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Why You Should Care About Pre-Commerce Now

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Tesla’s Model 3 pre-orders have proved the power of pre-commerce in the product development process. How is it different from traditional commerce?
Read full blog post at: https://goo.gl/8z8bLo

Published in: Business
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Why You Should Care About Pre-Commerce Now

  1. 1. PRE‐COMMERCE D E F I N I T I O N , T R E N D S A N D W H Y Y O U S H O U L D C A R E
  2. 2. WHAT IS PRE‐ COMMERCE? Pre-commerce is a product development method which allows new product ideas/prototypes to be mass produced only when they have reached an initial threshold of buy-in from investors/consumers.
  3. 3. Taps into upfront investments from consumers In terms of either: Capital Knowledge Applies to products not yet at the mass production stage PRE‐COMMERCE
  4. 4. QUICK EXAMPLES Pebble Watch Tesla Model 3 Oculus Rift
  5. 5. That improves the success rate of a crowdfunding/pre-commerce campaign to 99% Where momentum of the collective action takes over The "magic" number 34% represents a tipping point: TIPPING POINT
  6. 6. HOW PRE‐COMMERCE DIFFERS FROM OTHER FORMS OF COMMERCE
  7. 7. There is a prevalent viewpoint that sees pre- commerce as a trend within social commerce. The most common tactic within social commerce is using BUY BUTTONS on business social media accounts. SOCIAL NETWORKS + COMMERCE = SOCIAL COMMERCE
  8. 8. It’s more accurate to make pre-commerce a category of its own because it involves more than just the selling mechanisms. Pre-commerce touches other areas of the business, from product innovation, supply chain management, to marketing and sales.
  9. 9. COMPARISON
  10. 10. MARKETING STUNT While most campaigns on platforms like Kickstarter employ social media to trigger the viral effect, pre-commerce is not a short-term, quick-win kind of tactic.
  11. 11. MOST MARKETING STUNTS AIM TO: Stir excitement/ debate/ curiosity pre-launch 01 Cause a short-term sales surge Cause a brand uplift (either short or long-term) In a marketing sense, pre-commerce shares purpose #1 and #3 02 03
  12. 12. The underlying thinking is to jump in before the traditional product life cycle kicks in (pre-commerce sales & profits as dotted lines)
  13. 13. HOW PRE‐COMMERCE  LETS YOU GET AHEAD OF COMPETITION
  14. 14. Pre-commerce is a powerful product development engine, fuelled by evolutions in consumer preferences for innovative products and community engagement; as well as lower entry barriers for new product development.
  15. 15. Consumers increasingly value experiences over physical goods, which gives rise to experiential buying. Pre-commerce fits in with this consumer preferences evolution. CONSUMER EXPERIENCE PHYSICAL GOODS
  16. 16. Provides a sense of belonging that goes beyond the thrill of possession Injects "status" into the buying experience Taps on the increasing demand for new trends and novel products PRE‐COMMERCE
  17. 17. MARKET EVALUATION Pre-commerce allows innovators to test their product-market fit with a Minimum Viable Product (MVP) equivalent. Since consumers would only back projects they like, it helps: Accelerate innovation Ditch waste Tweak offerings along the way
  18. 18. The failure rates of new products launched traditionally or through crowdfunding are similar on the surface. But the risks could be reduced with pre- commerce. Would you rather pour millions into a product to learn a lesson, or one-hundredth of that amount? RISKSTRADITIONAL LAUNCH 40-80% CROWDFUNDED LAUNCH 40-90%
  19. 19. Being able to gauge demand before mass production allows for more accurate financial forecasting and less inventory risk. Innovators can also combine pre- commerce with e-commerce to reap benefits. SUPPLY CHAIN
  20. 20. A pre-commerce fashion startup that lets women pre-order fashion straight off the runway Leverages sales data it collects from the pre- commerce business Informs traditional retail buys using hard data rather than intuition MODA OPERANDI
  21. 21. QUICK BENEFIT RECAP: Focuses on social mechanisms rather than broadcast 01 Cuts down on the middlemen, e.g. retailers Direct feedback from potential customers 02 03 MARKETING EFFICIENCY MARGIN EFFICIENCY PRODUCT EFFICIENCY
  22. 22. HOW PRE‐COMMERCE TICKS ALL THE BOXES FOR TESLA
  23. 23. Just one day after the official unveil event, Model 3 pre-orders already outnumbered Tesla’s previous model deliveries.
  24. 24. In Australia, people lined up to pre-order Model 3 “despite not knowing what it will look like, how it’ll drive, or even how much it’ll cost.” They might even have to wait longer as the left- driving countries will get the car first. This goes to show experience trumps physical goods. EXPERIENCE BEING FIRST EARLY ADOPTER
  25. 25. MARKET  TESTING Clearly a lower end model has lured in more consumers from the “entry-level luxury” segment as they have shown explicit interest by giving Tesla money in advance.
  26. 26. No new capital required after around 6 months of taking pre- orders. With information about the high demand, Tesla has put together plans to ramp up production capacity. SUPPLY CHAIN
  27. 27. LOCK‐IN ADVANTAGE Those who have prepaid are more likely to go through with the purchase and less likely to buy something that catches their eye in the meantime.
  28. 28. THE STARTUP VS. INCUMBENT DEBATE
  29. 29. FEAR OF COPYCATS There is a fear, especially among large corporations, that pre- commerce would reveal their strategic plan for everyone to see. A potential scenario is when information about new product development is leaked, which gives fast followers time to get their product to market right behind yours.
  30. 30. Pre-commerce actually works out better for established brands in this case. If your idea/prototype is already out in the marketplace, supporters will defend your company against copycats.
  31. 31. People are paying for the experience rather than the physical goods. This goes back to the experiential buying trend. You already have a brand name and an engaged fan club. WHY?
  32. 32. Forward-looking incumbents have come to accept: "It’s better to own a bit of a disrupting startup than be the prey of a new business model from an unknown competitor.” FINAL THOUGHTS
  33. 33. “What separates your brand and company from a world of innovative independent designers is only a semi-permeable membrane.”
  34. 34. 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

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