Complementing Physical Products with a Digital Product Strategy
“Shipping Optional” is a testament to the power of digital e-commerce, which refers to selling electronic products through electronic means.
But companies that sell physical products can also take advantage of the digital revolution. Just because you are shipping boxes to Omaha doesn’t mean that you can’t complement, or even improve your business model by up-selling a digital service.
One example of a company that up-sells a digital product along with their standard physical products is REI. I was recently in their brick-and-mortar store for a look-see; I found a jacket that I liked and took it to the register.
Once there, I was presented with an offer of $20 for a lifetime membership. As a member, I get various discounts, members only offers, and even a Board-of-Director voting privilege.
While this story occurred in a physical location, I later noticed that REI offers this membership online as well.
In reality, what has REI sold to me? Essentially, they’ve sold me access to their email marketing campaigns so that I receive special offers and discounts, along with the opportunity to join a special community of outdoors enthusiasts.
But don’t I see these same offers for free from other companies? Don’t I even occasionally shun these offers as spam?!
This digital up-sell by REI is the result of some great marketing and I wouldn’t be surprised if this offer changes to $20 annually in a few years. Long-time brand loyalists would be grandfathered into the club without having to submit annual payment. This would ensure continued brand loyalty and differentiate between early adopters and late comers.
Another way I’ve seen digital up-sells bundled with physical goods is in the music industry. I recently noticed that one of my favorite artists, Bob Mould from Hüsker Dü and Sugar is reissuing Sugar’s debut album Copper Blue on vinyl with a coupon included for a full download of the record.
Since I’m in the middle of restoring an old vinyl record player, I really wanted that double LP. But we’re also in the age of digital access anywhere, on any device, and a high quality MP3 version of the album is also important to me.
Merge Records has taken advantage of the ability to up-sell a digital version of the album I want, along with the vinyl LP. This way, I can listen to the digital version anywhere I go, and I still get to experience the nostalgia of playing the vinyl on my record player.
A final example of a physical product company leveraging the latest technology for digital revenue is the Master Lock company. We all know Master Lock for protecting our school lockers and storage sheds. But they also provide two types of digital products – one is an on-premise software sold as a perpetual license and the other is a free-to-use SaaS product for PCs and mobile devices.
The on-premise software is called Locker Manager. It is a great digital up-sell for a couple of reasons:
It is a system that helps individuals and companies manage the tedious task of assigning, remembering and resetting the lock combination codes in large lock installations, such as schools, gyms and libraries. Therefore, it enhances the usability of the original product.
At $200 for a single license and $400 for five licenses, it generates additional revenue for Master Lock.
The free-to-use SaaS product is called Master Lock Vault. With this product, Master Lock has created an online digital vault for your valuable digital documents, passwords and combination codes. While this product does not generate direct revenue, it does build a deeper relationship with customers and expands the company’s reach to digital customers.
As you can see, there are many creative ways companies that sell physical products can leverage the digital product world. The benefits for your company are additional revenue and increased brand loyalty, while your customers receive more functionality and better services.
Don’t look at this as a challenge. Look at it as diversification. Who knows? You may stumble upon a better revenue stream in the digital world than you have in the physical world.
Tell us about your ideas for up-selling digital products along with your physical ones.
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A vital article worth its weight in e-gold. At the end of the day, one is simply influencing consumer behaviour in favour of your physical retail products by enhancing with digital products, provided the consumer perceives value in those offerings. It may seem a tacky form of promotional marketing but one sale is better than no sale against the competition; and obtaining lifelong loyalty from consumers is key to looking after your existing e-customer-base and maintaining that necessary competitive edge.
Craig Vodnik says:
Hi Nick - I think that these examples are a great way of enhancing the physical product with a digital product. I do think that there are scenarios where a physical product is being disrupted by a digital product and it's better to do the disrupting yourself than wait to be disrupted. Music is a good example where if I were the record industry, I would have wanted to disrupt myself before Apple did it. The movie industry is one that is being disrupted and the studios have been at the forefront.