The article is about storytelling in village communities still observed in the 21th century, conspiration theories and modern advertising. My experience as longtime villager and suburb dweller helped me.
I am living in the same village I spent my childhood some years ago. There are still many natives, some of them never moved out of their parents and grandparents house. They tell stories about families in the village, what they do, what the members of that families do and their fates.
Wondering why I did not know anybody mentioned in the stories while quite many villagers from associations, businesses and events, I asked the storytellers who these people are. The commone response was how could it happen that I do not know the people from the stories.
The characters are fictional. It is similar to movies many people have seen. Everybody is expected to know the story of the movie, and some words go into common language, like “catfishing” (pretending to be another person online), “gaslighting” (making somebody questioning their own reality) and “weinsteining” (behaviour close to what Harvey Weinstein is imprisoned for).
Village storytelling, repeatedly told by villagers, are the local kind of the bigger stories in movies. The stories connect the community. In the neighbouring village they have other stories the locals do not know.
Modern conspiration theories follow a similar scheme. Insiders know the story, and they feel the knowledge makes them much smarter or at least better informed than others.
What do we do with that information? There are stories others impose on us with the argument “As long you do not know the story you do not belong to us” or they use for gaslighting us. These stories are not worth anything for anybody except for the teller. There are other stories well told and worth remembering and retelling, for example “Good Wife”. Newly elected governments might also suffer the comparison between their results and the stories they told before election.
The article deals with the possible uses of automated advice and partial automation in sales and customer service.
The interested customer is looking für information before bying. He or she may ask a specialised salesperson and consultant who has all the relevant answers ready and can think in the customer’s interest. This relieves the customer. Or they, the potential clients, may look for publicly available information and customer review to avoid the advice of an inexperienced and overburdened sales representative.
Many sales representatives of complex products, starting with bicycles, are quickly overwhelmed by well-informed prospects. The rhetorically untrained salesperson feels attacked, the sales talk goes off the rails, the interested party prefers to buy from a supplier without advice.
The web part of customer journey
Depending on the product, between 80% and 90% of the buyers begin their customer journey with an search engine. So it is important for the seller to know what it is reported in the web, take care of the correctness of web information and avoid contradicting information. If there is human sales staff, they are supposed to assist the web customer journey and take care of a seamless process.
The consultant with all the facts in mind and the fully automatic customer advisor are extremes, the practical truth in the company lies in between.
Can the web be the better customer advisor?
Yes and no. The informations in the web and the informations given by a human sales person are supposed to go without contradiction. Nobody likes lies and deception.
Some companies help themselves with consulting software for salespeople. In this way, the seller collects the relevant information from the customer, the software itself compares the information with the content of the database and delivers a print-ready result.
This is often used by financial service providers, banks and insurers and is not yet artificial intelligence. The results are determined by a fixed algorithm. Today, the software is mostly a web application, giving management strong control over the sales process. The sellers outside have to adhere to the guidelines of the management. Furthermore, the consultation process can easily be implemented online for a web form to be used by the customer himself. The interested party enters the data themselves without being tied to branches and sales representatives.
An experience from market research: the classic CATI procedure: “read the questionnaire and let the interviewer type in the answers” is no longer the only state of the art. Online research providers are winning and therefore have better data.
Artificial intelligence would record the results of the consultation or process, compare them with predetermined success goals and recommend adjustments. Something salespeople do intuitively, too, if you let them. Artificial intelligence therefore means less control, and the susceptibility to errors is at least not reduced. On the other hand, opportunities are used that might otherwise have been overlooked. Not enough staff. I have to replace people with machines. What to do?
Make as much information as possible available on the Internet in a neatly structured way. Many people would like to find out more before making personal contact, but cannot find the information they are looking for. The use of test studios or at least test persons for user-friendly optimization that is understandable, especially for the uninitiated, can help here. Self-promotion Saving half an hour of calls per working day justifies an expense of €2,000 for an improved sales website or other type of customer information – and that for telephone staff at a standard wage. Informed customers are better customers.
The meaning of human interaction
The seller has my needs, takes my wishes and builds the best possible solution with his expertise. In between, looking up details and availability on the computer is essential for complex inquiries.
Advice form humans or from machines and websites?
