Business Lessons from Selling Iced Tea?

Labels: Business, Others on Friday, October 1, 2010 at October 01, 2010

I am a Money Magnet! We are Money Magnets!

Since it's a Friday. Let me offer something different for this blog. Trust me! You'll learn a lot from this story while having a good laugh as well.

Francis Kong is definitely among the best inspirational and motivational speakers in the country. If you haven't seen his blog yet, you should visit it and subscribe. I'll provide the link in this post.

In a recent post entitled "A Lesson From A Tea Business" he illustrated the importance of charging accordingly and delivering quality to help sustain a business. A friend and I have been agreeing on this matter for quite some time now. Both of us are from Davao City but we occasionally come to visit Manila. We noticed that prices in restaurants are way more expensive in Manila compared to Davao. On the average it is 3 to 4 times more expensive. This however, does not discourage us from splurging occasionally and trying out the sumptuous meals. And the only reason we give is because of the quality. The quality of the food and the ingredients, albeit being very expensive, are definitely much better here in Manila. We reasoned out that if only Davao restaurants provided the same type of quality then we wouldn't hesitate to spend as much in Davao as well. I'm not saying that all Davao restaurants serve food of poor quality, it's just that restaurants should charge accordingly with the quality that they deliver.

The anecdote comes with a punch line at the end of the story which is ingenious. Go ahead and read the entry after the jump.

A Lesson from a TEA Business
by: Francis Kong

There’s a sign on a small-time lemonade stand:

"Lemonade 25 cents a glass. Special offer: 10 cents a glass only if you bring it back fast enough so I can use the ice again." Well it looks like this boy knows how to do cost cutting at his young and tender age.

Let me share with you another story.

Benny had told all his friends about the delicious steak he'd eaten in the newly opened restaurant the day before. So they decided to go down there and see if it was really as large and delicious as he said. But much to their disappointment, the waiter brought them the tiniest steak they'd ever seen.

"Hey waiter!" Benny barked. "I was in this restaurant yesterday and you served me a big juicy steak, and now today, when I've organized a party, you serve such a small one." Why is your business so inconsistent?

"Yes, sir," replied the waiter. "It is true that yesterday we gave you a large and juicy piece of steak. But you see sir, yesterday; you were sitting by the window. And today you’re not!”

Many eating-places would love to bring you to their window seats because they want people passing to see that their business is always full. But here’s the problem. This technique could augment business but the one principle they need to understand is that they can have all the marketing techniques they want and employ it but if their products are not good and their services not excellent, they may as well kiss their business goodbye. In all things, especially in business, you and I need to be honest all the time.

Driving home from her office one summer day, a woman noted that there were four places within two blocks of her home where she could stop and buy a five-cent glass of iced tea. Each little stand had two or three youngsters behind it, all eager to serve any customer who came their way. During the next two weeks, the woman managed to stop at each of the stands to encourage the kids. In each case the tea was very good. Small talk revealed that all the youngsters were selling tea made by their mothers, who used tea leaves and real lemons in making the tea.

One day the woman discovered that only one stand was operating. Behind it was the new kid on the block. She stopped and ordered a glass of tea. It was served in a paper cup and it cost 10 cents. Some conversation brought out the fact that the young man's father was a lawyer who specialized in charging, which had inspired the boy to buy out his competitors, bartering with baseball cards, marbles, and stuff he had laying around in his garage.

His first act, he explained, was to raise the price of the iced tea, and cut costs. He was using a powdered tea mix from the supermarket, he said, which eliminated buying real lemons as well as the bother of squeezing them or putting them in the charges.

He didn't have to charge real tea either, he pointed out. He had plans to cut costs further, he said, and with his competitors out of the market, he expected sales to grow.

Intrigued, the woman made a half dozen more stops at the stand and became aware that the tea was getting weaker and weaker. One day the young man confessed that sales were dropping and he attributed this to the fact that he was using less and less of the chariot mix.

Then one day he went out of business, as attempts to turn things around failed. The moral of this story is: HONEST TEA IS THE BEST POLICY.[1]

Charge accordingly but deliver quality. This is being honest. Even if you cut on prices but deliver sub-standard quality, your business will not be sustainable. Respect your customers. Be honest and serve them well.

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