The Importance of Understanding What You Sell

I went to IHOP the other week with a few friends for their free pancakes in celebration of National Pancake Day to see what all the hype was about. Similar to Denny’s free grand slam breakfast, IHOP’s promotion should be deemed successful, if not even more successful than Denny’s promotion. Free offers like this cause people who don’t normally go to those stores or purchase those products to do so. The difference between IHOP and Denny’s is that Denny’s gave away a lot more food and it cost them more. IHOP offered only 3 small pancakes. If people went to get the pancakes for a meal, then I’m sure 3 small pancakes would fill few people up. This, in turn, causes people to order additional food to fill themselves up and of course, drinks to quench their thirst. The cost of making a pancake is extremely cheap compared to the other food. So while they may lose some money from those pancakes, they are now making a lot more money from the influx of people coming to eat and buy other things (the people who otherwise would not have been out getting a meal).

This brings me to the topic of how important it is for business owners to have a full understanding of the product(s) they offer. To be familiar with a product is important because it can help you dictate the type of promotion you want to run. As for restaurants that give away free food, they know this will be successful because people will buy drinks and this has a much higher margin than the food or they know that the food they are offering isn’t enough and they know that people will buy more than what is given.

Some questions to consider:

What product offers the highest margin?

What is your most popular product?

Do customers often buy more than one product at a time? If so, which?

Who is your target audience? Do they buy for themselves or for others?

What is your goal?

If you run a special promotion, how will you promote it? Who will respond? How do you make it profitable?

Can you offer something at an extremely discounted price?

Can you giveaway something for free?

This is a very short list on some of the things you should think about, but thinking about these answers can help you implement a successful campaign. Leverage products with high margin, go after audiences likely to buy, combo up products people enjoy purchasing together (shoes + shoe cleaner; cameras + camera bag; pens + paper; etc), and understand your goals. Study what you sell and use it to create some profitable campaigns!