Whether or not a human intermediary remains necessary for information collection and transmission depends on the product itself and on the personal preferences of the interested party. Some can evaluate and implement the freely available information, such as product descriptions, customer reviews and more for their own needs, while others cannot.
Good sales people relieve the customers. To do this, they must put the interests of the customer first and not fight for sales at any price. Consulting software in the sales pitch
Success has many reasons
Incidentally, the screen of the gentleman can turn directly to a prospective customer without the computer interfering. And if he needs information from the cloud or machine, he has it quickly at hand.
This article is about bringing qualitive and quantitave research together with integrating numbers and representativity into qualitative research. Quantitative research is primarely counting and statistics.
The topic of qualitative market research is understanding. What does the world of my target group look like? What emotional and financial settings do they have? Quantitative research, on the other hand, determines how many people in the target group have which attitudes, how many they are and how their budget looks. A random sample is drawn so that not all members have to be questioned.
Some entrepreneurs therefore believe that unstructured observation can replace qualitative market research. Sometimes that works too. Quantitative market research uses representative, large samples according to statistical rules and brings different results due to the large number of subjects.
Large institutes can save costs by comparing similar studies and using similarities to minimize the required sample size. Others sell the same report to multiple customers – that is Boutique Market Research.
The claim of qualitative market research
Qualitative market researchers understand the customers. Its like some newspapers articles, where journalists describe some individuals where they think they are good for the numbers. Quantitave shows the numbers – for example 60% believe that the government does a good job in education. Discussions in focus groups, in-depth interviews, images, social media and much more can be used as data sources for qualitative research.
Also compare here (New Market Research Blog). The qualitative market researcher is an active part of the research process. He or she uses their subjectivity to better understand the phenomenon being studied. You want to understand why people believe in what and see the world a certain way. A qualitative researcher wants to understand the process of selecting a product, for example. A quantitative researcher wants numbers, averages, and more. Manufacturers and dealers can then base their decisions on this.
How qualitative researchers can do representative studies with small numbers
A qualitative researcher makes small samples. Understanding the process and the mindset of the subjects, this researcher assumes some validity. To ensure this this procedure can help:
The result of the small sample are suitable when no changes are to be expected from a larger sample. This can be checked by first evaluating 30 questionnaires. Hopefully there is no significant change with a further 10 questionnaires. If there is, another 10 questionnaires are added. If this does not maintain the hypothesis that the differences in responses are statistically insignificant, the study can be considered representative provided the responding participants represent the target group.
Some subjects suitable for qualitative studies:
Lists of ideas – if the ideas are repeated, the study can be ended. Studies that do not record the subjects’ ideas via structured questions but via free text information fall into this category.
All – or – none results. If every participant in a small study says the same thing—like, “I see a train station in this ad,” or “I prefer the new packaging”—the conclusions are likely to be valid, even with small samples.
Strong hypotheses for the study to support If we have a hunch and it is supported by the small sample, we can be sure that the hunch is correct. All we have to do is verify that the underlying hypothesis is not just speculation. This type of market research is popular with journalists who can get by with just a few interviews.
Understanding instead of measuring – for example customer journey. This analysis helps testing new products.
The problem of representativeness in qualitative research remains.
With small samples, the problem of representativeness remains. There is no statistical way to ensure the representativeness of a non-probable sample. The market researcher’s judgment must be added here: can the result be as the study suggests or are there other, contradictory results? Trusting only statistically proven results without knowing the underlying connections can be misleading.
Pricing affects everybody. Selling your apartment, selling used furniture, doing salary negotiations or finding prices for your products. How to find a price liked by the seller and buyer? In my seller history I found situations with low prices where the customer voluntarely added a gift, and many situations where nobody wanted to buy. The reason for this can be “no market for the product” and “price is prohibitively high”. The latter one means there is a market for the product, but not at the charged price.
The next chapters give structure to this complicated matter.
The classical theory of pricing for optimal is very simplified. It assumes a linear demand function, with only one determinant, the price: demand=f(price) . This means only demand determines the price. What happens if demand has many more determinants?
This can be:
The look of the selling (web-)site
Do the salesmen make a good job?
Do I get good advice from the staff?
Can I expect some value if I pay more?
Does the product make me feel better?
Do I have the budget for luxury?
What are the prices of the competitors?
