Pre-Order
Allow users to pre-order your proposition at a discount, to gauge interest and commercial potential.
What is Pre-Order?
Pre-order validation is a powerful experiment where startups offer their product or service for advance purchase, typically at a discounted rate, before it's fully developed or manufactured. This technique serves as both a market validation tool and an early funding mechanism, allowing entrepreneurs to test real purchase intent rather than relying solely on surveys or expressed interest. Unlike traditional market research, pre-orders require customers to put money down, providing the strongest possible signal of genuine demand.
The pre-order approach is particularly valuable because it tests both desirability (do people want this?) and viability (will they pay for it?) simultaneously. By collecting actual payments upfront, startups can validate their value proposition, refine their target market understanding, and generate initial revenue to fund product development. This method also helps establish an early customer base and creates valuable feedback loops with committed users who have financial skin in the game.
When to Use This Experiment
• Physical product development: When you have a clear product concept but need validation before investing in manufacturing or inventory • Software or digital products: Testing market demand for apps, SaaS tools, or digital courses before full development • Service-based businesses: Validating demand for consulting, coaching, or subscription services • Post-MVP stage: When you have a working prototype or detailed specifications but need market validation at scale • Capital-intensive ventures: Projects requiring significant upfront investment where failure would be costly • Crowdfunding preparation: Testing and refining your offering before launching on platforms like Kickstarter or Indiegogo • Market expansion: Validating demand in new geographic markets or customer segments
How to Run This Experiment
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Define your offering and pricing strategy: Create detailed product specifications, determine your pre-order discount (typically 15-40% off future retail price), and set clear delivery timelines with buffer periods for potential delays.
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Build a compelling landing page: Create a conversion-optimized page featuring high-quality mockups or prototypes, detailed product descriptions, customer benefits, social proof, and clear pre-order call-to-actions with secure payment processing.
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Set validation metrics and goals: Establish specific targets such as number of pre-orders needed to prove viability, minimum revenue thresholds, and conversion rate benchmarks based on your traffic expectations.
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Launch targeted marketing campaigns: Drive traffic through paid advertising, content marketing, email campaigns, social media, and PR outreach, focusing on your identified target audience segments.
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Monitor and optimize performance: Track key metrics including traffic sources, conversion rates, average order value, and customer demographics while A/B testing different headlines, pricing, and page elements.
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Engage with pre-order customers: Send regular updates on development progress, gather feedback through surveys and interviews, and build community around your upcoming launch to maintain engagement.
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Analyze results and make decisions: Evaluate whether you've met your validation criteria, assess customer feedback for product improvements, and decide whether to proceed with full development, pivot, or iterate based on learnings.
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Plan fulfillment and delivery: If validation is successful, use pre-order funds and customer insights to finalize product development, establish supply chains, and prepare for delivery to your early customers.
Pros and Cons
Pros
• Strongest validation signal: Real money commitments provide more reliable data than surveys or expressed interest • Revenue generation: Provides upfront capital to fund product development and operations • Risk mitigation: Validates market demand before major investments in inventory or development • Customer relationship building: Creates engaged early adopter community with vested interest in your success • Market insights: Generates valuable data on pricing sensitivity, customer segments, and product preferences
Cons
• High execution pressure: Creates obligation to deliver on promises, with potential legal and reputational consequences • Significant upfront investment: Requires professional marketing, web development, and payment processing setup • Customer service complexity: Must manage expectations, communications, and potential refund requests • Cash flow timing: Revenue comes before costs, requiring careful financial planning for development and fulfillment • Market education needed: May require extensive marketing to convince customers to buy unreleased products
Real-World Examples
Pebble smartwatch successfully used pre-orders through Kickstarter to validate market demand, raising over $10 million and proving consumer appetite for smartwatches before Apple entered the market. Their pre-order campaign not only validated the concept but also provided crucial funding for manufacturing and helped them build a community of early adopters who became brand advocates.
Tesla pioneered pre-order validation in the automotive industry with their Model 3 launch, collecting over 400,000 pre-orders worth $1,000 each within weeks of announcement. This validation helped them secure additional funding, proved market demand for affordable electric vehicles, and provided valuable customer data for production planning.
Notion, the productivity software company, used pre-order validation for their enterprise features by allowing teams to pre-purchase annual subscriptions at discounted rates. This approach helped them validate demand for business-focused features, generate upfront revenue for development, and identify their most engaged customer segments for product feedback.