Day 1: The Start- When I was a kid growing up I loved sales. I loved the idea of product margins and negotiating. I may not have known exactly what a margin or a markup was but, I LOVED IT. It all started after Halloween when I was in 5th grade. I had a lollipop and another student from my class asked for it. I declined, yet I thought to myself there is a new NOW cd coming out and I wanted to purchase it. I made an offer to my classmate; "50 cents and this lollipop is all yours". What do you know my very first sale. Literally the beginning.
Day 2: Start Up- One transaction made me start to think. I received this lollipop for free from going out on Halloween and I just made 50 cents Net Profit. Did I really think like that? Sure, but maybe not as scientific. I decided I was going to take the risk and I was going to purchase lollipops and sell them at school. This is where I would encounter my first business dilemma. I had no start up capital. I went to the first place I could think of. MOM! What parent can deny their child's first business endeavor, even after looking up the school handbook and seeing the no solicitations policy. She took me to the grocery store and we decided to go with a big bag of tootsie pops. Now, I needed a price for my product. I figured that the cost of a lollipop was about 12 cents so I would charge 50.
Day 3: Creating the strategy/Market Penetration- My price was set but how am I going to make a sale when my business goes against school policy? Easy, Scope my market. I decided to pay close attention to the goings on of the school day. I would take notes on when the teacher was most likely to look away or leave the classroom. I would be attentively taking notes on the force of gravity, just kidding, when the teacher was most distracted by other students. By the end of the day I had created my market penetration strategy. It was perfect, the end of the day getting ready for the busses to be called, the teacher was running around helping students get their jackets, shoes and class work. She was way to busy to notice me.
Day 4: Advertising- I now needed to promote my business, but how would I do that when I was breaking the rules. Well, I would start with the student next to me and then the two from across the table. I opened my desk and just happened to make my giant bag of lollipops visible. "WOW, can I have one" the student to my left asked. "NO" I replied, "They are mine and I'm saving them". If there is a mischievous face to be visualized, do so here. I am creating demand. I closed my desk and I said, "well, I didn't want to give them away because I purchased them myself but I guess for 50 cents", "OK!" he replied, and BOOM starting to see that ROI. Now, let my WOM Marketing strategy takeover from here. The kids across the desk see me take out my bag of lollipops and give one to my neighbor. Now they want one. Cha-Ching, another $1 of lollipops sold. The growth was incredible, in 15 minutes while waiting for the busses at the end of the day I made $10. The lollipops only cost a total of $4 thus leading to a net profit of $6. 60% profit and $10 in my first day of operation. Needless to say I got home off the bus and "MOM, we need to go to the grocery store".
Day 5-8: Repeat the process: buy, markup, resell.
Day 9: Market Challenges- My business was growing nicely. I had a great clientele and had established the ground rule that no one could talk about where they were getting their lollipops or there would be no more. The first rule of lollipop selling in 5th grade is that we do not talk about selling lollipops. If you take nothing else away from my story at least remember that. My problem was that my customers started to catch on to the less expensive alternatives to my lollipops, buying their own. There was mumbling about being over priced and my daily sales volume was starting to decline. I made a quick decision to lower my price to 25 cents. I listened to my customers concerns and made the proper adjustment. The beginning stages of learning Customer Relationship Management.
Day 10: The Up-Sell- Before my price reduction my customer daily value (CDV) was 50 cents. Since my price reduction, my CDV was still 50 cents, however, my profit had dropped because they were purchasing 2 lollipops for what was the previous price of 1. My costs are increasing so I needed a strategy to generate more sales. I decided to create bundles. Instead of surviving off of my 50 cents per transaction I was going to try to average $1 from each customer. New pricing options: 25 cents per lollipop or 5 for $1. Now promoting my new purchasing options the cost of a lollipop just dropped from 25 cents a unit to 20. My customers were thrilled, but not as thrilled as I was. My CDV had just skyrocketed. I was getting an entire dollar from each transaction.
Day 11-20: Business as usual- Everything was great the Up-Sell strategy was working and growth was great. Buy-markup-resell.
Day 21: Business was good until it wasn't- My competition was low, the barriers to entry were even lower yet one weakness in my model brought my business to its end. FACULTY! When 20 out of 20 students in the classroom have a desire for your product and they are all walking around at the end of the day with lollipops, well look for the kid with 20 bucks and no lollipop. Life lesson: A bar owner should never be a drinker = a lollipop salesman should never be a sucker. Ofcourse, I wouldn't be wasting product I could be making $$$ off of it.
I learned a lot about business in my first venture. I had an amazing ROI and walked away with profit. I also learned that sometimes the government can be a huge problem in doing business, am I right or am I right.
Very funny!!!!!! Also very informative! Can't wait for the next posting!
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