The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Creating demand is one thing, I get it

On March 24th, 2014, posted in: Uncategorized by

Supply&Demand

We stood in line the other day waiting for our turn to spend money. I don’t normally stand in line for much, but this was “Pappy’s Barbeque.” It might be the best in the world based on how many salivating people were in line with me. Our wait was a half-hour. When we left, my guess is that the wait time was extended by at least another 20 minutes or so, given that the line was even longer. That’s quite a demand for BBQ pig. And creating that demand will keep people coming back – to a degree. After all, human nature is an inherent want to be a part of something popular. It’s how “flash mobs” are created.

Creating demand is one thing, I get it. You want your product to be a hot topic, a “hashtag” on Twitter, a “like” on Facebook, or the “cooler talk” at the office. But, the fact is, when you get too much demand without satisfying with sufficient supply, you’re going to lose some opportunity. Add in an area rife with employees who are strapped with a limited lunchtime, and you got a quandary for sure.

It’s a balancing act. There is only so long before loss of opportunity kicks in. In the case of BBQ, eventually the line shortens as people move to their second choice – a by-product of time constraints. Back to the “cooler talk” at the office – my guess it goes like this: “Yeah, the BBQ is fabulous, the best pig in the world, but I only have forty-five minutes for lunch. It’s a fifteen-minute drive and a thirty minute wait. That leaves no time to stuff my face with the Q and the fixins.”

If such a backlash occurs, opportunity costs shoot up. Now, multiply that “cost” by how many people work in the area and go out for lunch. The next thing you know your current demand may be actually costing you money. Current profits won’t show it, the line in the hallway fosters the current demand and produces the revenue. But how much more profit could there be? You’re pulling people to your product – pull more, right?

Yeah, but expansion costs money too. Bingo! That’s where thoughtful analysis must be considered. Can you “scale” the pig? If not, increases in labor, occupancy, operations are all real and must have thoughtful consideration before rushing into a decision to expand. But, that lost revenue and the word on the street could be long-term damaging.

I’m reminded of the Master of Malapropism, Yogi Berra, who once said something like this when talking about a New York City restaurant: “Nobody goes there anymore, it’s too popular.” That’s funny, costly and true.

Granted, my approach is always “grow baby grow.” Nobody shrinks into greatness. There is another side to the “grow” argument that is practiced by Pappy with great success. Both are acceptable to a business leader, but I always lean toward growth.

The truth be known, this mild rant is all about my disdain for standing in line. The BBQ is fabulous, but I don’t want to wait. Dear Pappy, please expand so that I can eat your pulled pork more than once or twice a year. Please!

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