What My 8-Year-Old Taught Me About Business.
I have a good story for you, one about my 8-year-old daughter asking me about business in a recent car ride on our way to her soccer game. It actually started before that, it started at the gas station right after I filled up my gas tank she looked out the window and saw $145.38 on the pump.
She was absolutely blown away at how much it had just cost me to fill her tank...she has been saving up her money for the last few 3-4 months doing her household chores and responsibilities and had earned $160.
It basically started out as "Daddy, how do you make money?". Then I went off on a tangent about how business works, the semantics of how profit and ROI works, and realized I was being met with a blank stare lol.
So I decide to offer a scenario that was relevant to her, through an analogy. For those of you reading this, this is also a good way to connect with your audience by simplifying things and offering people a real-life scenario that they can resonate with and relate to.
So I posed the following questions to her. Imagine every house on our street had a lemonade stand...
- How would you go about selling lemonade to cars that drove by?
- How would you create a lemonade that was better than everyone else's?
- How would you get people to stop?
- How would you get people to buy more from you once they were stopped?
- When would be a good time to sell lemonade?
Then we proceeded to discuss these. We broke it down into several conversations.
Focus: Better Tasting Lemonade (Product Improvement, Competitive Advantage)
The first thing we discussed was the quality of the lemonade and what separated hers from the others. She said she would fresh squeeze more lemons in them and add more sugar to make it taste better.
Then I asked...
Me: Does sugar make it actually taste better? Also, if everyone has lemonade on the street that was very similar, how would you make yours different.
She then proceeded to come up with an idea.
Her: Let's add strawberries to it.
A good idea, and one that would differentiate her lemonade with the competitors along the street.
APPLYING THIS TO YOUR BUISNESS: In terms of a business, this is the product that you are selling and/or the competitive advantage that you have over the others in your industry. What separates you from every other "blog" (lemonade) stand on the Internet (your street). This is something that you need to think about as you build it out, and if you are promoting products and review products, this is something that you are going to need to take into consideration as well.
Focus: Getting Cars to Stop. (Marketing)
The next discussions was getting cars to stop.
Me: If there is a bunch of lemonade stands all offering lemonade for sale, how would go about getting a car to stop?
Her: My sign.
That is obvious, as that is what kids see and that is the natural first step to setting up a lemonade stand. But then the discussion quickly pivoted to "what would you put on the sign to make people stop at yours, versus the others?".
Her: Best Lemonade, $5.
But what about it is the best, and is $5 a good deal? Also, where would you put the sign and what would you do want to put on your sign to encourage people to stop.
Are you going to use language that is a call to action like "Get Our Thrist Quenching Lemonade Here!" or, "ROAD_NAME's Best Tasting Lemonade!".
Lots of potential ideas there. And do you want to lead with price on it, or do you want to get people to stop before you explain the price. Are you marketing the product on the basis that you are cheaper, or better tasting?
All things to think about with the signage, that is, the marketing.
APPLYING THIS TO YOUR BUISNESS:This reflects the marketing and advertising component of your online business. Not only how do you capture one's interest with a captivating ad, how to you make it so that it is clearly readable to your audience and that it stands out from the crowd.
Focus: How to Get People to Buy More Lemonade (Upsell, Improving ROI)
Alright, you have people pulled over and they are out of their car. They come up to your stand and ask for one lemonade, how do you go about earning more revenue from this one person. They are almost certainly going to pay you money at that point, but how could you add value to this person to get them to buy more.
Her: She said, "buy one get one free".
...which is a great idea, but I suggested that might be something that she wanted to market on her sign that would separate her from the crowded street of signs. That won't lead to her making more money ONCE she has a customer, and it will lead to her having less lemonade to sell to others. It could serve very well for her sign though and getting more revenue as a result of more people stopping.
We discussed a little further. She suggested that she could sell other stuff at her stand.
Me: Like what?
We have a yard that produces fruit, we have a small orchard of fruit trees, lots of plums and a plethora of blackberries. Not a bad idea, and she may just be able to sell something else once she has a person with commercial intent. They are out of their car and they are almost a certain "sale".
Then we discussed the idea of discounting "multiples", if they wanted to buy more, or even offering different sizes of cups so she could ask more money for a larger size. Those are ways that she could increase value, considering that the overall cost of the lemonade itself was nominal and additional revenue could be added quite easily.
APPLYING THIS TO YOUR BUISNESS: This has a lot of application to your business. Upsells and improving your overall value per customer. If you look at this in the context of any business, you will realize that the first focus is establishing a customer...then once you have a customer, it is much easier to sell more to that particular customer than it is to generate new customers.
Focus: Go to an Area of Less Competition. (Scarcity)
Alright, the discussion continues. The next thing was the competition. What are we going to do about competition, as in the scenario I posed there are going to be MANY lemonade stands that we are going to compete with.
Now I explained that traffic of course goes both ways on the street, and we are about in the middle of the pack in terms of "first stand".
Her: Well we could move our stand to the end of the street, to get more exposure.
That is actually a good idea, and in business whether you are operating a store front or you are operating an online business, being the first to be seen can be beneficial. Location is everything in that case.
Me: But what if we had to keep our stand at the end of our driveway?
Her: Well we could put a sign at the end of the street before the other houses.
The kid brain, is the logical brain and it is one that often times though naive to the actual idea of business and running a business, makes a logical sense.
We could in fact put a sign at end of the both directions, exclaiming that people need to get the BEST lemonade by coming to OUR particular address. In other words, don't buy yet...wait until you reach the best lemonade down the street (and this is where we could have the 2-for-1 marketing as well).
That is another way, but the law of averages would also indicate that people might not select the "first" stand they see, if they see other stands down the road. So being in the middle of the street might have advantage naturally with two-way traffic.
APPLYING THIS TO YOUR BUISNESS: If you are in a crowded market without a unique selling proposition (also known as a USP), then you are not going to have much success. You need to decide how you can differentiate yourself or position in yourself in a way where you outshine the competition, or have access to more exposure.
Focus: Selling on a Hot Day (Demand)
So last question brought me to WHEN we should sell the lemonade to people. Are we going to sell it in the winter or the summer? What about the temperature outside, will a hot day be better for selling a cold drink or hot drink?
Naturally my daughter understood that people would prefer to have a cold drink on a hot day, as the "demand" would be higher. It is hard to sell a hot drink to someone in the arid heat of the desert, the same as it is harder to sell a frozen drink to someone on a cold day.
She got this. It was easy to understand. We plan on setting up our lemonade stand in the summer, on nice days. ;)
APPLYING THIS TO YOUR BUISNESS: The supply/demand formula applies to absolutely every business. Also, presenting the appropriate product (most relevant), to the appropriate audience is what is going to lead to higher conversions. Not to say you can't sell lemonade to someone on a cold day, it will just be more infrequent and happen at a much lower rate.
As you can see, a simple analogy that was "age appropriate" lead to a very cohesive discussion about business. In fact, I don't think she even realized she was learning a lot about business, she was actually very excited about the idea of earning money from a stand but just as much so, being able to drink her own tasty lemonade!
Well anyways, we are off to plan out our lemonade stand for next summer. Her strawberry lemonade is going to be a hit...even more so because she likely won't have a street full of competition.