Why You Should Care About Pre-Commerce Now
Transcript of Why You Should Care About Pre-Commerce Now
WHAT IS PRE‐COMMERCE?
Pre-commerce is a productdevelopment method which allowsnew product ideas/prototypes to bemass produced only when they havereached an initial threshold of buy-infrom investors/consumers.
Taps into upfrontinvestments from
consumers
In terms of either:
CapitalKnowledge
Applies toproducts not yet
at the massproduction stage
PRE‐COMMERCE
That improves the success rate of acrowdfunding/pre-commercecampaign to 99%Where momentum of the collectiveaction takes over
The "magic" number 34%represents a tipping point:TIPPING
POINT
There is a prevalentviewpoint that sees pre-commerce as a trendwithin social commerce.
The most common tacticwithin social commerceis using BUY BUTTONSon business socialmedia accounts.
SOCIALNETWORKS
+
COMMERCE=
SOCIALCOMMERCE
It’s more accurate to makepre-commerce a category of its ownbecause it involves more than just
the selling mechanisms.
Pre-commerce touches other areas of the business,from product innovation, supply chainmanagement, to marketing and sales.
MARKETINGSTUNT
While most campaigns on platformslike Kickstarter employ social media totrigger the viral effect, pre-commerceis not a short-term, quick-win kind oftactic.
MOSTMARKETINGSTUNTS AIMTO:
Stir excitement/ debate/curiosity pre-launch
01
Cause a short-term salessurge
Cause a brand uplift (eithershort or long-term)
In a marketing sense, pre-commerce shares purpose #1 and #3
02 03
The underlying thinking is to jump in before the traditional productlife cycle kicks in (pre-commerce sales & profits as dotted lines)
Pre-commerce is a powerful productdevelopment engine, fuelled by
evolutions in consumer preferencesfor innovative products and
community engagement; as well aslower entry barriers for new product
development.
Consumers increasinglyvalue experiences overphysical goods, whichgives rise to experientialbuying.
Pre-commerce fits inwith this consumerpreferences evolution.
CONSUMEREXPERIENCE
PHYSICALGOODS
Provides a senseof belonging thatgoes beyond the
thrill ofpossession
Injects "status"into the buying
experience
Taps on theincreasing
demand for newtrends and novel
products
PRE‐COMMERCE
MARKETEVALUATION
Pre-commerce allows innovators totest their product-market fit with aMinimum Viable Product (MVP)equivalent.
Since consumers would only backprojects they like, it helps:
Accelerate innovation Ditch waste Tweak offerings along the way
The failure rates of newproducts launchedtraditionally or throughcrowdfunding are similaron the surface.
But the risks could bereduced with pre-commerce. Would yourather pour millions intoa product to learn alesson, or one-hundredthof that amount?
RISKSTRADITIONALLAUNCH 40-80%
CROWDFUNDEDLAUNCH40-90%
Being able to gauge demandbefore mass production allowsfor more accurate financialforecasting and less inventoryrisk.
Innovators can also combine pre-commerce with e-commerce toreap benefits.
SUPPLYCHAIN
A pre-commercefashion startupthat lets women
pre-order fashionstraight off the
runway
Leverages salesdata it collects
from the pre-commercebusiness
Informstraditional retailbuys using harddata rather than
intuition
MODA OPERANDI
QUICKBENEFITRECAP: Focuses on social mechanisms
rather than broadcast
01
Cuts down on themiddlemen, e.g. retailers
Direct feedback frompotential customers
02 03
MARKETINGEFFICIENCY
MARGINEFFICIENCY
PRODUCTEFFICIENCY
Just one day after the official unveil event, Model 3 pre-orders alreadyoutnumbered Tesla’s previous model deliveries.
In Australia, people linedup to pre-order Model 3“despite not knowingwhat it will look like, howit’ll drive, or even howmuch it’ll cost.”
They might even have towait longer as the left-driving countries will getthe car first. This goesto show experiencetrumps physical goods.
EXPERIENCEBEINGFIRST
EARLYADOPTER
MARKET TESTING
Clearly a lower end model has lured inmore consumers from the “entry-levelluxury” segment as they have shownexplicit interest by giving Tesla moneyin advance.
No new capital required afteraround 6 months of taking pre-orders.
With information about the highdemand, Tesla has put togetherplans to ramp up productioncapacity.
SUPPLYCHAIN
LOCK‐INADVANTAGE
Those who have prepaid are morelikely to go through with the purchaseand less likely to buy something thatcatches their eye in the meantime.
FEAR OFCOPYCATS
There is a fear, especially amonglarge corporations, that pre-commerce would reveal theirstrategic plan for everyone tosee.
A potential scenario is wheninformation about new productdevelopment is leaked, whichgives fast followers time to gettheir product to market rightbehind yours.
Pre-commerce actually works outbetter for established brands in this
case. If your idea/prototype isalready out in the marketplace,
supporters will defend your companyagainst copycats.
People are payingfor the experience
rather than thephysical goods.
This goes back tothe experiential
buying trend.
You already havea brand name and
an engaged fanclub.
WHY?
Forward-looking incumbentshave come to accept:
"It’s better to own a bit of adisrupting startup than be theprey of a new business modelfrom an unknown competitor.”
FINALTHOUGHTS
“What separates your brand andcompany from a world of innovative
independent designers is only asemi-permeable membrane.”
T H A N K S F O R R E A D I N G
C R E A T E D B Y
Read full blog post at: blog.enabled.com.au/pre-commerce