The Preorder/Presell Strategy

It is undeniable. Whatever product you have, the most important question that you should be able to answer is this: “Is there a demand for my product?” You might have the best and cheapest product out there, but if no one buys it, then your business would fail.

I found this the hard way while I was trying out a variety of ways to earn money by being self-employed and working at home. My initial strategy then was to create digital products which for the most part, does not need a lot of financial capital but only time and knowledge capital.

I made websites, game apps and soon found out that although in my opinion I made quality products, there were only a few people who used my digital products. I have seen to my dismay more simple digital products from other sellers make more money than mine.

And so I discovered that having the best and cheapest products alone is not necessarily the formula to success, at least in the field of digital products. I realized that people as customers were complex. It is nearly impossible to guess what people want.

The dream of almost all product creators or businesspersons is to know what their customers or intended customers want. Sadly, this knowledge comes at a high price and is only at best, an indication of what your intended customers want. Let me explain.

The best and most direct thing to be able to know what your customers want is to ask them directly. This strategy however works for high ticket items only where a company only needs a few customers to thrive.

A custom built automaker or a custom built jeweler may thrive on this strategy. All they have to do is approach a potential customer and then ask them what kind of custom built car or jewelry they want.

Because the car and the expensive jewelry costs a lot of money, the companies making these do not need a lot of customers to thrive. The bad part of this strategy however is that the more customers are needed by a company to break even, the more difficult it is for them to approach each and every last one of their customers.

Of course there would be readers who would say: “Why don’t you do market studies?” While market studies are a good thing for companies, they are relatively expensive strategies to implement.

While a company can depend on industry reports bought online or commission a market research company to give them a general idea of how the industry is doing or what customers tend to buy, the reports are never tailored specifically to meet all the companies data requirements.

But let’s assume that your market research was able to determine what your customer want. You might even get an indication based from your market research that people would truly buy your product.

But how sure are you that people would really buy your product even if they indicated it on the market study or even census that you have conducted? The simple answer is that you can’t be sure.

Unless people actually buy your product, this would be the only way that you would be able to know that people would actually buy your product. The more are the people who bought your product, the more indicative it is for the demand or popularity of your product.

As the saying goes: “I won’t believe it until I see it” applies here. This just means that you can do the most expensive and sophisticated market research but the only true indicator would be your sales figures.

Let me give an example. The Coca Cola company was sure that they have a winning product with their “New Coke” based on their market research and the taste tests they conducted with a sample public.

They failed to recognize that most people were too emotionally attached to the regular Coke. Many people not only rejected New Coke but even detested it. In this case, the sales figures of regular Coke exceeded the sales figures of New Coke.

The hardest product to sell for common people today is real estate. It is easy to see why. You can be a small home builder and build a small house aimed at budget conscious home buyers. But this is not usually what happens.

The usual scenario is that people who have capital for home construction approach several home builders and then decide on which one they would contract to build their home. This is the usual way.

Of course, many people today buy premade homes. Many people today just don’t have the time to wait while their house is constructed. Besides, it is arguably more expensive to build a house from scratch.

Enter companies involved in building homes and apartments who presell the homes and apartments they would build. Although it costs them a bit of money to find people who would buy their houses and apartments even though they haven’t been constructed yet, this makes sense for them.

The reason for this is that building homes and apartments is expensive and if there are no buyers for a building company’s presold apartments or houses, then the company goes under. This is the main reason building companies go bankrupt.

And why are presold apartments and houses being discussed? This is because if such expensive products are being sold this way, then how about cheaper products like books and even food?

Of course, when you presell your product and no one buys it, it just means there is no demand for your product. You can do two things when this happens. The first is to quit and try other things to sell. The other thing is to try different markets and hope they would be better.

But let us say that you were selling books and you preprinted 500 copies but only 250 were ever sold. This just means that the real market for your books is only half of what you estimated before.

What you could have done is to contact your list of customers and ask them to buy your pre-selling books. You would have needed only to print 250 books to get your maximum earnings without losing money on the extra 250 books which remained unsold.

The beauty of this is that you would be able to even know if you would be profitable based on the number of presold products you managed to sell. Let us use again the previously mentioned example of printing out and selling your books.

Let us say that 250 people bought your presold books but you have determined that printing and selling only 250 books would not be profitable. You would in fact lose money for example if you only presold 250 books.

You can just cancel the printing of the 250 presold books and return the payment of the people who have bought your presold books. You can just send them an apology message and explain your financial situation.

Arguably, the best example of the preorder strategy is exemplified by the many people who seek crowdfunding capital on online crowdfunding platforms such as KickStarter. Here, enterprising people could market even just an idea to potential customers/investors.

The beauty of utilizing online crowdfunding sites to fund the creation of your products is its ease. All you have to do is to create at a minimum a product pitch and upload them online. For sites such as Kickstarter, utilizing their platform is free, but they do take a commission at some point.

If you don’t reach your funding goal, Kickstarter’s services would remain free. If you however managed to reach and exceed your funding goal, Kickstarter takes in a 5% commission. This makes them ideal for people with little capital to begin with.

One thing that you must note is that KickStarter and similar crowdfunding sites have been a mining site for people who steal ideas. There are numerous reports online of product ideas being stolen from these sites by counterfeiters.

As you can see, depending on the presold product that you are selling on these sites, your intellectual property is exposed on a global basis. This is the reason why many experts in crowdfunding advise that you hide as much working details of your product as possible.

If for example you are creating a machine, you could just show a mockup of your product while demonstrating it’s purpose. Theoretically, you can crowdfund a working time machine without showing its parts.

Since a service is essentially a product that is made out of humans, you can also presell your services. This might seem unreal especially in the world of wages and salaries were people are paid only after they have performed a service which is work.

But let us use an example. Let us say that you are interested in cooking while your officemates are primarily interested in eating. You can offer cooking services for your officemates or whatever group you plan to make customers of.

What you can do is to ask your officemates to agree on a type of cooked food they want to eat for lunch, breakfast or lunch. You can then presell your cooking services to them after you have computed how much cost and profit you would make cooking these particular dishes.

Of course, not all of your co-employees would agree to order from you based on what the other employees want to eat. You can then change the volume of the food that you would cook to still remain profitable.

You essentially become a cook for your co-employees without having to fork out your own capital to do it. The beauty of this idea is that not only do you get to do what you like which is cooking, but you also get to earn.

Developing the best or the cheapest product does not essentially mean that you would have a successful business. The important thing to consider is how many people would actually buy your product. This is very different from people who only intend to buy your product.

By making your product presold, you can essentially create and sell your products without needing financial capital. This strategy can be utilized for all sorts of products including service products.

Marketing To A Saver Type Personality