How often does your customer need to buy your products? Is it something that they need only once, never to buy again? Or are your products something that customers will buy again and again? For many types of products, the fastest way the business can reach its volume targets and increase sales is for the product or service to be needed over and over again. This is how the demand arises for toothpaste, for gasoline, and for food to name a few examples.
Many of the successful products are those that can be repurchased again and again. How repetitive is the demand for your product? It order for an item to pass a repetitiveness test, it must:
- be something that runs out but is needed on an ongoing basis,
- be something with a useful life that can be deliberately limited thus encouraging repeat purchase, or
- be something that though limited in its level of repetition, can have its repetitiveness extended through alternative uses.
The need to have the customer make repetitive purchases drives the concepts of (1) “planned obsolescence,” and (2) the phasing out of products where the interval between purchases is so long that the firm that produces the product cannot survive on the low rate of purchases.
An example of a product that falls into the second category is a particular antiperspirant. For several years, this product was available in a small bottle that would last (given daily use) for 1-2 years. Though the price was somewhat high–it was worth it because the stuff lasted “forever.”
Eventually, the product was phased out and replaced with a formulation that would run out every two or three months. Why? Apparently someone realized that for the venture to be persistent over time, a certain rate of repetitive purchase of their product is necessary. They adjusted the characteristics of their product accordingly.
Another approach to enhancing repetitive purchases is to identify alternative uses that can permit the achievement of volume targets. Take the baking soda example. For years, people only purchased baking soda for baking.
So, a box of baking soda would last a very long time. Then, someone made an entrepreneurial discovery–people were using baking soda to eliminate refrigerator odor. An advertising campaign that encouraged odor elimination use, and replacement every six months, multiplied sales many fold. Instead of selling one box of baking soda every two or three years, the venture achieved a substantial increase in its repetitive purchase index, selling five or six boxes over the same period of time.
Whether you are creating a new product or thinking of buying into an existing business, it is important to investigate the issue of its repetitiveness. The demand should be persistent over time. If not, then you should consider to find a (legal and ethical) way to create repetitive purchases using some of the suggestions previously noted to raise the level of repetitive purchase.
About the Author:
Dr. Ronald K. Mitchell is a specialist in entrepreneurial cognition, global entrepreneurship, and venture management. He developed the Entrepreneur Assessment which won the acclaimed Heizer Award for this groundbreaking research. Find out more entrepreneurs at http://www.venturecapital.org/
Category: Business Types