By Louis Tanguay, Special to California Business Journal
There’s a saying by a business coach of mine: “We all know what to do, but we don’t do what we know.”
This is very true, especially in this article. What you’re about to read might seem like common sense at first. However, most companies never think of business growth in this manner — in such a simple and easy-to-understand formula.
I cannot fairly claim to have created this formula. Giving credit where credit is due, I first heard this from marketing expert Jay Abraham. Seeming too obvious to be true, I tested this and applied it across different business types — from the retail store to the restaurant to the big-ticket service providers. I am surprised and pleased to report that this works. I will share some ideas on how to actually accomplish this theoretical formula by taking some direct actions.
Unless you’re willing to apply for a personal loan to physically expand, there are three ways you can increase your business: selling more items, selling for a higher profit margin, and increasing each customer’s repeat-business number. Here’s the formula: If you want to increase your business 10%, then increase sales 10% or raise your prices 10%.
Too simple to be true? It’s not…
Let’s see how we can increase your business by 10% through more sales…
|Sales||X||Price||x||Purchases Per Customer||=||Sales|
You start with this example of 1,000 sales in a particular sales cycle. Each average sale price was $10 and each customer purchased two times (on average) in that sales cycle, so you’ll end up with gross revenue of $20,000 in sales for that cycle. So, you say you want to see the numbers if you increase the number of sales by 10%? It’s a no-brainer on this one, but look at your immediate 10% growth.
|Sales||x||Price||x||Purchases Per Customer||=||Sales|
Obviously, there are factors in play here. This is a simple example to set-up the formula. If you increase any of these three numbers, you’ll find your business grows 10%. If you increase each of these key categories, you’ll grow your sales at least 30%.
I know talk is cheap and action speaks so let’s get into some ideas on how you can increase your sales and your price margins, so your purchases per customer per cycle can help you easily achieve that 30% (or more) growth.
Before we do, however, just one more note: you can grow sales 20% instead of 10% and find ways to increase your margins by 10% and you can get to 30% that way. The math is simple and so is the formula and concept. It’s simple, but it’s not easy. Here are some ways to make it easier for you…
ACTIONS TO INCREASE NEW SALES
Targeted (or better targeted) Advertising: Target your advertising – don’t just take out random ads, boosted posts, or dump money into any ad network or platform. The more you target and segment your outreach, and the more splits (ad variations) you run, the more efficient you’ll be in reaching more (and higher quality) potential customers.
Better Advertising: Analyze which ads are working for you and which are not. Kill the ones that aren’t performing or the channels (newspaper, Facebook ads, AdWords, Yelp ads) that are NOT working for you. Too many small businesses throw away money trying to sit with an inefficient channel too long and not learning from their data.
Data Analytics: I know, I know…math. Ugh. That said, if you want a bigger business and want to know what is working and what isn’t working, look at data. If you don’t have any analytics code installed on your website, app, etc., then you’re going to need to start that right now. Knowing where your customers come from, what they do once they’re in contact with you or your product, and where you’re losing conversions will all help you optimize your sales numbers.
Onboarding Experience: If you have a “must be a member before you buy something” model, then the Onboarding Experience is probably where you’re losing most of your potential customers — with another large portion being in the shopping cart or checkout screens. The easier you make it for someone to create an account, manage their shopping cart, and pay you quickly and easily, the easier it will be to add more sales to your business. Some ideas are to use Facebook Connect or LinkedIn Connect so the potential customer can get an account on your website just by verifying (and sending over) their information on Facebook, LinkedIn, etc.
Easy Payments: To immediately build off the previous example, we want to optimize (and quicken) the checkout process. The easier you make it for someone to give you money for your product or service, the more sales you’ll have. If you currently use a multi-page checkout and payment series, you are going to lose sales. Every time a User has to do something else, especially these days, the more likely they are to bail on the sale. Integrate with PayPal or another “minimal click” payment solution. Online, people don’t necessarily mind paying with Debit/Credit cards, but if you have an app or you’re in-store, you need to think about your checkout process there because you need to quicken the transaction time.
Positive Reviews: Make sure you ask your satisfied customers to give you a 5-star rating on Yelp and Google. These directories don’t want you to ask your customers for reviews because they want them to be natural, but I say if you have a satisfied customer then naturally they’d be happy to tell the world about your services and high quality product, right? Just make sure the person you’re asking is active on Yelp or Google. Yelp will flag the review as not trustworthy if someone just opens up an account only to review your listing. If that’s the case, then it’s better to not have them try.
