Archive for October, 2010

Impulse Purchase – How SMBs could benefit

October 22, 2010

Recently read an article in Wharton Business School e-zine Knowledge@Wharton. One of the things, I like to do is to bring the latest and much promising ideas in the B-schools to the benefit of SMBs. If you want to frame it, you can frame this as an article on “impulse purchase behavior”. Though, this study talks about groceries, this is widely applied to all physical products as well. What I would like to write about here is that it is applicable to online services as well. I would lay out as to how this study can be extended to online services.

The core of this study is this statement – “people behave more impulsively when the outcomes of their decisions will be realized in the near future rather than the more distant future.” You can read the complete article here Complete article

Amazon, eBay and other online product companies offer a variety of recommendations on what else you could buy along your check-out process similar to groceries. This is nothing more than a burger joint asking you for “would you like to have fries with that?” Well, most of the online services company might do the same. A dating service might offer you to send flowers, a flower ordering website might recommend sending a box of chocolates along with flowers etc.  All these are bigger corporations with revenues in hundreds of millions. They were once a small company like every other SMB and they haven’t gotten big for no reason. What they were able to do is to carefully define their product portfolio, lay out a smooth ordering process, define their sales channels for various products and established a great customer service.

In the case of a good number of SMBs, there is no such clarity of product offering and most of the time they generate products to satisfy “A” customer demand on an adhoc basis. A product is made once and sold once! Once you have a good clarity of your product offering, carefully analyze all your products to see if you can create finer products out of the existing product offering. These “finer” products are kind-of sub-products of our existing products, a feature of a product is taken out independently and given focus and create it as a separate product. Once such “finer” variations are created, create recommendations for them along the check-out lines of your other products. These recommendations will have greater impact if these variations of your products offer immediate satisfaction (consumption/ gratification). If you are having a courier service, recommend “expedited delivery”; if you are a “professional services” recommend allied services closer to the service being currently bought.

 

SMB owners are smart hard working professionals and all they have to do is sit, think and create clarity of product offering. Ask these simple questions

  1. What are our products? Can we create “finer” products out of these products?
  2. Are we selling each product in all possible relevant channels?
  3. Does any of our product offer instant-gratification?
  4. Do we recommend / cross-promote product along the check-out process?

I would love to hear from varied businesses, willing to study their business and offer my thoughts on improving the product management process.