Valentine's Day is upon us yet again, which presents opportunities for both romance and revenue. The U.S. Census Bureau estimates that $30 billion will be spent on candy, flowers, and jewelry, not to mention services like restaurants and travel. Many entrepreneurs see this as an opportunity to introduce their brand, acquire new customers, and boost their revenue.
But dangers abound, as a lot of companies waste money during the holidays. How do you take advantage of the Valentine's Day opportunity on a limited budget? Are you sure you are acquiring the right customers? Can you do this without unintended consequences that can hurt the health of your core business year round?
Take a few lessons from the veterans in the candy industry, where nearly $8 billion, or 23 percent of annual category sales, occur during the days surrounding just four holidays: Valentine's Day, Easter, Christmas, and Halloween (the largest), per the National Confectioners Association.
The vast majority of holiday candy is the same old candy people enjoy year round with the main difference being the novelty of the packaging and the display. The extra packaging and promotional materials increase your cost of goods, slow down your supply chain, and are often heavily marked down the day after the holiday. The risk of losing money is high, so you'd better be crystal clear on your strategic objectives by asking these three questions.
1. When do the expensive extras really matter?
Demand during each holiday is not the same. Halloween is a mix between chocolate and non-chocolate candy (e.g., gummy bears, hard candy, chewy candy), whereas Valentine's Day has a stronger mix of non-chocolate candy (e.g., Valentine's Day hearts). Some candy companies have a higher profit margin on non-chocolate candy, meaning Valentine's Day is a much more profitable opportunity.
For entrepreneurs, it's important to understand where Valentine's Day stacks up for you versus other holidays. Double down on the higher profit holidays, and make sure you're not overinvesting in the expensive extras like holiday packaging and promotion when it doesn't really matter.
2. Why do the expensive extras really matter?
The question of why requires entrepreneurs to take off their business hat and step into the shoes of the consumer. For me, my goal as a Halloween consumer is to do my duty as a good neighbor to have enough candy to last just long enough until I can turn off the lights and pretend I'm asleep guilt-free.
As far as packaging goes, I just want it to be big and sturdy enough to have as many pieces of candy in as few bags as possible so it's easy to carry home. This is why Costco has the number one selling product in all of Halloween. It mixes the top brands from different companies, which Costco assembles itself. One-stop shop.
For Valentine's Day, my goal is a lot more personal, whether it is to tell my wife and kids I love them or to help my kids pass out fun candies to their classmates. So the packaging does indeed matter then, so you have to invest and tailor it to make it easier to gift.
This is where entrepreneurs can really set themselves apart. A lot of companies just follow the leader or follow tradition, without putting much thought as to why it's really important. If you can go beneath the surface, you can set yourself apart by resonating more clearly with what the consumer wants.
3. For whom are you investing, and what do you want back?
The bulk of this article has been spent talking about consumers, but the truth of the matter is for candy companies the holidays are really about their retailer customers. Holidays are critical trip drivers for retailers across a wide variety of categories beyond candy. Retailers hunger for insights and unique items that will drive consumers into their stores.
The best candy companies know this, and in some cases have made a deliberate decision and know precisely how much gross margin they are willing to give up in exchange for more shelf space, and more favorable placements and displays. They are clear on the quid pro quo they want for their investment, ensuring their return on investment.
If you are an entrepreneur who is choosing to invest in Valentine's Day, just make sure you have strategic clarity for your economic investment. Answer these three questions, and you should be in good shape to profitably grow your revenue and romance your consumers and customers.