Pretend you own your own whisky company. Business is booming. Your product is flying out the door. In fact, your product is so popular that you can't make enough of it - literally. You're looking at the numbers from last year: one million bottles sold for thirty dollars a piece = $30 million. It's been a pretty successful operation, but now there's a problem. You're running out of whisky to sell. Looking at the projections for the coming year, you notice that you've only got about 500,000 bottles of whisky to offer. That means you're only going to make $15 million this year.
"Hold on there!" says one of your investors. "We're one of the most popular whisky companies in the world! How is it that we're going to only make half of what we did last year? We should be making more, capitalizing on a successful year!"
From a marketing perspective, he's completely right. You've spent the past few years promoting your brand, traveling all over the world, busting your behind to put these bottles into the hands of whisky drinkers everywhere. It would be a shame to lose all the momentum you've built up. However, the whisky industry is a tricky business. You needed to prepare for this new-found success a decade ago when you were actually making the whisky, laying down the barrels to mature the product you're currently selling. Unfortunately, no one at your company thought 2012 was going to be such a successful year.
You're now in a pickle. You own the hottest product on the market, but you don't have enough of it.
"Sir? Did you hear what I said? We should be capitalizing on our success!"
You clear your throat and address the board room.
"We've got a problem, gentlemen. We only have half as much inventory as we did last year. We're going to have to make some tough decisions."
What are your options? As far as I can tell, you've got three choices:
1) Take the hit, try and prepare for the following year. Your investors aren't going to like this option, however. You also risk losing your place in the market. If your product isn't visible, people might forget about it and move on to a different brand. That would be terrible!
2) Raise your prices. Simple supply and demand. There's less product, it should cost more. Your customers aren't going to like this, however. Consumers flocked to your whisky because it offered quality at an affordable price. Forcing them to cover the holes in your budget might upset what has been, up to this point, an incredibly loyal following.
3) Bottle a younger product. You've got whisky, it's just not nearly as mature as what you've been selling. Would it be better to sell an inferior product than nothing at all? Maybe no one will notice the difference. However, if people do notice the difference then your product's reputation is in the toilet.
What do you do? Your investors are waiting to hear from you.