Using starter kits to promote repeat purchases

31Dec07

Whether it’s for personal or business reasons, people move all the time. Some companies, like transportation and self-storage firms, do a good job of capitalizing on this activity. But with the exception of the annual college-dorm-stock-up sales at places like Bed Bath and Beyond, I think retailers are leaving a lot of money on the table. In particular, both mid-range and higher-end stores could benefit from offering a handy package of items to get you started after a move, which they can then use to drive upgrade sales for months and years afterwards.

When people move, there are always some things that they throw away because the items are worn out, are a pain to transport, etc. Best intentions aside, I think most of us end up buying the replacements in a marathon shopping trip at stores like IKEA or Target, where you can get nearly all the missing things at a low cost. But at least in my experience, these items end up wearing out quickly and getting replaced with higher-quality versions over time. And when it comes time to find the replacement products, at least some group of shoppers will place quality and reputation ahead of low cost and one-stop shopping. Think Crate and Barrel, rather than IKEA.

Taking things back a step, retailers who offer higher-quality products seem to be at a disadvantage when it comes to selling things to people who have just moved. Relatively few people would go to these stores to stock up a new home from the get-go, unless their budget is quite large. And when people are ready to upgrade later, it’s one store against the other in the usual game of advertising, discount offers, etc.

So what’s the solution? Simply put, even mid-to-high-priced retailers should start offering a starter kit for people who have just moved. This would bundle the common kitchen, bath, and living items together in an affordable package, probably at much lower margins than the store usually gets. The goal is to win that business away from the low-cost sellers. And then once customers buy the starter kit, they are primed for upgrade purchases down the road.

Here’s how it works. Start by including a “Good, better, best” card with every single item in the starter kit. Then, when the customer has had enough with the small skillet or 4 cup coffeemaker, they can choose an upgrade option, go to the website shown on that card, and purchase the better model. (Of course, they could also bring the card into the store.) Depending on the product, this could be accompanied by a special offer code for free shipping, a percent discount, etc. Besides offering an upgrade path for each product in the starter kit, customers could be sent a monthly or quarterly newsletter with relevant offers, especially since the store knows exactly which items the customer already has, and might be ready to replace.

Regardless of the exact implementation, the basic premise remains the same: give customers an easy way to start purchasing your products at a key time in their life (in my example, after they have moved to a new home), make it cost-competitive with other options they’re considering, and use that relationship to sell upgrades and related products over an extended period of time. Granted, that initial sale is going to be lower margin than the store is used to. But since this approach lends itself to repeat business, the margins earned on those follow-up sales should lead to considerably higher profits over time.



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