If you had to choose between two cars with the same features and price. Which one would you choose? The choice would be difficult. Now, let’s say one of these two cars is a newly launched (limited edition) with only ten units in the world. This time the choice would be easy, right?
Running a pre-order sale is commonly used by companies launching a new product. Pre-ordering can be an extremely beneficial strategy to increase conversion rates. This article will expand upon the concept of pre-ordering, why and when you should use it, and most importantly, how to conduct this strategy. Let’s get started.
What is a pre-order?
Pre-orders offer exclusive access to products not available to the masses yet. For example, pre-orders can be offered on products that are not manufactured or even on sale yet. When customers pre-order a product, they are usually required to pay a deposit to reserve their purchase. Limited stock is a hallmark of pre-ordering as it gives exclusive access to early adopters.
Now that we’ve explained the basics of pre-ordering, let’s see what makes pre-orders so lucrative for companies and when is the best time to use this tactic.
When to use pre-order?
We know that utilizing a pre-order strategy for every new product launch can be tempting. It’s hard to resist the urge to run flash sales and collect initial funding from a pre launch campaign.
Exclusivity is what makes a pre-order campaign special. Pre-orders campaigns are meant to build hype and a sense of excitement amongst your customers, but if you continue using this tactic repeatedly for every minor product launch or update – it can backfire. Nobody likes a pre-order flop.
Pre-orders require meticulous preparation time and strategizing. Thus it is best used for events like:
- Launching a flagship product (like Tesla’s Cybertruck)
- Launching a big promotion on an existing product (like a business anniversary sale)
- Offering limited edition products (like Coca-Cola’s Daft Punk bottles)
In essence, you should avoid using a pre-order strategy for products that bring nothing new to the table or don’t resonate with your established target demographic.
Benefits of using a pre-order strategy
When creating a new product, you need to invest in research and development and production. There are viable options for fundraising like crowdfunding or startup investors; however, fundraising can be time-consuming.
Pre-order sales can help you gain funds directly from your existing customers, saving you the hassle of searching for investors and pitching your ideas. In addition to generating initial revenue, here are some more benefits associated with pre-ordering
#1 Creates hype for more sales
Pre-ordering campaigns can be executed irrespective of your company’s size. If you have deep pockets, you can avail PR agencies or run ads across various channels to capture your target audience’s attention. Small scale companies with tight budgets can use social media platforms like Instagram, Facebook, and Twitter to achieve the same.
Receiving a pre-ordered item makes customers feel special. They get a sense of being early adopters to a product and feel differentiated from the regular customers of the brand. You can use this emotional bonding to generate more sales.
Limited stock positions itself as hard to obtain, and by using the “scarcity principle,” you can generate buzz around your products.
#2 Estimated market response
Making a television show is an expensive proposition – from paying actors to building a set. Production houses need to decide which stories are worth investing in and which ones to reject. For this purpose, they use a practical approach rather than gut feelings.
They create the first episode called a pilot and show it to a test audience. The fate of the series is dependent on the audience’s response. If the pilot episode gets approved, then production of an entire season of episodes is initiated.
Just like pilot testing of episodes, pre-ordering helps test the response from your audience. This allows companies to gauge potential demand and helps in calibrating the manufacturing quantity. In case the response is not as good as expected, the manufacturers can manufacture a low amount of stock, saving the potential loss from unsold inventory.
Even if the actual sales from the pre-order campaign turns out to be less than expected, your product still receives publicity which raises brand awareness.
Challenges in executing pre-order campaigns
Pre-ordering can surely give your product a head start, but won’t sustain sales indefinitely. Along with the benefits, comes a set of challenges.
#1 Operational challenge
As you are working on a new product, you need to take precautions to ensure that operational errors do not delay the final product.
Running a successful pre-order campaign requires cooperation from external stakeholders. They are your source of expertise in the ins and outs of your supply chain, shipping charges, and customer demands. You also need to run quality checks to ensure the product works as expected.
If you use specific marketplaces to sell your products, understanding their policies. For instance, Amazon merchants need to dispatch orders within 30 days or else risk cancellations.
#2 Logistical challenge
A poorly organized pre-order campaign could fail to deliver products to customers.
“What if I fall? Oh, but my darling, what if you fly?” – Erin Hanson.
Most businesses only prepare for the worst (i.e., low sales), but they overlook the process to plan for success. What if your business gets bombarded with orders? Are you prepared to cater to the demand? The Playstation 5 global shortage is an excellent example of this situation.
If a product lead time is longer than the customer anticipated, it will lead to dissatisfaction. Thus, it is crucial to communicate with customers and be transparent.
Best practices for creating a pre-order marketing strategy
#1 Form a dedicated team
Special times call for special measures. It is advisable to form a dedicated team around the pre-order project to fully cover all requirements associated with the project. The involvement of marketing, IT, and customer service executives is vital throughout the pre-order campaign.
Team members must be passionate about the project and dedicated to making it a huge success. Keep the other contributing employees informed of the campaign’s progress with regular meetings.