The price the seller wants
Point 1-4 are the value to the product added by a good sales team. Example: if a retail store buys a pallet with 1000 packets pasta for 600 € and sells the package for 1,2 € the sold package is not the same product as on the pallet. The services of the retail store are added.
The following graph is an example. It may look different for a specific produkt. The graph with the numbers given there works good for used cars and expensive utilities sold on Ebay or webshops.
Example: make advice a valuable good
Many brick-and-mortar retailers complain that their customers do not pay for advice. What they do not tell: how much do their prices differ from common internet sellers without any consultancy? Is there really value added in the store?
In old times, when sales was based on printed catalogs, there was the famous trade costing, with list prices, heavy rebates, and purchase prices. Most retailers ordered their stuff at wholesales, which themselves made their cuts. The result was that end user prices were about 3-10 times as high as the factory price. I understand that many want this time back. The customers had no choice, they had to buy locally. Many wishes and dreams of customers weren’t ever fulfilled for the high costs of maintaining catalogs and storage.
Now many internet retailers order directly at the manufacturers, and they have to look for competing offers worldwide.
There are two approaches for long-term pricing: with interchangeable goods, many manufacturers, in the long run the price will be the production cost plus some earnings. The earnings are the incentive for producing. Examble: a spare part for an historic car. Production cost is 150 €, with this part added the car gains 2000 € value. If the seller knows that and wants a high price, the buyer might look for another source which produces it for 150 € and pays additional 50 € for the favor.
In Services it is a bit different. Production costs is one side. The other is: how much will the buyer profit from my service? If the seller, you, knows that 25-50% of the profit for the seller, the trainer or consultant, are normal.
Is there a formula for prices?
In economic theory the price is equal to marginal use. That means the price equals the benefit the buyer thinks he has from the last unit he or she buys.
If we can measure the benefit in money and realtime, we have the formula.
The benefits are listed at the beginning of the article. The problem is that the customer does so many estimations, that change over time. Also new competitors with low price entrance strategy might show up.
When selling over a website it is quite easy. Look at the ones who buy related to the ones who look at the article. If there are many who look and do not buy then lower the price, if most of the visitors buy then raise. This needs a lot of finetuning. Sometimes visitors look a few times at the articles until they finally buy. When they see that the prices go down, they might wait even longer. So you might want to include the total number of visitors.
How to calculate?
There is a mathematical formula and there are ways to survey it.
We measure the first eight determinants, with due consideration of costs:
how to find and count
The look of the sales (website) position.
Survey of visitors
Are the salespeople doing a good job?
not available everywhere, get feedback
Do I get good advice from the staff?
Can I expect value if I pay more?
Tests and surveys on buying motivation, own samples
Do I feel better because of the product?
Tests and surveys on buying motivation
Do I have the budget for luxury?
What are the prices of the competitors?
The price the seller wants
Look deep inside you
Market research helps with the first six points. Usually it is necessary to repeat the market research every 3-6 months with the well-known market research problem: the target person doesn’t like to answer. They are bored and do not know whatfor they took their time to answer the questions. We must therefore look for other methods. An easy-to-install method is to encourage visitors to comment. You may get 1-5% comments from the customers. This responses add up to valuable data source. It is also possible to conduct studies with paid testers. There are some problems with representation of the correct user group there, additional research helps to circumvent this.
Total addressable market analysis – what does it mean for your plans
To predict the number of future customers we use Total Addressable Market analysis, TAM. The technical term TAM refers to the number of possible customers and the number of products that they will buy as a whole. This is the full market. If you sell cars, everyone can be your customer. There are competitors, and not everyone is going to buy cars from a new producer. So the number of cars you are going to sell is smaller like the market for automobiles. If you want to sell Yoga classes, everyone is a potential customer as well. The vast majority of clients for Yoga classes are women, which decreases the number of clients. People who need to go over 30 kilometers for the workout are unlikely to buy your lessons. For a year now, Covid-19 has been a big problem – either lessons together in a gym are prohibited, or older clients do not want to come due to fear of infection.
The total addressable market narrows down to the servicable accessible market.
These are the customers who may be ever hear from you and suscept you as your potential supplier. You have to be able to sell your products to them. This is much closer to the reality and is one step calculating your future sales.
