I never believed in the volume game. It was stupid, risky, and didn’t really allow a company to grow (in my opinion). My rationale was simple: If you’re only making 10 cents off a $2 product, you’d need to sell 19 of them before you can buy extra product for your next inventory purchase order. In the meantime, all you need is one theft, slow mover or dud product, and you’re basically in the red until you can sell your way out of the hole you just created for yourself. Razor thin margins didn’t make for good business, and could even hurt perceived value if priced too low.
While some of this logic is sound, I have realized there are more benefits to the volume strategy than I had once imagined. If done correctly, you can use volume to your advantage, and even come out better than if you were to have employed the profit strategy instead. Here’s how:
Quicker product iteration
With the qualification that the product is owned by you: what are some things people dislike about it? What can you improve? What could increase sales by 3x? You won’t really know the answers to these questions until you get enough feedback. And that won’t happen until you sell enough of it. Natural feedback occurs when there are multitudes of product-customer experiences occurring on a regular basis, which will help evolve the product into an even better market-fit.
Buying power benefits
The more volume you are able to move, the greater discounts you can demand from your suppliers. Bulk orders almost guarantee savings on costs, and that’s where the higher profits come in — without the need to increase price. More sales equal more volume buying, which equals volume pricing, all while keeping the customer happy.
Organic marketing flywheel
If more people are buying your product (and your product is good), people will naturally refer their family and friends to you. Word of mouth is the best form of marketing, after all. In other words, you don’t need to spend money on advertising or sales staff if your volume is at a level where organic referrals eclipse all forms of marketing.
Greater buyout potential
If customers are buying your product, that means they are typically not buying the competitors. And that’s market share you’ve just gained. Unless your industry is not a zero sum game, every sale you make is one less your competitor is making and your brand is now (slowly) making a name for itself. Eventually, the competition will notice and may acquire you to get you out of the way, for a large sum.