Premiere Items with Gifts for Preorders

When introducing a new item to your audience, you can benefit from preorders. Kicking off with a bundle of sales builds buzz to motivate further sales. And the revenues before the item even appears provide a cushion for recovery in case the new item flops. Encourage preorders by telling shoppers they’ll be among the first to have this state-of-the-art version in their hands.
     You also might grant a substantial discount off the price you’ll be regularly charging, or you might offer a special free gift at the time of the preorder. Researchers at Purdue University Northwest, The University of Memphis, Westfield State University, and University of Nevada‐Las Vegas find that how these incentives work depends on the length of time between the preorder and the promised delivery of the item.
     When this interval is relatively short, a larger discount produces more preorders. A preorder discount of 22% on a portable printer produced greater intentions to purchase than did a 7% discount if the product was due in one week. But when a different set of consumers were told the launch date was six weeks off, those offered the 22% discount did not show a higher preorder purchase intention than did those offered the 7% discount.
     An explanation for this curious finding has to do with the difference between search goods and experience goods. Search goods have features, the value of which can be relatively easily assessed before purchase. The values of experience goods are more difficult for the shopper to assess until they’ve been used. Because the preorder is being placed for a previously unavailable item, a high price discount could arouse perceptions of inferior quality. Much prior research has shown that when an item is purchased for immediate delivery, feasibility—such as a low price from a high discount—carries particular weight. But when delivery is in the further future, perceptions of item quality predominate.
     If an incentive you’re offering for preordering is a price discount and the delivery time is a number of weeks off, improve your revenues by keeping the amount of the discount modest.
     But the researchers found that when the incentive was a free gift, offering a higher value produces stronger purchase intentions for both long and short intervals until delivery of the preordered item. Here you’ll do best by balancing the value of the free gift against the increase in preorders you observe.

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