How a Bag of Ice Revolutionized a Catering Company

When I graduated college my father offered me the opportunity to run the catering company that he was starting as a spin off from our family delicatessen that my grandfather originally had opened after WWII in the Roxborough/Manyunk section of Philadelphia. He was already doing a decent business with deli trays out of the store, but reasoned that with a full-time focus on catering, and our own catering commissary, we could build catering into a nice profit center.
After the 1st year we were doing about 200k, not terrible for a 2 person operation in 1987, but no great shakes either. Then my father hired catering guru Micheal Roman as a consultant to help us take the business to the next level. One of Mike's "lessons" took him less than a minute to impart, but was responsible for completely changing how our clients perceived and valued our service.

I was loading up the days lunch orders into our delivery van as Mike stood watch. Each order came in multiple stackable boxes (that we "borrowed" from our wonderful bakery - Amoroso) that contained the entrees, bread, salads, beverages and paper goods. In the top box of each order was the invoice for the client.

As I was loading one of the boxes into the truck Mike grabbed the invoice and started to look over it. He got this disapproving look on his face and called me over. "You didn't charge for the ice on this order," he said.

"We don't charge for ice," I replied.

"Why not, ice has a cost you know"

(Trying not to be a 22 year old talking down to the brilliant catering sensei) "Of course, I know that, but I thought it would be good customer service to include the tumblers, ice, ice bucket and tongs whenever we sell a soda service. I've set the price so that the costs of all those items are covered, including the ice."

"Do you think your customer realizes that?"

I could feel myself starting to get annoyed. I had orders to get out the door and he's trying to earn his consulting fee by trying to show us how to notch up our profitability a fraction of an inch by getting us to charge a few extra dollars for ice.

"I don't think it would be smart business to start nickel and diming our customers," I responded.

"You don't? Those nickels and dimes add up. And you know what? Nickels and dimes mean something to your customers too. Here's what you're going to do from now on. What's would you say is a fair price for a bag of ice?"

"I don't know, maybe $3.25?"

"Ok, $3.25 it is. On EVERY invoice from now on, when you include a bag of ice I want you to include a line item that says 'ICE - $3.25'. Then I want you, in your own handwriting with a marker, to draw a line through the $3.25 and write 'Free — ok/LG' so they see your initials. Got it?"

It was a small but brilliant bit of salesmanship and psychology. Something cannot be valued unless it has a value. Without a price, that ice had no value and was thus totally unappreciated by our customers. With a price attached and then crossed out, we became seen as the kind hearted merchants in the eyes of our clients. Perception is reality and Mike helped us to change how our customers perceived us. It would always bring a smile to my face when clients, as they often did, would call and thank me for doing them such a nice favor.

We then put this principle into more aggressive action. When someone had a big order we'd throw in a sheet cake or tray of cookies. The $10 hard cost hardly put a dent in our profit margins, but the retail value of $50 generated even more goodwill. The word of mouth publicity we received (often from dept. to dept. within big companies who we may have catered a single lunch for) helped double our sales in the next 12 months. By the end of year two we had a full-time staff of 4, including a Culinary Institute of America trained chef.

You won't have to think for but a moment how can you apply this tactic in your business today? Try it out and then write and tell me what happens.

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Posted by Larry Genkin at 10/10/2008 8:49 AM
Categories: Marketing
 

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