Seth Godin's Two Lemonade Stands

[hittjw]

While everyone is so excited about Seth Godin's story of Two Lemonade Stands, you might be interested in hearing about the third little lemonade business ran by Carl, a block down from the bright eye'd little girl in Seth Godin's story.

By the way, that proud eleven year old girl is Sarah, but more about her later.

Carl's been in the "thirst business" since was he was nine, now twelve, he has four other lemonade stands located across town. Two mobile, moving from construction site to construction site, operated by his older brother Larry who was tall enough to push the cart. Two which had some troubles you'll hear about later.

Fresh lemonade made three times a day, cold pressed right on site. You can also get lemon candies, sour apple bombs, spicy gum and various other sour treats. Stands aren't that fancy, just his little cold press machine, a cooler, and a few boxes of candy to choose from.

Like the eleven year old Sarah, customers wait a little for their refreshment, but they do so in the line with other thirsty customers. Lines were pretty consistent at his lemonade stand across from a playground, and the other the local sports field, but Parks & Recreations wants him to get a concession license so he's closed down those spots temporarily.

At his two mobile carts, lines are longest between shifts, at his other locations it depends where he's testing. These carts are great because it's easier to keep all supplies together, plus, the carts are easy to inventory, and can carry lots of ice. With just a 350 cup cost recovery, more carts may tested.

When local competitors are slow, wrapped up in the "value" of their hand pressed lemonade, Carl happily picks up their customers at $2.00 a glass. He too has a story, "every lemon hand selected by local farmers, organic, with all peels recycled." Actually his Mom ("Kathy") recycles the peels by turning them into "Carl's Candied Lemon Peels", "Kathy's Lemonade Candles", and in bags of dried flakes because they don't compost very well.

Carl's Mom doesn't have to pay for the lemon peels and pulp, but Carl did ask for her to "tell the story" of his Lemonade stand in the back of her "27 Ways to Benefit from Lemons and other Citrus" booklet she uses as lead generation for her "Kathy's Candies and Candles" catalog business.

It's not all fun and games, for example, two boys who used to own his 6th stand, are now know trying to knock him off with a traditional stand. They even went so far as setting up in some of the places Carl had tested in the past.

Unfortunately, their standard lemonade stand is just trying to undercut Carl at $1.00 a glass, not understanding cost per glass of lemons is around $0.35, with labor at around $0.15 with the cold press machine, more around $0.45 per thousand for hand pressed. Add to that costs associated with cups, sugar, and advertising Carl knows they will never be able to expand.

Something else unique about Carl's stands, his cups have advertising from two local businesses on the front and back of each. He also offers lunch coupons and specials for his local advertising partners. Because those businesses pay for this advertising, Carl has lower costs, bringing his revenue per glass to $3.50, even when he sell them for just $2.00.

Because Carl collects business cards and names of customers, as part of his weekly t-shirt giveaway (sometimes Carl gives away other prizes donated by his lemonade stand sponsors) he can send a postcard if the location of his stands change. After all, each location is evaluated weekly on sales performance. These names are worth another $1.50 a month in profit because they are twice as likely to return and each return brings at least one new customer.

Carl's two other booths are licensing arrangements with a local Pub and the other a Deli, he figured Parks & Recreation couldn't touch him this way. Plus, Carl wasn't old enough to get a permit to setup in the towns business district, so he licenses his machine and method of producing lemonade closer to his customers.

Between machine rentals and license, Carl brings in about $0.50 a glass in profits, but at those locations his licensing partners sells "Carl's Cool Lemonade" for $3.00 a glass. At volume Carl profits another $0.75 a glass when these partners participate in his giveaways. This is enough to provide monthly advertising kits that advertise his stands, giveaways, and builds his customer list.

The Pub adds Smirnoff Vodka, an idea presented by one of his customer on a off-hand comment one late afternoon, this adds a premium per glass which Carl gets because his father helped negotiated a fee based on percentage gross. The Pub doesn't care because Carl's monthly "Happy Lemon News" mentions the location and flyers are available at his other stands.

And the Deli is price testing a larger cup size, both are using his "advertising cups" which adds value to his partner relationships. All locations participate in weekly drawings. And, if by September these locations offer his Mom's candies he'll get another $0.12 a glass estimated return.

Carl's nice to Sarah, the little girl down the street, his Dad even buys a glass or two a week, waiting patiently in line with his car parked right in front of her stand. Shame those other customers don't want to wait, her Lemonade is almost as good as Carl's, but he takes care of them because his stand is just a little further down the road and there is plenty of parking.

Carl picked up 8 new customers the other day, would have been 12 but guess some still didn't want to wait. If Sarah wasn't so darn cute, and a source of new customers, Carl would put her out of business. But Carl will be in the 8th grade next year and even though she's a bit chatty he might want to take her to a dance next spring.

Sarah is a little upset with Carl because she thinks he's too "factory" and missing the fundamentals of good lemonade, Carl tried to show her that quality is very important to him with a taste test demonstration at the County Fair. But that backfired when he won 4-H's "Best Organic Lemonade", it helps his lemonade is farm friendly and his suppliers are local farmers market distributors.

While Sarah is still a little upset, the win was great publicity and business is up 25% percent month over month (with his list up 12%, so repeat business is good too.) By the way, his Mom's "Candies and Candles" booth tested well for lemon related treats and got good feedback giving away his "Carl's Cool Lemonade" that he may rent his own booth next year.

If only Sarah understood he doesn't make his money by the glass, instead he makes it by the thirsty customer. Now that Carl has finished his "Carl's Seven Steps to Happy Lemonade Customers", he's confident the boys and girls he's hired to run stands will be just fine, plus Carl's older brother Larry is his general manager at least till he goes to college.

And with a system in place, plus cooler kits and mobile stands, Carl will buy a concession license with Parks & Recreations as well as the local minor league ball stadium then license them to operators for those locations. His father will have to help him the hiring, but at least his attorney and accountant are agreeable with the decision as long as he complies with local state franchise laws.

That leaves Carl to ride around on his new bicycle every afternoon after school looking for locations, checking in on his lemonade stands, and to check in on his advertising partners. He'll be speaking at the local Rotary if they meet on a day that he doesn't have school, but right now the flyers he drops off help him keep advertising rates high.

Between his $2.15 a glass net profit, licensing relationships, and back-end proceeds from advertising partners; Carl will definitely have enough to pay for his brothers first year of college because someone will have to run his five city roll-out who is old enough to get a business license. After that his brother is on his own, but at least Carl will have time to charm Sarah.

The question for you, Are you running a lemonade stand or a business?

Sincerely,

Justin Hitt
Strategic Relations Consultant
+1 (757) 282-7779

P.s. There is more to the value you bring customers than just the product you sell (and your customers perception of engagement), it also matters how you delivery it, your interactions with partners, and true sustainable value delivered. All the time customers get excited about things that don't help them, there is a lesson in this story that gets you results in your sales and helps customers solve real problems. If you want to get past silly stories and get down to real business, then contact Justin Hitt for an initial consultation.