The third and most important technical term is the “_S_ervicable _O_btainable _M_Market”, SOM. These are the real customers, the ones you can serve and the ones who want to buy your products. They need to know your products and services.
For calculationg, demographic statistics are important. These data indicate the number of people in the target region.
How to find the number of potential customers? The primary source is Wikipedia (really) and the governmental Statistics Office. Their data is normally free. The state administration places great value on correct data. They use this to distribute taxpayer money.
You can find more than population data there. The number of dairy cows is also there, and a lot of the data by economy. So it is possible to predict the number of future clients.
Using google to search for the data you arrive at several websites that are trying to sell industry reports. The normal price for these reports is between 800 and 3700 Euros. On my Fiverr account, a website that acts as an intermediary between freelancers, a lot of requests are aimed at selling these reports for less, say 80 €. The reason the prices are so high is that the authors use the most expensive data, for example at Bloomberg.
Is it necessary to pay more? For small entrepreneurs who offer specialized products, the answer is no. The reason is: it doesn’t say anything which we can use to predict the number of future customers.
Data Quality needed to predict the number of future clients
To estimate the SOM, industry associations offer a lot of data. Perhaps this data is old, but there are no or little fees.
The internet offeres a lot ot data about what is popular with users and what they think an want. That data is hard to find and to be familiar with with web evaluation and web scraping ist helpful. In 2020 I worked on a market study for flower pots. There was a lot of data coming from the associations of the friends of the gardens. They show me that all people love their garden and their flowers more and more. Are the data true and dear to the seller of the flower pots? How much money do they want to spend on the jars? What appearance will they like? Lots of work to do.
Going into price negotiations is difficult. What is the negotiation scope of the other side? How much bargaining power do both sides? What do I want? How to avoid getting lost in bargaining? After looking into auctions, where for psychological reasons it is difficult to make rational decisions, I look at the decision tree with estimated earnings and probabilities.
Auctions – the risc of following the group
Auctions are popular for antiques, used items and real estate. In the bidding war the offers may run away while the auctionator counts highet and higher. For that happens there have to be at least two bidders. Participants see and hear competitors bid higher and higher and infect one another. The bidding continues, so the race goes on for not having a defeat. Giving up means the object is gone. Due to the short decision-making period and the group, spontaneous decisions are made, which be confirmed experimentally. As soon as the bid is accepted, the bidder goes back to his rational normal and recalculates: the high purchase price makes the investment unprofitable. The buyer tries to get out of the contract. This phenomenon occurs less often if a security deposit to be presented limits the bids.
How a decision tree helps
We try to look at every possible scenario and calculate the probability of that scenario. The example is about a freelance teacher, who applies for teaching a class. How much money will she get?
Sandra is applying to be a lecturer at the Montgomery Training Center. She has no experience and is pretty much broke right now, so she urgently needs paid work, her lower limit is 20 euros an hour. But she wants to achieve the maximum possible hourly rate in order to look good in front of her friends and colleagues and to earn money.
Sandra negotiantes with the dean, Ms. Dr. Teufel. She wants more earnings for the school and save money spent on teacher salaries. If teachers are scarce or one has special qualifications, she can pay up to 40 euros per hour. She tells the applicants that there are lecturers who work almost on a voluntary basis. So it tests their price scope downwards. That the training center also hires expensive lecturers is not for the appliants ears.
Doing background research helps
Sandra asks herselfhow much she could ask. She estimates that the school can spend up to 50% of the participiants fees for lecturers salaries. The difficult question about the income of the training center can be answered with the help of price lists of the company, sales figures from the Federal Gazette (corporations have to publish there), inquired or estimated numbers of participants. Sandra does the math and comes to a maximum of 40 € per hour.
Sandra analyzes her competition. What is the likelihood that another qualified person will do it cheaper? This is very high when teaching in university cities. Public statistics on wage levels can help, or a survey among friends. Industry associations often have fee statistics. She heard from friends that they often only pay 25 euros per lesson. So what to do in the price negotiations?
Price Negotiations and Background Research: Add Probabilities to the decision tree and play with scenarios
The probability that a sufficiently qualified applicant appears charging only charges 25 euros per hour is 50%. Let’s figure out whether Sandra should play it safe and demand 25 euros per hour or whether it is worth asking 40 euros per hour. The contract lasts for 200 hours, i.e. 5000 euros at 25 euros per hour and 8000 euros at 40 euros per hour.
