Presale - On counting chickens

Posted in Planning , on Tuesday, September 09

Up until late May, actually the day before we would have launched our pre-order, we were convinced by accumulated assumptions that a pre-order was a good idea for us. In retrospect we're very happy with our change of minds.

Our situation at the time was probably quite similar to companies that has done crowd-funding campaigns, or companies who has announced a product before it reaches market; DURR Alpha was old news – the idea was communicated, and we just wanted our damn thing ready for sale. However, in the process of designing for manufacturing there are a myriad of details and decisions that continuously arise, always moving the finishing line. Which in turn makes it very, very tempting to open a pre-order. The pre-order will capture your current internet mojo by capturing the customers money - before the product is fit for sale. Tempting... The service we considered was the popular Celery . It integrates great with Shopify , plus it seems quite easy to use and manage. Despite the alluring promise, we found ourselves nervous and at our toes before the pre-launch. So, we sat down and weighted the pros and cons of pre-orders. Our case and point of view might differ from most other companies, but it became clear to us not to start counting chickens, and thereby ditching the pre-order. This is how we saw it:

Pros
· Bagging online traction:
This is already mentioned, but perhaps the biggest pro. We were lucky and had great coverage on DURR Alpha, not just on US gadget blogs, but worldwide and from different angles. For each day the Beta was not for sale we felt the clock ticking, and the attention dwindle. This becomes an increasing risk of lost income. At Skrekkøgle we fund our own projects, and so we invested all of our hard-earned cash, on expensive production that might not turn out profitable. The pre-order could have been able to ease the concerns of our ever shrinking bank account.
· Adjusting volume:
Earlier we had been talking about how the pre-order would be a good tool for predicting the demand for the Beta version, and thereafter adjusting the volume of pieces. However, in our case it quickly became quite clear that the volume was already set for us, due to minimum count at production facilities, and of course, economy. Still, you could make a solid case for this argument.
· A/B testing:
Another thing that's definitely valid is using a pre-order as an A/B testing tool. What finish or color do most people prefer? Or even, could you get some interesting feedback that could be implemented, changed or fixed before the product's launched? We imagined this being helpful for ruling out issues, but most relevant for DURR Beta , prevent us from sitting on boxes full of our weird favorite colors.

Cons
· Cost:
Pre-order is expensive. Even though a 2% fee seems little at first glance, it quickly becomes a lot of money, and actually a big expense. And especially when all these percentage fees are adding up; PayPal 2.9% + Shopify 0,5-2,0%, + others? We contacted Celery asking about their volume discounts, but those were negligible differences for volumes far beyond our own. Monthly plans for short term pre-orders were also mainly for bigger merchants and bigger monthly loads.
· Cash in limbo:
Another deal-breaker for us is that you can't access the money from your pre-ordering customers. The cash is in this limbo state, where they're reserved and held by the pre-order service at hand, until you are ready to ship and thereby fit to capture the payment. Fair enough. Guess this might be obvious for most business minded people, but it wasn't quite clear to us. So all that money, reassuring as it might be, can't be spent for development, promotion, etc. and will therefore help you very little financially.
· Customer pressure:
Promising something to people can be very stressful. And, it can be very time consuming. If you trade your customer's cash with a pretty picture, keep in mind that many will be excited, an excitement that can quickly turns to impatience. Even though we haven't made many promises, for e.g. dates, prices, etc. we've used many hours every week answering mails from eager and itching customers. Which is super nice, don't misunderstand, but still time and energy consuming. So, if you're stressing to get your product out on the market, we'd guess the last thing you want is hundreds of people breathing down your neck.
· Unfinished product?
The product at hand might not be entirely finished, either cosmetically, software-wise, promotionally, or other. Once something is launched (unless in a drawing-board kinda way), it will probably be perceived as finished. And the customers who are buying into that product may not approve of your later changes in aesthetics, behavior or story. This could also be the case for the selling price; perhaps the production or development suddenly took an expensive turn and your current price doesn't quite cover the costs.

Again, we admit to being biased, these observations are based on our impressions, opinions, and of course our own product 's case. Nevertheless, we were happy to skip the pre-order and rather wait for all the pieces to fall into place.
If you have other opinions or points of view, please send us a note !

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