthly, or yearly. Seasonality is often driven by factors
such as holidays, seasons, or events that consistently influence behavior.

Noise/Irregularity - The residual component accounts for the random variation in the data that
cannot be explained by the trend, or seasonal components. Residuals are essentially the
"leftovers" after the other components have been accounted for.

Decomposition Methods

Additive Decomposition - This method assumes that the components (trend, seasonality,
residuals) combine linearly; the observed value can be modeled as the sum of these components.

Formula: Y = Trend + Seasonal + Residual

Multiplicative Decomposition - This method assumes that the components interact in a

multiplicative manner; the observed value is modeled as the product of the components.

Formula: Y = Trend × Seasonal × Residual

TIME SERIES ANALYSIS

Time series analysis is a specific way of analyzing a sequence of data points collected over an interval of
time. In time series analysis, analysts record data points at consistent intervals over a set period of time
rather than just recording the data points intermittently or randomly.
Time Series Analysis Types

Classification: It identifies and assigns categories to the data.

Curve Fitting: It plots data on a curve to investigate the relationships between variables in
the data.

Descriptive Analysis: Patterns in time-series data, such as trends, cycles, and seasonal
variation, are identified.

● Explanative analysis: It attempts to comprehend the data and the relationships between
it and cause and effect.
● Segmentation: It splits the data into segments to reveal the source data's underlying
properties.

SOURCES:

https://corporatefinanceinstitute.com/resources/equities/moving-average/#:~:text=A%20moving%20avera
ge%20is%20a,to%20arrive%20at%20an%20average.

https://www.shipbob.com/blog/demand-forecasting/#:~:text=Demand%20forecasting%20is%20the%20pr
ocess,a%20given%20period%20of%20time.

https://www.qualtrics.com/experience-management/research/regression-analysis/

https://www.simplilearn.com/tutorials/excel-tutorial/regression-analysis#regression_analysis_examples

https://medium.com/@roshmitadey/time-series-decomposition-62cbf31ab65eab65e