Sandra realizes that she still doesn’t know enough about the lecturer market. What is the probability that in the case of a rejection by Dr. Hell, a new job of the same type appears that brings in at least € 40 an hour? It is not possible to ask the competition, they will hardly tell the truth. Miss Dr. The devil is also talking about volunteering, so no wages at all.
Looking at the decision tree: if demanding 25 € per hour Sandra has the job safe and gets 5000 Euros. Demanding 40 € there is a 50% chance that she will earn 8000 Euro and 50% that she needs to go cleaning houses for 12,50 Euro each hour, that makes 2500 €. In addition and weighted by probability this goes to 5250 €, slightly more than talking about the low price.
External Factors – Prestige and Feeling Safe
Sandra possibly thinks she definitely needs the teaching job. She no longer wants to clean and needs references. Then she plays safe and only charges 25 € per hour. Demanding high prices is only worthwhile to a limited extent, as the previous analysis shows. The opportunity costs in the form of stressed nerves can be an argument for low claims. ————————————————————–
 To know this average value, information about the business model of the schools is necessary. The basis is the commercial calculation with cost price, handling costs – and profit surcharge and sales price. The lecturer’s fee is the cost price, the remuneration paid by the participants per lesson is the sales price. The trading surcharge includes rooms, advertising, administration and risk. 
 Between 2008 to 2010 I did some tests with groups of 30 participants about that subject. The results were that very young people tend to ask too little money, older people tend to ask too much in price negotiations for work.
Usually start-ups. Survival and growth need exponential growth here. That could double weekly sales. Growth hacking also works for more traditional companies that can expand their production fast enough and still grow their market.
Growth hackers are people who achieve such sales growth using methods that are not directly visible and easy to conceive for the environment. This gives their work something magical.
Traditionally Hacking meant using not necessarely legal methods to gain access to data that is not immediately visible or protected. The hacker searches for loopholes and hidden entrances in computer systems. A growth hacker seeks and finds direct ways into the consciousness and perception of potential customers. This are paths the competitor or late-bloomer in the business says: “If I knew that”. Both Hackers use methods that would require too much technical knowledge and creativity from others.
Extraordinary skills of the growth hacker
He sees unfulfilled human needs. She or he tests that in niche markets there it is possible to see how well a product is being received. Market research can test new products with well-known techniques, for example group discussion or sending out samples and questioning later.
According to Henry Ford, market research and customer suggestions were not the impetus for the development of the then revolutionary Model T, which was built in huge numbers. Customers would have wanted faster horses instead of cars they had never seen before. Growth Hackers and Market Researchers need to be visionaries to see the new product in his best shape.
Growth hacking is referral marketing
Inexpensive and fast customer acquisition cannot circumvent recommendation marketing. People recommend a product to others if it has helped them or arouses enthusiasm. Or if they can earn money with the recommendation.
Free trial access, distribution of samples, influencers, trial lessons, presence on social media – a lot helps a lot, like Germans like to say.
Market Researchers – are they still needed?
Growth hacking is the product of many ideas and numbers. The firm belief in one’s own success is of no use if all market fundamentals oppose it. For example what to do if an analysis of the Totally Accessible Market shows only limited growth opportunities?
The market researcher also knows the penetration and effect of the individual recommendation or influencer channels and can doreliable tests.
How do I find the right story for my product, how does my storytelling become a success?
Products are enhanced with storytelling. I am looking for a 17 mm socket, which of the three available nuts or wrench sockets will I buy:
Simple picture on blue background, price € 5.60, supplier unknown
Same picture as 1., but additional information that it was made in China by a small factory in Shenzen from the best steel for heavy use, price 8.30 €
Again the same picture as 1., and the same manufacturer as 2. The dealer introduces himself as Franz Müller from Rottweil in deep Swabia, who specializes in the sale of quality tools. Price € 9.20.
I learned that Swabian dealers are very quality conscious. Franz Müller connects to my experience, and his story gives me expectation that the tool will run smoothly and that can use it without any problems. I order his stuff despite the higher price.
Storytelling has to appeal the customer’s mental world
Good examples for that:
Promise of getting rich fast with Network Marketing. You are shown the beauty of wealth. The way to do this is very simple: you win a few customers who in turn win new customers.
