In the last few weeks, I have written two blogs that were repeats from a few years ago…
These blogs are focused on the first three ways of the 4 Ways to Grow Your Business (any business).
The following is the third part in the series. Enjoy!
What is the 3rd Way to Grow Your Business?
Over the last 2 weeks I wrote about the first two ways to grow your business. Today I am going to write about the 3rd Way to Grow Your Business.
As a refresher – the 1st Way is to increase the number of customers of the type you want. Here the big takeaway is to find out who is serving clients in your industry and create a relationship with those businesses, so you can get direct “warmed-up” access to their clients. This transforms a cold marketplace to a warm one. For the full Blog post, please click here:
The 2nd Way, which I wrote about last week is to increase the number of times (on average) your customers do business with you. For the full Blog post, please click here:
The 3rd Way to Grow Your Business is this – to increase the amount people spend with you during each interaction (in accounting terms – increasing the transactional value of each sale).
The strategy and the resulting actions you will take are completely different from the first two ways to grow when you focus in on this way.
And, by combining all three together you will have the potential to create massive increases to your Net Profit.
Find the Key Number
First, to increase something, you need to know what your starting point is. For this Key Performance Measurement, it is quite simple and easy to find.
You just take your total sales for the period (month, quarter, year) and divide that by the total number of sales invoices issued to get your average dollar amount per transaction.
Ok, now that you have a starting point…
How do You Increase Your Average Sale Without Sounding Salesy?
One way is creating scripts to use to simply ask your customers if they want to add to their purchase.
Of course, we all know the ubiquitous line from McDonald’s clerks, “would you like fries with that burger?”
And what they know at McDonald’s is that this has a profound impact on the average sale per customer and the net profit.
Another way to view “scripting” is to take the opportunity to educate your customers/clients on all the services/products you offer. Your customers may just not know you offer certain things and will often be delighted to spend more with you because you are adding value to their lives!
In fact, it is the focus on adding value, on educating your customers with a solution-minded intention that moves you from simply sounding “salesy” and mechanical to interested, and educational.
Newsletters are a fantastic way to educate your customers and not only increase your average sale, but to increase your transaction frequency.
Discounting is Bad, But It is Ok When You Do This First
Another way to increase your average sale is to bundle things into packages or offer 3 for 2 specials.
For instance, if someone is interested in cross-country skiing and they have not skied before, they do not come in to just buy skis. They also need, boots, poles, gloves, a parka, a toque…you get the idea. Even lessons.
All these items can be packaged into a beginner cross-country ski package and a discounted price offered for the bundle.
We do not recommend our clients offer blanket discounting across all their product lines as a way to grow sales, however, when bundling, it is ok to offer a reduced price for the whole package.
The reason is that the increased amount they are spending justifies the discount.
Add Value and Raise Prices
Finally, it may be time for a price increase. First you must examine your products/services and ensure that the value you are offering is high and service levels are high in terms of quality, timeliness, and so on.
Most business owners under-value their products/services – looking at them through the lens of their competitors rather than their customers.
Many business owners are fearful of raising prices, yet when they do, they often are surprised to discover that almost no customers leave, and the few that might were often price-shoppers and difficult to deal with anyway.
Case Study in Action
A few years ago, we met with a client to do some strategic planning.
The client was a log home builder, and they built exceptionally beautiful homes.
We went through the 4 Ways to Grow and saw quickly that the only leveraged way to grow was the 3rd Way – increase the average sale of each transaction.
(After all, how many log homes per year would most people likely buy? So, transaction frequency could not easily be increased).
The power of this focused, strategic way of the thinking is that we could rule out the second way and concentrate a lot of our attention on the 3rd Way.
I knew that the owner had outsourced the marketing and sales to another company. I also knew – from observation – that the marketing people were doing very well financially by the amount of time spent golfing, the cars they drove and the commissions in the business being paid out.
This client was giving up a lot of profit.
So, I asked the owner – “why don’t you get your wife to do the marketing? After all she is incredibly good at building websites and could put together a nice presentation.”
His initial answer was, “no way!”
I asked, “why not?” (Good business coaching is asking rocket science questions like this!)
He told us that the marketing guys had an extensive network throughout the USA and that if he moved away from them, he could never, ever replace those valuable contacts they had developed over years and years.
I kept probing and pushing a bit, and he decided to go for it and get his wife involved in the marketing and do it all in-house.
The results were explosive!
The very next year his sales doubled, and his net profit margin hit 50%!! This was an unheard-of net profit in the log home building business.
He sold homes to very wealthy people, including the 4 chalets at the Salt Lake City Olympics.
This volume continued over the next few years, so he became quite well off.
Thank you so much for reading…