Business Lesson Number 1: Give the people what they want

This weekend I was reminded of the most basic business lesson.  Give the people what they want, even if they don’t know they want it.

I was in Whitsable, a fishing town in Kent famous for Oysters.  Whitsable is seeing a renaissance as Londoners descend every weekend.  There are downsides of course but one of the upsides are that more money is following and with money flowing comes opportunity.

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On Saturday morning I embarked on a 12 mile walk.  Before getting going I passed a row of small huts on the harbour side now turned into stalls selling crafts etc…  One such stall sold coffee at £1.50 a cup.  However, on the blackboard next to the stall was a sign “Free Mince Pie or Doughnut with every hot drink”.

I was always going to buy a coffee but this made it much more pleasurable.  I love a doughnut.  It got me thinking, how many passers by who were not thinking of buying a coffee or tea but did so as they could not resist a ‘free’ doughnut?  A lot.  Th owner told me turnover had doubled since the sign went up.

So, in on line world his conversion had risen by 100%.  He only discovered it by accident, he had the sign up really for locals to thank them for their support.

So, I started a few calculations.  Lets just take Saturday.  £1.50 per cup of coffee and doughnut.  Lets say the coffee and doughnut costs are £1 all in.  So, £0.5 margin.  I reckon on average had had 1 person per minute, over 8 hours thats 480 people for the day.  480 at £1.50 a time is £720 turnover.  At roughly 33% margin thats £237 after costs.  Not bad at all and thats on a cold Saturday in December,

In summer I reckon his turnover rockets as people visit to enjoy the sun and I am sure he changes his products, cold drinks etc…

Without the free doughnut his margin per day (in my assumptions) would be £118.50.  So, the free doughnut made a huge difference.  He managed, by accident, to tap into peoples desires without them really even realising.  A great sales message, something excellent for seemingly nothing extra.  It’s business lesson number one.  The most obvious way to increase sales so why is it so many businesses end up in price wars rather than improving the perceived value?  Price is powerful but value always wins.  I think.

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