In measuring the success of a product, not all sales are born equal.
Sunbeam is a name that’s seared on my mind. My earliest
memory of the brand is as a kid in Mumbai, when my uncle had gifted us a
Sunbeam steam iron. Once, the iron fell, breaking key plastic parts while more
rattled inside. My father got his typewriter out and wrote a letter to the
company explaining our predicament. Going to work in crumpled shirts isn’t an
option, he said, I presume, and we mailed the letter to England in an airmail
envelope bordered with red and blue stripes. Then we forgot all about it, and also
about the iron.
Several months later, the postman delivered a small package
with replacement parts sent to us by the manufacturer. We took it to the local
‘jugaad’, or make-do repair shop, and our Sunbeam iron was back in action, as
good as new. When I shop for an iron, it’s no surprise that I first look for a
Sunbeam. I could be their legacy customer.
Often, the trajectory of companies that have booming sales for
their top notch ‘gratitude’ product, one that leaves customers in gratitude for
having made their lives easier or for solving a pressing problem, is one worth
studying. Before a company celebrates sales, they must seek to learn their customers’
‘why’. That will help them figure out the ‘how’ for sustaining growth.
Separating sales revenues by product lines or territories are
important. However, it is just as important to understand the propulsion powering
a sales trajectory from a long-term investor’s perspective. In a startup,
understanding that trajectory is important even for family members or a
significant other emotionally or financially invested in the entrepreneur’s dream.
Financial reports must break down sales by loyalty – the
reason customers invest in a product or brand. Loyalty is demonstrated through
different kinds of repeat customers.
- Product-Repeat: Is the customer a product-repeat buyer because of a great experience the first time they bought the same product?
- Brand-Repeat: Are they a brand-repeat buyer because they loved a different product being sold under a brand name?
- Referred-Repeat: Are they a referral-repeat buyer because someone they trust recommended a product? If your siblings purchase a product or brand you use, it’s effectively a repeat purchase by a family.
The greater the proportion of repeat sales in overall
revenues, the stronger is the wind beneath the sales trajectory wing. Knowing
the repeat-sale component would help one understand whether a sales trajectory
is merely passing through the silver lining and heading for cloudy skies, or if
it is going to be through sunny skies all the way.
Repeat sales also keep lowering the costs of customer
acquisition.
