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Is it Repetitive?
With rare exceptions, the only way to achieve the volume target required as a part of
building value, is for the product or service to be needed over and over again. This is how the demand arises for toothpaste, for gasoline, and for food to name a few examples. The need to have the
customer make repetitive purchases drives the concepts of (1) "planned obsolescence," and (2) the phasing out of products where the interval between purchases is so long that the firm that produces the
product cannot survive on the low rate of purchases.
An example of a product that falls into the second category is a particular antiperspirant. For several years, this product was available in a small
bottle that would last (given daily use) for 1-2 years. Though the price was somewhat high--it was worth it because the stuff lasted "forever." Eventually, the product was phased out and
replaced with a formulation that would run out every two or three months. Why? Apparently someone realized that for the venture to be persistent over time, a certain rate of repetitive purchase of their
product is necessary. They adjusted the characteristics of their product accordingly.
Another approach to enhancing repetitive purchases is to identify alternative uses that can permit the achievement
of volume targets. Take the baking soda example. For years, people only purchased baking soda for baking. So, a box of baking soda would last a very long time. Then, someone made an
entrepreneurial discovery--people were using baking soda to eliminate household refrigerator odor. An advertising campaign that encouraged odor elimination use, and replacement every six months, multiplied
sales many fold. Instead of selling one box of baking soda every two or three years per household, the venture achieved a substantial increase in its repetitive purchase index, selling an average five or six
boxes per household over the same period of time.
So, for an entrepreneurial discovery to meet the repetitiveness test, it must either:
1.be something that runs out but is needed on an ongoing basis,
2.be something with a useful life that can be deliberately limited thus encouraging repeat purchase, or
3.be something that though limited in its
level of repetition, can have its repetitiveness extended through alternative uses.
In a new venture, if the purchase pattern for the product or service is not repetitive, the answer to Question C: Is it
Persistent Over Time? is NO--which means DON'T GO ON until the issue of repetitiveness is resolved.
If you are evaluating a business that is already running, then you should work to find a (legal and
ethical) way to create repetitive purchases using some of the suggestions previously noted to raise the level of repetitive purchase.
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