Taking customer orders for products before they become available for public purchase is a smart tactic used to generate interest and buzz ahead of a new product launch. Customers love pre-orders because it means they can get their hands on a product before anyone else.
But pre-order sales aren’t just about getting the customer excited. They can be a powerful tool for raising the funds needed to develop a product or service for the market. And for startup startups, especially in the current climate, revenue from pre-orders can be the key to kick-starting their new business.
A pre-order sales strategy helped UK nail tech startup Glaize to make a flying start. Founder Gina Farran says: “Because we produce everything in-house, we didn’t have a full picture of which colors would sell well and which would not. With pre-orders, we can model our production runs based on actual customer orders, which reduces waste and ensures that we only use necessary quantities of raw materials.”
The team began building a waitlist nearly a year before the launch, through a combination of organic content that helped build a social media community, some press coverage, and experimentation with lead generation ads.
“By the time we opened for pre-orders, we had over 4,000 people on our waiting list,” Farran says. “They had been waiting for a long time, so we opened the pre-orders exclusively for them at first to thank them for their patience. Our strategy has helped us launch the company with a bang.”
One of the most effective ways to get pre-orders is through crowdfunding. Alan Mosely and his wife are the founders of smart sleep aid for babies SleepaSlothwhich they self-finance since 2019 and oversee the development of the idea and prototypes. They are now working on a Kickstarter crowdfunding campaign for September to secure pre-orders, get feedback and create a community.
“Pre-orders help you get the financing you need to continue manufacturing your product,” says Mosely. “Creating a hardware product or device requires a significant amount of upfront capital to create the tools your factory uses to make your product. Factories also require a minimum order quantity, usually 1,000 units or more, to even start building your product. You have to pay half of this upfront where you can put your pre-order sales to good use.”
Martina Schwarz, founder of Black marketran a crowdfunding campaign on Kickstarter last year to determine whether there was sufficient demand for its product and to help generate the cash flow for the first production run.
She says. “I was amazed at how much support we got; a supporter in Australia ordered £180 worth of hand wash. We have considered doing another pre-sale for future product launches, but it’s always a matter of balancing the time invested in the pre-sale campaign and the economies of scale and cash flow benefits.”
In addition to easing financial pressures and boosting cash flow, a pre-sales strategy can be a valuable way to gauge audience interest in the offering, such as EJ Trivett, founder of creative business incubator thrivingexplains.
She says: “If pre-sales are difficult, it’s a strong indication that the offering may need to be refined, the messaging adjusted, or it’s just not worth developing further. before they invest’.”
But as she also points out, post-Covid has seen a shift in consumer spending habits. The online space in particular is more saturated and people are buying much more last minute than before. “For startup founders, this is also where our coaches work on their mindset, because this is a tough time to sell something, and they need to have the courage to take that offer out into the world,” she adds.
Pre-ordering isn’t easy and a solid marketing strategy that includes social media ads on Google and partnering with industry influencers and PR is key to generating that initial buzz around a new product.
Schwartz’s advice is to build a strong community of supporters early on, and ideally have 50% of them ready to pre-order as soon as you go live.
“Psychological pricing plays a big role, so offer more than one product and create different packages to appeal to different price ranges,” she says. “For us, this meant selling linen towels with our hand wash, as well as bundles of products.”
She also emphasizes the importance of managing expectations for delivery. “So many things can go wrong, so allow extra time to ensure a smooth delivery of your pre-sale products,” she says.