Business lessons learnt from Young Apprentice Season 2 Episode 1 – Frozen treats

The BBC’s Young Apprentice has returned for a second season, and a lot of people watching it, especially young people, will be inspired to try their hand at business. This is a good thing in general, but the show as a whole doesn’t teach you the whole truth about business. But what can we learn from it?

Firstly, some general points about The Apprentice show as a whole. These are always worth keeping in mind when watching the show, and are what sets it aside as being entertainment television, rather than factual:

• The applicants have clearly been selected for screen presence. Yes, they pick a range of personalities, but that is only because it gives better television
• The contract that goes with The Apprentice is one hell of a gamble – few people serious at business would take it on. Applicants are required to sign over all their business ideas whilst on the show and for the year following if they win or come second
• Each episode starts with an montage intended to make you already have a feeling about each applicant before you’ve even seen them in action that episode
• The show is highly edited to create a storyline for each episode, and a character for each applicant
• The Apprentice tasks are all one-off events, with no need to maintain a good reputation, and in general you can expect to see all the bad habits of pop-up businesses being played out
• The Young Apprentice prize fund of £25k is nothing, and won’t cover modern tuition fees. They are being offered basically a year’s graduate salary. The big win, however, is the easy industry contacts and the television coverage
• For businesses shown as the winning team ‘treat’, the apprentice is very much a major boon. These businesses are presented as the life of luxury, and are probably offering their services for free in return for an incredible advertising opportunity
• The team discussion after a failure is not about trying to actually figure out how to improve, but who to blame and how to make good tv. Engineers know that this sort of situation is ideally suited for root cause analysis. Sadly a culture of blame makes for better TV, but I worry about the precedent this is setting
• A regular feature in The Apprentice post-failure reviews is “what did you actually do?”, and sometimes this has to be asked as part of a root cause analysis. This is why it’s important to track what you do, keep a list of things done, and as a manager, ensure you have the statistics and analytics to make decisions based on evidence
• As the Apprentice operates pop-up businesses, come the end of the day they normally slash prices to near cost to clear stock. Businesses that are not pop-up traders would only do this with stock that would otherwise had to be disposed of, or if the goodwill was worth it. At the end of the first episode, Lord Sugar states “the fact that you ended up selling off a load of stuff in the end is, really unforgivable”, but that’s patently not true!
• One of the sad things we see every time on the Apprentice is that there is no incentive to really try and build an effective and working team. Time and time again we see a newly formed team descend into some form of infighting, often about who came up with what idea. This infighting directly interferes with the process of team formation. In the real world, it would probably better to acknowledge mutual input and praise, however there are no incentives to do this on The Apprentice

At the start of the first episode, Lord Sugar states that he doesn’t care what class people come from, only if they’re ‘first class’. This is entirely false – class advantages affect how people act, and have been shown to make a huge difference in business. Those applicants from better backgrounds will almost certainly do better on the show, unless any of the others have been suitably mentored.

The Task: frozen treats (ice cream, sorbet, etc)
Objective: profit (takings – costs)

Only one of the teams attempted to estimate their sales quantity, but in my opinion they went about it wrong. Don’t simply assume a quantity you will sell per hour when estimating supply – estimate instead this figure from footfall, how many you will catch to pitch to, how successful on average pitches are (assume a rate of failure), and on the time you will need to pitch and serve customers.

In this exercise, costs for raw materials were very low, so the cost of having spare stock was minimal. As in the end both teams sold out entirely, the teams would have been better to produce more stock, with the reserve plan of having to try and sell at cost.

Kinetic (the girls’ team) based their branding around “Treat and Trim” – this is utterly awful, as they are still selling ice cream. People don’t want to be reminded of a negative when they are going for an impulse buy. This might work out better when it comes to the long-term branding of a product, however, as you can switch the consumer from impulse thinking to brand association.

Some materials are commonly purchased by weight including wastage. This needs to be accounted for. Similarly, be careful proceeding with purchases reliant on another delivery that you are still waiting on – if this messes up, you may have excess material on your hands. For a pop-up business having any excess that can’t be used can be a disaster. Thanks to forgetting about this, Kinetic were forced to dump 30 litres of ice cream mix.

Atomic priced at £1.50 for one scoop, and £2.00 for two, which was sensible. This clearly shows to the consumer that it is better value to buy two scoops, and makes the upsell more likely. It is always easier to secure one customer and upsell, than it is to secure two customers, and this helps to also shift stock.

Atomic’s pricing strategy was to undercut the market on price – whilst potentially income, this often can help to increase sales. Of course, they didn’t then have the stock to take advantage of that and, as we saw later, it turned out that by charging so little they lost a lot of potential revenue. Something we did see here however was that most of their sales team were keen to have a low price, and proceeded to sell well thanks to having confidence in their price as well as their product.

Kinetic performed the legally dodgy activity of giving people extras and only afterwards charging for them. They also gave children ice cream and then hassled their parents for money. This would quickly get you in trouble if you where an established business, but as a pop-up business such tactics made sense to them. Ultimately, however, any long-term business trying this would get in a lot of trouble for such tactics.