#2 Strategize a promotional plan with a timeline
Do you think the most important day of the campaign is the launch day? Unfortunately, it is not. If you think it’s the day before the launch day, you’re mistaken.
The most important day is the one where you start your pre-order campaign; it could be weeks or months before the actual launch. If you fail to create hype before the launch day – you risk losing potential sales.
Your marketing team needs to develop a solid promotional plan to execute throughout the project timeline to keep customers engaged and to generate much-needed awareness and excitement. A good rule of thumb for announcing pre-orders is 4-6 months ahead of the actual product launch date.
#3 Collaborate with influencers
What good is your campaign if nobody knows about it? To garner attention from your target audience, you should collaborate with relevant influencers.
Influencers are people who are popular on social media platforms that you would like to target – Twitter, Facebook, YouTube, Instagram, etc. Influencers often have an authentic bond with their audience, and getting your products promoted through them increases your odds for conversion. 71% of customers are more likely to purchase because of social media referrals.
While working with influencers, there are certain critical points that you should consider:
- Look for relevance over follower count. If you are launching a new protein shake, getting it promoted by a fitness influencer (50k followers) is far better than getting it done through a generic influencer (200k followers).
- It is unnecessary to use the same influencer for the various social media handles. First, shortlist the platforms where you want to promote your product, and then choose specific influencers for each of the individual platforms. Each influencer has a platform they dominate, so select them for that platform.
- You can try sending freebies to the influencers to test, and if they love it, they are more likely to promote the product amongst their followers.
As influencers are experienced in their platforms, they can give your marketing team valuable insights to boost engagement and drive more followers.
#4 Use FOMO for urgency
When it comes to sales, emotions overpower logic. The fear of missing out (aka FOMO) can be a great tool to create urgency and capitalize on to build sales. Use the opportunity to grant exclusivity to your customers by introducing urgency.
When you only produce a limited quantity, you introduce scarcity of the product. So, customers who place the order benefit from the product’s utility and receive the emotional thrill of owning something scarce.
You can bundle your new offering with existing ones to increase overall revenue. To sweeten the pot, you can also offer future discounts to your pre-ordering customers. For instance, you can create an offer for the first 50 orders to receive a 50% discount or the first 50 orders to receive a special gift. This incentivizes the customers to take action immediately rather than wait for another day.
#5 Maintain the momentum
You collaborated with influencers, strategically posted content until the launch date, and coordinated efforts that led to a successful pre-order launch. On the launch day, you were flooded with orders (congratulations). But what about Day 2? Or a week later?
As per Ebbinghaus Forgetting Curve, we retain nearly 60% of the information after 20 minutes of learning it. And as time passes, the retention further decreases.
The best way to beat this challenge is to keep revising the information. This is why you need to keep reminding your customers about your offer even after the launch.
Content marketing should play a crucial role in this phase. You need to push content regularly to keep the hype alive and boost sales. You should also collect the emails of the people who pre-order and nurture them with content, as they are more likely to recommend your products to their friends.
Here are some tips to keep the momentum going:
- Publish guest posts/blogs on relevant publications about your launch. This will help you reach an audience unfamiliar with your brand.
- To cater to the audience familiar with your brand, i.e., social media followers and email subscribers; you can share content around the testimonials you receive. Also, share updates and new information about the product. They have already shown interest in your brand by following/subscribing, so they are more likely to convert.
- Join conferences, podcasts, and public events to meet with the audience.
- Publish educational content around solving a problem by using your product.
- Implement a referral program to incentivize current customers to encourage word of mouth.
Utilize ads, influencer marketing, guest blogging, press releases, and keep your content game strong, both before and after the pre-order launch, to create and sustain the hype.
#6 Buckle up your platform to sustain massive traffic
In December 2021, Spiderman: No Way Home was released. The craze for the movie was so intense that movie ticket sites crashed when the pre-booking sale started at midnight on November 29.
As mentioned earlier, you should also stay ready for the fortunate scenario in which your pre-order campaign overperforms. You don’t want your website to crash the minute your customers visit it to place orders. You would not only lose potential sales, but a server crash creates a negative impression amongst customers, and could lead to negative word of mouth.
To safeguard against this issue, check the bandwidth of your website servers and estimate if it can handle the sudden spike in traffic. Your customer success team is also pivotal to assisting customers with their queries on social media and phone/email.
You can also create a separate website for the pre-order campaign so that a potential website crash doesn’t impact regular orders. Be sure to set a limit on the quantity available based on your ability to manufacture.
If orders exceed the pre-order production run, you can collect customer emails and nudge them when restocked.
DEAR Systems for inventory management
Now that you know the ins and outs of crafting and executing a pre-order strategy, you are ready to rock! To ensure that your pre-order launch goes as smoothly as planned, you can implement Dear Systems.
With DEAR Systems, you can manage your inventory, orders, and manufacturing saving yourself from unexpected headaches.
Schedule a call with DEAR Systems to learn how we can help your inventory management.