Anyone who has ever been to partner exchanges surely knows the many supposedly young and good-looking women and men who promise the perfect relationship. Fortunately, they don’t present their price list until late, so you don’t have to pay for the illusion of a perfect relationship due to the lack of a valid contract.
Berlin advertising agencies in particular currently love telling stories from the ideal world of the rurals village or a small city with intact neighborhood “where everybody knows your name. The stories are pinned to every product whose distributor requests it.
Coaches encourage other their coaching clients to tell their history. That is supposed to induce more interest from potential customers. A very common story is that of the poor lady or gentleman, stricken by fate. This person believed him/herself and made it again into great wealth. And there are photos from trips to exotic places or they buy artworks.
How to find your story?
Take care that your story does not disguise the product, unless the story is the product. Example: an email from a coach who promised me a great development as a globally admired speaker and expert in my discipline. I asked myself: “What does he even offer”? It was simply an rhetoric training, as I learned later. By reaching into the rhetorical multi-level marketing language, however, he created unpleasant associations for me. If any kind attention was the target of the action, the coach is successful. If he wants to be a serious personnel developer, less so.
Market Research helps you to find about more about your targeted group.
To the featured image: Thanks to Allie for sharing their work on Unsplash.Photo by Allie on Unsplash
Bitcoin is a freely tradable cryptocurrency. A currency needs security against unauthorized copying. With normal money this is done by the central bank and the state, with bitcoins with strong encryption and a publicly accessible database with 262 gigabytes of data in May 2020.
There is a maximum of 21 million Bitcoin to be scraped. Currently there are 18.4 million. A limited amount of a good gives hope for an increase in value. That is the matter with gold, in some areas with housing. The prospect of increased value makes people to invest in goods who bear no interest. In the following, I analyze whether buying and selling Bitcoin might bring a good return.
Bitcoin lures with impressive price fluctuations, longer periods of steadily rising prices and, unfortunately, a few crashes.
The lowest price for a complete Bitcoin in the period covered by the graph was 3207 US-$ on 2018-12-14. Successful traders bought for example for that price and sold high for 19107,46 US-$ on 2020-11-24. Which good makes six times its value in two years?
In the years after I wrote this article the bitcoin reached 40.000 US-$-
I used the close prices of the days. Bitcoin prices are changing fast along the day. About 15% of all existing bitcoins are sold on one day. Also high prices slower the market: it is visible and statistcally noticeable that high prices lower the trading volume. That is not only in cryptocurrency market. Real Estate also knows this phenomena.
The picture shows that during the normal day the prices fluctuate by 5-10%. Only on explosive days, less than 11 days out of 723, did prices fluctuate more than 15%. Considering usual transaction fees of 0.1-5%, you can win and lose very quickly. Current sales offers and trading conditions can be found e.g. here.
Bitcoins are very speculative. The reason for the many offers for investing in Bitcoin is that if somebody owns already the currency convincing others to buy it also raises the prices. Now it is possible to sell the the own stock and make a little fortune.
Using Bitcoin for payments
for legal transactions:
The fees for exchanging cryptocurrency into stone age currency such as Euros or US dollars are 3-5% of the value, as is the case for transferring an amount of money to another account. The reason is the high computing power required for the encrypted currency. PayPal takes 1-2.5% of the transferred amount for the same service, the banks go down to 0.1%. The advantage of Bitcoin is the secure transmission: are the bitcoins stored in your wallet they are yours. There is no chance for the delvering side to get it back, like for example in European direct debit authorizations.
Bitcoin for the darker side of business
For transferring unlawful earned money the cryptocurrency is well suited. The account owner can remain anonymous; no connection can be established between the account holder and a natural person. The Bitcoin accounts are publicly visible, so the threatened person can, for example, see how much the account holder has already harvested with his criminal actions in the case of extortionate emails.
How do I change the price?
The price elasticity of the demand for Bitcoin is positive overall. That means rising prices increase demand and vice versa. It therefore makes sense to find as many co-investors as possible. These buy with you, and your bitcoins go up a bit in price. You just have to get out before the co-investors want to sell. The price may drop and eat up your gains.
Business location for starters – the Problem We think there is a lot of money to be made with a mobile snack stand, a food truck and other sales vehicles. Additionally it is not only making money: it is fun to prepare and selling food and drinks.