James’s acting as pirate vanilla was a good idea “it created a bit of interest. It was more than what you normally get at an ice cream stall”. Characters help to get attention, and would work long term very well. Having lived in a coastal town, I know that the local characters and stories are essential to the community. Life outside of the main summer months is boring, and the colourful members of the community retain your adoration and such business become heavily used and loved by the locals. This generates initial trade, giving social approval of your business to the tourists, helping to build up trade further.

Kinetic also attempted colourful promotion using mascot suits, however these have a number of drawbacks. On a hot sunny day, these quickly become uncomfortable to wear for extended periods. Mascot suits do make you stand out, but in my experience they can actually be a detraction as a lot of people are very wary of them.

Both teams charged extra for sprinkles and toppings, in an attempt to drive up profits. These extras are very cheap, typically, so most businesses offer them for free – like condiments in fast food places. Free extras make customers like you more. Offering free things actually is a sales pitch – if you say “FREE CONE AND TOPPINGS”, it implies that other people charge you for these, instantly making your prices seem better.

Kinetic promoting to the audience waiting for the animal shows was genius – this is an entirely fair form of promotion. This is what kebab van owners do after gigs, or ice cream vans do at school closing time, and is the entire core business of many retailers.

Harry H decides to try and do deliveries to people on the beach – they can spare the people to make the deliveries, and this is a sensible way to access a market their competitors are not in. This is also something you can charge extra for doing, and people will accept. I actually did this back in school, covering the costs of my own chocolate by charging for deliveries.

It was no surprise that both team’s best selling products were established flavours that the market already likes – “cookies” “strawberries and marshmallow” “chocolate and banana” – better sticking to established successful products when in this for the short term. “apple and watermelon” is a nice flavour for a ice crush or smoothie, but as a frozen yogurt it didn’t appeal. Further, frozen yogurt is still a small market segment. In fact, vanilla would have made a lot of sense, as people do actively default to it if they want an ice cream but don’t like the other flavours offered.

Both teams managed to sell out, which was surprising given the difference in location and price. Kinetic were priced above the market rate for their location, and probably were generating disgruntled customers. However Atomic found that a seaside audience may be at a British beach to save money. In effect, this showed that the most important aspect of this week was pure sales ability, and pricing the product right. As both teams were able to shift all stock for at least cost, unusually cost management wasn’t a factor this week.

Kinetic’s project manager ended up operating in the back room, which should have been a very process-driven environment. By this point, the product was already agreed upon, and there was no checks really required for quality control (since they were operating a pop-up business). This prevented her from reigning in an unruly field team on the production day.

When in the board room getting the results, we saw that Kinetic had no idea how much was spent on raw materials. Never ever as a business lose sight of your costs.

Atomic spent: £117.92, sales: £677.17, profit: £559.25
Kinetic spent: £131, sales: £839.34, profit: £708.34

Interestingly, this is one of the few times that an apprentice task has seen a team take home an amount that would cover their wages!

Ultimately, Atomic lost because of their low pricing. To quote Lord Sugar, “That is the most heinous of crimes, as far as I’m concerned, when it comes to business. Cutting the price before you even start”. There are a number of things Atomic could have done better, but the first is obvious:

• Higher prices – this is really why they lost in the end
• Charge for everything – this is very mean but what pop-up businesses do! They could have even charged extra for the delivery
• Replace the frozen yogurt flavour with something more generally agreeable. It is important to note that the apple and watermelon frozen yogurt was not the cause, as it did sell out in the end, and the prices were just too low

People tend to dislike someone who is attempting to claim all the credit – wrongly or rightly. We saw this in the boardroom discussions around Mohammed, with his lines like “I personally think I was the best salesperson in this whole team. I was pushing for sales. I was making people come” ultimately causing people to respond “Mohammad should be fired purely for his contribution, his lack of ability to accept when he has done something wrong”.

Similarly, one very true lesson for the real world is that people like people who admit they were wrong, and will show them consideration for the admission. Harry H also demonstrated that the converse is also true, failure to admit mistakes gets you disliked: “I have a thing I don’t like about you James – you can’t accept when you’re wrong”.

In my opinion, Mohammed was fired because:

1. Actually causing problems
2. They’ve had their TV fun from him
3. james is likeable
4. Harry H has yet to fail properly

Something Mohammed said at the end I thought was odd was “I’m really surprised I’ve been fired. I’ve still got my successful business, I’m still going to be a success”. In a way, this shows why they were fired more than anything. In business you should try to never be surprised by a negative outcome. Always try to know everything that’s going on to the best of your abilities and anticipate everyone’s next move.

So, how I would have done this week’s task?

• Stuck to established, well-liked flavours – no time to establish new ones
• Stock was cheap, margins were very high, selling was relatively easy – always produce more stock!
• Theming and theatrics – helps to bring in people
• Delivery/selling to captive audiences
• More closely match competition’s prices, perhaps beat them if confident enough in theming
• Just give away extras like cones, toppings, etc – better to charge more for the base product
• Remember – a free thing that everyone does is still A FREE THING TO PROMOTE
• Try to get people to promote you for you to other people, or repeat visits
• Stuck to some kind of luxury treat theme
• Sell through being awesome, not dubiously illegal tactics – just good sense

As it’s now approaching winter, ice cream sales isn’t really testable, however