Sell more to more people.

If you like ice cream we expect you have taken advantage of the large number of ice cream outlets that serve Hershey's Ice Cream.  (Note here that Hershey's Ice Cream has no association with the candy bar company in case you did not know. Both are different companies and both successful operations.) We know in my area there once were at least four or five places that serve the large number of flavors Hershey's offers.  

The high quality product and large selection is the hook that keeps people coming back for more.  Hershey's some years ago decided to make a move to sell more of their ice cream parlor product and some smart person in their marketing department came upon a way to do so. The approach was to offer places like convenience stores, small mom and pop restaurants, and other small operators a great deal. That deal was if they would buy ice cream exclusively from Hershey's and sell a certain number of the selections Hershey's would in turn provide the coolers for the products.  Made good sense since once the coolers were bought in large numbers the price would come down and the local operator would pay for maintenance and power costs.  Hershey's would sell lots more ice cream and would gain more outlets in which to do so since the upfit costs for the local sellers was next to nothing. 

However things are changing in the Hershey's ice cream outlets.  We caught wind of this change about 4 months ago when a Hershey's ice cream operator at the beach where we frequent told us that they would have to reconsider their Hershey's deal.  The reason was quite simple Hershey's was no longer going to offer free coolers and would charge for those in use now.  This of course hurts smaller operators and sure enough we are already seeing some Hershey's operators switch over to Blue Bell.  Now we do not know if Blue Bell is offering a deal, but they must have a cheaper arrangement. 

The point here is that Hershey's management has broken a rule we took to heart back many years ago.  Simply put the best business, the most profitable business is one that sell more products to more people.  Not more profitable but less products to less people.  It stands to reason if you have a better price and better deal or deals you will sell more as I can absolutely assure you that the masses will find your place and product.  Yes one might think that if they raise their price and get more profit per sale that profits will go up, but the short lived bump will fall when your competitors take advantage of the situation.  Maximum profit occurs when a business sells the most product it can in market at the lowest price. 

The optimum market situation is selling as much of your products or products to the most people at the lowest possible price and maximize profits by the larger number of sales.  This in effect keeps your competition at bay and allows you to own your market.  All businesses large and small are for the most part in process of proving this concept.  It is a concept that only smart management obeys.  It is a business sin that should be avoided at all costs. This rule has been known for decades, but for some reason business managements tend to not resist the short lived sweetness of seemingly higher profit.  

Look no further than Walmart to see how this rule works and how it can max out your profits if you adhere to the rule.  Walmart for years has decided that with the items they sell they will be the low cost provider and they squeeze suppliers and their own operation to do so.  They refuse to be undersold and as anyone can see they  are the largest retailer in the entire world.  Toyota is another practitioner that been smart about maxing out sales even when the Yen was highly valued which hurt North American sales. Toyota adjusted prices to keep market share and today still owns the auto market worldwide. 

Of course there are business managements that have partaken in this foolishness.  Newspaper management of which I am highly familiar are one of the worst.  For years newspapers owned their markets for news and associated advertising products.  Classified advertising, small consumer ads, were one of newspapers profit centers.  Lots of customers and lots of readers for those small ads.  Publishers decided to raise prices to get more profits, at least what they thought was more profits.  What they got was less ads and less readers when competitors undercut them on prices thus ended their supposed monopoly.  One can find businesses in every town in process of either proving this rule and dying due to ignoring this rule. 

As we began we noted Hershey's management looks to be the latest practitioner of this foolishness and we will all watch this play out over time.  If you own a business please resist partaking in this short lived business destroying activity.