For example, independent sausage sellers in their food trucks and carriages on the Freiburg Münsterplatz are estimated to have a six-figure annual income per car. These people endure the market in cold and hot weather and most of them do not have to publish balance sheets. There are therefore no generally available figures on the income from sausage sales, it must be estimated.
The following article contains a model calculation to determine the expected profit with a food truck or trailer. Advertising and the very important factor “sales per customer” are taken into account.
If the dream of your own food truck or trailer is to become a reality, you need a wagon and one or more selling places.When researching a truck, I will quickly come across offers from franchisors.At first glance, at least to me, these look new and inspire me very soon.After the first impression, I just want the car.
The smart entrepreneur thinkss: “First check the calculation”. The sample calculations submitted by franchisors could be daring and presented very nicely. The realistic scenario is possibly hidden between airier calculations. Speculatively high assumptions about workloads create unrealistic high earnings.
A serious seller does not lie, he arranges the facts nicely. A simple trick to make things beautiful but not wrong bases on the fact that people love the middle. We intuitively think the middle scenario is realistic, the left one is bad and the right one is so good, that it will not happen. And already we are in the mental trap. The scenario in the middle is in reality the extreme upwards. The very good case shown in the “good” column of the sample calculation, usually on the left, cannot be achieved.
The formula for the financial success of mobile sales stands and food truck
Here is a formula that is simple and works well. Some market research is necessary for some of the necessary information, I just give estimated figures.
Lets start with the sales volume.
The turnover U is calculated from the number of passers-by n, the purchase probability for each passer-by p (p) and the turnover per buyer u (p). So daily turnover = n * p (p) * u (p). We see 500 passers-by every day. Of those, 10% buy. Everyone makes a turnover of 5 €. This results in a daily turnover of 500 * 0.1 * 5 = 250 €. That is not much, as we shall see later.
The costs add like that:
Daily costs = stand rental + purchase price of the car / service life in days + maintenance costs + energy costs + labor costs + cost of goods + advertising other ancillary costs.
A food truck or trailing carriage with the same purpose has space rent of € 30 per day, depreciation is € 25 per day, energy costs € 10, maintenance € 5, our minimum wage worker costs € 100 per day including social security contributions and vacation. We make € 250 in sales every day, the cost of goods is 40% of sales. Taken together, this results in a daily loss of € 20. What to do? The employee complains about stress and how much he has to do.
We check what the employee is actually doing. He needs three minutes per customer and has 480 minutes a day, of which he needs 45 minutes for preparation and cleaning. That equates to 435 minutes for the customer – with three minutes per customer that’s 145 customers a day. Nobody can serve customers quickly and permanently for 8 hours at a time. There are also times of weak demand. We therefore assume a maximum utilization of 50%. That would be 72 customers every day. So far we have had 50 customers a day. So the employee could do a little more.
We decide to do a promotion. This costs 30 € daily and brings 20 customers daily. The turnover increases to 350 € per day. Previous costs + advertising + more cost of goods = new costs.
270 € + 30 € + 40 € = 340 € costs, 350 € income, we finally earn a little. But not enough to cover our entrepreneurial risk. We want 15% of sales, € 10 per day is just over 3%.
We achieve the 15% minimum profit with a slight increase in customer sales to € 5.5. With 70 customers, this equates to a daily turnover of € 385, the costs then amount to € 324 per day.
The number of customers matter
Mobile food trucks and trailers are a a business of big numbers. Additionally it has some similarties to real estate business: location is everything. In addition, a clever price and product policy. This increases sales per customer. He is offered what he wants and his wishes are addressed. Franchise concepts must be checked to see whether they allow an increase in customer sales. In addition, the sales time per customer must be low. The sausage barons can serve a customer in less than a minute and generate € 2.20 in sales.
More revenue per customer
Here, high sales per customer combined with mass business lead to the desired profit. The sales car must offer enough space for this.
Sidelining with a food truck
They are easy to operate part-time.Because of the lower capacity utilization, the depreciation per working day is higher.In addition, a parking space is required for the idle time.For this we can choose days and places with high turnover at public festivals and in summer.The good places are hard to come by at first.With patience and a start-up time, they will also become accessible in the long term.
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