Taking orders from customers for products before they become available for public purchase is a clever tactic used to drum up interest and create a buzz in the build-up to 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 securing the funds needed to develop a product or service for the market. And for early-stage startups, especially in the current climate, revenue from pre-orders could be key to kickstarting their new business.
A pre-order sales strategy helped U.K.-based nail-tech startup Glaize to get off to a flying start. Founder Gina Farran says: “Because we manufacture everything in-house, we didn’t have full visibility on which colors would sell well and which wouldn’t. With pre-orders, we can model our production runs based on actual customer orders, which reduces wastage and ensures we use only necessary amounts of raw materials.”
The team started by creating a waitlist almost a year before launch, through a combination of organic content that helped to build a community on social media, some press coverage, and experimenting with lead generation ads.
“By the time we opened for pre-orders, we had over 4,000 people on our waitlist,” says Farran. “They had waited a long time, so we initially opened pre-orders exclusively to them to thank them for their patience. Our strategy helped us launch the business with a bang.”
One of the most effective ways of securing pre-orders is through crowdfunding. Alan Mosely and his wife are the founders of smart baby sleep aid SleepaSloth, which they’ve been self-funding and overseeing the development of the idea and prototypes since 2019. 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 secure the funding you need to move forward with the manufacturing of your product,” says Moseley. “Creating a hardware product or device requires a significant amount of capital upfront to create the tools used by your factory to create your product. Factories also require a minimum order quantity, typically 1,000 units or more, to even begin building your product. You will need to pay half of this upfront, which is where you can put your pre-order sales to good use.”
Martina Schwarz, founder of Blackmarket, ran a crowdfunding campaign on Kickstarter last year as a way of establishing whether there was sufficient demand for her product, and to help with cash flow for the first production run.
She says. “I was amazed by how much support we received; one supporter in Australia pre-ordered £180 worth of handwash. We’ve considered doing another pre-sale for future product launches, but it is always a question of balancing the time investment for the pre-sale campaign, with the economies of scale and cash flow advantages.”
As well as easing financial pressures and boosting cash flow, a pre-sales strategy can be a valuable way of gauging an audience’s interest in the offer, as EJ Trivett, founder of creative business incubator Thrively, explains.
She says: “If pre-sales are hard going, it’s a strong indicator that the offer may need to be refined, the messaging tweaked, or that it is simply not worth developing further, which is why we strongly advise our learners to ‘test 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 where our coaches work on their mindset too, because this is a tough time to be selling anything, and they need to hold their nerve as they put that offer out there into the world,” she adds.
Securing pre-order sales isn’t easy and a solid marketing strategy that includes advertising on social media on Google as well as working with industry influencers and PR is essential for generating that initial buzz around a new product.
Schwartz’s advice is to build a strong community of supporters early on, and ideally to have 50% of them ready to pre-order as soon as you go live.
“Psychological pricing plays a big role, so offer more than just one product, and create different packages to appeal to different price points,” she says. “For us, this meant selling linen hand towels with our handwash, as well as bundles of products.”
She also highlights the importance of managing expectations for delivery. “So many things can go wrong so factor in extra time to ensure a smooth delivery of your pre-sale products,” she says.