- October 8, 2019
- Posted by: Paul Foster
- Category: Increase Profits in Business, Profit Improvement Strategies for Small Businesses, Strategic Planning and Implementation Services
Which of the two restaurant business models do you think is more profitable?
Model A is a sushi restaurant with 130 different items on the menu; customers can dine-in or get takeout or delivery.
Model B is a morning coffee shop, which also opens on Friday evenings from 5pm till 8pm and sells only fish and chips during that time; customers can dine-in or get takeout.
How much inventory is necessary to maintain the menu of the sushi restaurant? Do you think they sell out of inventory each day and end up with little or no waste?
Wouldn’t a business be more efficient if you only had to buy one type of fish, make it one way and make it really good?
While I don’t know the actual results of each of these real life examples from my hometown, I can tell you that the sushi restaurant is now closed and customers line up outside the coffee shop before 5pm on Friday nights because they sell out of fish every week!
How many product and service choices do you offer your customers? Why so many?
There was a study which demonstrated how too many options can paralyze decision making. Sales tripled when participants were offered only six types of jam, compared to the group who were offered twenty-six types of jams.
Here is the million-dollar question:
What product, product feature or service could you drop from your current offering that would simplify the decision-making process for your customers? (For example – the choice of fish and chips or the choice of fish and chips.)
Are there methods to streamline efforts and costs? (For example – only serving the best fish and chips from 5pm to 8pm.)
And keep in mind, simplifying doesn’t have to mean eliminating the product or service entirely:
- Are you offering free delivery to customers who would prefer to pick the product up?
- Could you reduce the number of combinations or colours?
- Are you bundling products and services when customers don’t want the entire bundle?
- What product or service has the worst profit margin and the highest costs? Could you eliminate it?
- Could you eliminate a resource-consuming, labour-intensive process or stop selling slow-moving inventory?
If you haven’t taken a good hard look at your product and service offerings from this perspective, you might find that fewer choices often means more profit.
If you’d like to review these questions with me in person, please let me know: firstname.lastname@example.org