Startup Processes And Creating Value Through Repeat Purchases

In designing your startup processes, it is a crucial step to think about whether or not your product will encourage a repeat purchase. An item will showcase its value when it is purchased over and over again. These items usually contain at least one of the following traits.

1-­ is needed often, and must be replaced
2-­ has a useful lifespan that can be controlled and limited, then replaced
3-­ has multiple uses that encourage its consumption, and replacement

The first trait involves items that are consumed in high volume and are frequently repurchased. Toothpaste, gasoline, and food are just a few examples. By creating a need for these products, the consumer will have to continually repurchase them. This is where value lies in products. Be careful though as synical consumers know when you're taking advantage of a "need item" and will simply go elsewhere if they find a better deal.

The second trait encourages a repeat purchases through "planned obsolescence" and "phase-­outs." Planned obsolescence is the producer controlled useful life of a product. Phase-­outs make way for the "latest and greatest." Because of planned obsolescence and phase-­outs, consumers often feel as if they must replace the old in order to keep up with what's cool at that point in time.

As an example, in the startup process of a particular antiperspirant's product life, the consumer could expect the product to last 1-­2 years. The somewhat high price was worth it because the stuff lasted a very long time.

The original antiperspirant was eventually phased out and replaced with a new formula that would run out every two to three months. This was done because there is value in consistent, frequent, repeat purchases. This action created higher consumer demand and insured greater long-­term profits.

The third trait encourages repeat purchase if the item has multiple uses. An example of such a product is baking soda. The average box of baking soda takes a long time to consume. Eventually someone realized that baking soda was being used to eliminate refrigerator odor. An advertising campaign was quickly put in place encouraging its use for eliminating odor, and instructed replacement every 6 months. This increased sales dramatically.

While in the startup process for new ventures, products must be evaluated for repetitiveness. A need for repeat, persistent, consumer demand MUST be created.

If the product line is already up and running (yet unsuccessful), then it is critical to find a (legal and ethical) way to encourage repetitive purchases using at least one of the three traits.

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 at http://entrepreneur.venturecapital.org/

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