Please bear with the lengthy prologue to this blog. I promise, I have saved the best part for last.
As you may know, I was an early entrepreneur. My first business starting at age 14 was running concession stands at rural Kansas ballparks. I didn’t know anything about business when I started, so I talked to a lot of business owners that I knew around town. They basically told me two things: work hard and focus on the profit margin. That seemed like good advice.
Based on that advice, my criteria for hiring the 30 or so people I eventually needed to run those concession stands consisted of two questions: Will you work hard and are you good at math? That way I figured I could teach them how to be profitable as I was taught.
One day I was giving a new employee my profit margin speech, and she asked me: “Well, what’s the most profitable thing you sell?” I thought a minute, but the answer was obvious: Snow cones. They’re made of ice and a tiny bit of syrup, and come in a small paper cup. Which meant that what we sold them for was close to pure profit.
So we set out to sell more snow cones. First, I created a marketing and advertising strategy. We would post ads on the scoreboards at the ballparks promoting snow cones, figuring if folks knew we sold them, they’d be more likely to buy them. Result? Nothing; no increase in snow cone sales.
Next, we came out with a new product strategy, a “rainbow” snow cone consisting of all four flavors we offered. That gave sales a bit of boost, but we couldn’t deliver the new product quickly enough, because it takes twice as long to create a rainbow snow cone as it does to create single-flavor snow cones. (Interesting stuff, right?)
I went on implementing new strategy after strategy which employed variations on our marketing, sales and advertising campaigns and new product strategies. Nothing produced a great enough result to say we were successful at selling more snow cones.
Frustrated, I went back to one of my business owner mentors and explained our problem. He listened for a minute and then said: “You’re approaching the problem too logically. There is nothing logical about running a business.” I didn’t get what he was saying. Of course, I didn’t. It’s not logical.
Then he asked, “When people didn’t buy snow cones what did they buy?”
The answer was Coke.
“And what was the price of Coke vs. snow cones?” he asked.
We sold them for the same $0.75 (this was back in the day).
He then said: “You don’t need any fancy strategy. Coke is the problem. Coke is competing with snow cones on price.”