Brands in the ecommerce industry have always started their new product launches by conducting market research, analyzing sales data, surveys and forecasting models. However, online marketing is fast-paced and customers’ tastes evolve before a big production has even hit the shelves at the store. Some brands are moving towards a more flexible strategy – introducing products in smaller sizes, and considering every introduction as a ‘market test’.
Even a minor product drop provides brands with some sanctum sanctorum which can’t be entirely replicated through conventional research: real purchasing behavior. Rather than questioning customers about whether they would purchase a product, brands can determine if customers actually purchase a product, the speed of its demand, which variants are more successful, and customer feedback after receiving a product.
Small Drops Are Becoming Live Demand Signals
Controlled releases can be used as experiments within the actual ecommerce environment. Brands can launch a new product, design, product feature, bundle or variation without having to make an upfront commitment to high inventory levels.
The resulting information can give you a few things:
- The speed at which the initial units are moving.
- What sizes and/or colors or variants are sought after.
- The place where customers come across the product.
- Whether purchasers make purchases at a premium to the discount.
- The rate of customer returns or recommendations.
These signals are more than just the amount of sales. They are important for brands to see the nature of the demand and how it is formed before it is too late to change, enhance or drop the product.
The purchase behavior is greater than the interest expressed.
While customer surveys are still helpful, their stated preference doesn’t always mean that it will be a sale. What can happen is that a consumer can see that a product is convincing but when it comes to the price tag will choose not to buy.
The addition of that commercial reality is small drops in testing. Brands can track product page views, add to cart, completed purchases, cancellations and returns. That means that they’ll get a better idea whether or not the customer’s interest lasts through the entire buying process.
Sell-Through Speed Provides Narration to Demand
The 500 units sold is good news, but it depends on how many units you sold in how much time. If the drop is selling quickly without weeks of discounts and multiple advertising, it might be a sign of greater demand than a drop that is only getting sales through successive discounts and advertising.
Brands can thus analyze the sell-through velocity along with revenue. A sudden influx of demand from a geographic location, customer type or acquisition marketing source can also help to identify a bigger release where it’s needed.
Product drops can minimize inventory guess work.
As brands introduce new items, they should face inventory problems, especially when they are products that the brand is not familiar with. Excessive overstock can result in storage expense and/or markdowns and understock can result in lost sales.
The smaller that first run is, the smaller will be the size of that uncertainty. The brand is able to take the real-life evidence before committing to the next inventory.
Reordering Can Be Observed Demand
Brands need not predict the life cycle of the product before it hits the market, but can make inventory decisions in steps. A first drop is to set the baseline and any further production can be based on actual sales.
This is especially effective if the suppliers are able to provide reasonably short production times. It’s not a tool for predicting, but it provides more fresh data from the product to forecasting teams.
Returns Can Reveal Issues Covered by Sales
Product success in the launch market does not guarantee its ability to be a success in a larger market. If the rates of return are high, there could be a problem with size, quality, visuals, specifications or expectations and product.
These problems can be detected by brands before it reaches a large number of customers as there is a lesser number of people to be exposed to the problem. On the product pages, packaging, manufacturing information, can then be adjusted or on positioning.
Customer Language Can Improve Positioning.
How customers naturally describe a product is gleaned from a variety of sources, including reviews, support conversations, social comments and post-purchase surveys. They might use a variety of terms that are very different from what’s used within the marketing department.
These patterns can be used by brands to identify, optimize, and enhance product descriptions, advertisements, FAQs, emails and landing pages. The drop then not only provides an opportunity to test the product, but also the market positioning.
Marketing Teams Can Test Acquisition Before Scaling
A small release also provides a chance for a testing of the new product’s ability to market effectively. Brands are able to try out the channels to determine if they are the right fit before spending a huge budget.
Conversions, customer acquisition costs are compared to traffic from paid social, search, creators, email, affiliates and organic traffic. Audiences are able to react differently to different campaigns, and if one of these groups reacts much better, then the future campaign can focus more resources on that group.
Don’t use scarcity as a substitute for testing
While the urgency may be felt because of the limited availability, the demand created by the limited availability may not necessarily be interpreted as a long-term demand. If a product is fast selling and there is a fear of missing out, then it’s likely that it will act differently when it starts to be generally available.
Novelty effects and lasting demand are thus necessary to differentiate when evaluating teams. Multiple re-purchases, waitlist usage, customer feedback and performance in multiple drops can be a more accurate indicator.
Conclusion
The small drops are making a big way to enable ecommerce brands to directly conduct market experiments at the time of product launches. Brands don’t need to take every decision based on forecasts; by watching actual buying habits, they will be better equipped to make the right decisions with their stock and marketing efforts.
The best way to do this won’t be just to cut back on the production of products. To create each drop around a particular question, measure the correct signals, and then use the results to inform the next decision. If done systematically, small releases can help make product development more ‘customer responsive’.
FAQs
1. Why are ecommerce brands using small product drops?
Small drop quantities give brands more information about the actual demand of customers and reduces the amount of inventory and risk in making a huge production run.
2. Can small drops be substitutes for the classic market research method?
Not completely. Research can help to understand customer needs and attitudes, and live drops will give evidence of customer behaviour when making a purchase. The two methods can be used in conjunction.
3. What are the key metrics brands should track for a product drop?
Some metrics that can be beneficial are number of conversions, sell-through rates, customer acquisition costs, return rates, repeat purchases, product reviews, or performance for various traffic sources.
4. Are drops in product only indicators of actual demand?
No. They will only boost purchases in the short-term if it is scarce and new. Brands should look at repeat demand, performance on subsequent releases, customer satisfaction and waitlists as well as compare launch sales to repeat demand.