Referrals: This is an obvious one. We all know much of our best business comes from your current clients who refer others to your business. I’m going to take this note a step further, though, because this is very important: if an existing customer vouches for you then you have to perform even better for that new business than you even did for your current client. Why? Because not only is your reputation at stake at that point, but so is the reputation of your client. If you let the referral down, then you let everyone down. Never take it for granted that they’ll be happy because your current client was happy. Always assume all of your clients might not be happy. Having this mindset will make sure you never slip on one or two and you’re constantly trying to make everyone as happy and satisfied as you possibly can.
There are many more. I can write a whole column on each one so you’re just going to have to keep coming back to my articles for more tips in the future.
ACTIONS TO INCREASE PRICE/MARGINS
Increasing new sales isn’t the only column of business growth we have in our formula. We also have “price.” This price column could also be changed to “profit” or “profit margin” because that’s what we’re really trying to increase here. Not everyone can just raise prices and be perfectly fine. Sometimes we need to freeze the pricing but find other ways to increase margins. Some of these areas are below…
Lower Costs: Let’s say we can’t just raise our pricing 10% to grow our business an easy 10%. We also might want to split that and raise our pricing only 5% and look at cutting 5% in costs. That will be a 10% increase in your profit margins and have that same bump to your business revenue (and profit margins) without being too taxing on your customers. Also, just raising your price a flat 10% might adversely affect sales, which means you might not actually increase your business revenue. So, we need to look for ways to stretch that margin as easily as possible.
Cut Waste: In addition to cutting costs, are you wasting your profit anywhere? If you’re a printer, are you not using as much of the print sheets as possible or are you storing your ink in ways where it goes bad or dries up? If you’re a restaurant, are you cooking too much prep that you end up throwing away? Waste is as much a profit eater as high costs and low sales prices.
Less Discounting: Sometimes it’s better to not discount as deeply. Many business owners will want to make deep discounts or have loss leaders to get people in the door. This might be a great strategy for you, but at least consider it if your discounting is too deep. Experiment with sometimes discounting less, sometimes more, and see the swing of your sales. If you get the same transaction bumps, then you know the discount depth might be too unnecessarily deep.
ACTIONS TO INCREASE REPEAT SALES
Our last section here is all about how to retain and re-engage your customers so they are repeat buyers in any given sales cycle. We already went through all this work to acquire the customer, earn their trust, pitch them, perform for them, and make them happy. They’re already in your world, drank the kool aid, and if they’re happy and connected they already might have referred others to you. Let’s go back to the well, which worked for us in the past.
Be Awesome: That’s the best way to get your customers to come back again and again. The better your service and product is, the better your customer service is, the bigger the ROI your customer receives from you, the more likely they are to return and remain loyal.
Upsell: We all know about this one, so I’ll just leave this here. We can write a book on upselling funnels, but instead I’ll move on.
Re-Marketing: With digital advertising, we can market to our customers again and again. We can send ads only to them or offers only to them to re-engage with them and get them to come back into the fold. Make sure you retain sufficient data on all your clients (name, email, etc.) so you can use that information for future campaigns.
New Versions: If you have a product like an automobile or phone, you will have new versions released every year (or more often), and if you’re a restaurant then you can have new specials, new menu items, and new offerings there, too. Re-vamping your product or services with new items/versions will help you to reach out to your existing and previous customers. If you retain the right kind of data — and a new version is an upgrade or similar to something they already have — then it’s even better.
Check in: Stay in touch with your previous clients and customers. Even if you send an email, text, or pick up the phone and call them, people truly appreciate you taking the time to find out if they’re happy and if there’s anything else you can do to help make their experience even better. I would give a caveat here, though…DO NOT UPSELL on this phone call. You want to build trust and warm fuzzy feelings with your customers, past and present. If you are always trying to sell them something, you will turn them off. Just check in with them to stay on their radar, but in a non-salesy, non-pushy way. They’re going to really appreciate that and when they’re ready for more, they are even more likely to come back.
OK, that is quite a lot of information, but I really wanted to give you some decent value here. If you like articles like this, please keep coming back to this column. I promise most of my articles here will NOT be this long. I just didn’t want to leave too much out.
If you have any questions, or if you want to get some advice on how to tackle a particular marketing issue, please contact us and we might be able to turn that into a future article. At the very least, I’ll give you a quick answer to help you out…without a sales pitch.
Louis Tanguay is Managing Director of Circle Marketing. He founded the agency seven years ago during the recession. Having over 20 years of marketing and business experience, Louis wanted to help businesses acquire and retain the essential abilities and strategies to survive in any economy. Circle Marketing is a full-service marketing agency for small businesses and serves as a one-stop shop for all marketing and advertising needs.