The growth of every business today is no longer determined by the market share, but by the share of a single customer. There is no business without the customers. And their effective involvement in your business and loyalty to your products is what increases your revenue. The customer you have is worth a thousand.
How do you strategize for your business growth?
Strategy 1: Attract new customers constantly.
Strategy 2: Develop ways to generate more revenue on each sale.
Strategy 3: Develop ways to ensure that your customers purchase from you again and again.
If you are able to work vigorously on all three of these strategies, you are guaranteed to have a thriving, and profitable business. The problem is that most businesses focus solely on the first strategy; while largely ignoring the other two much cheaper and easier ways of generating revenue. No business can strive without addressing all these strategies simultaneously.
The following example demonstrates the power of this approach and its massive effect on profits.
A business currently has $800,000 in annual turnover. The turnover is made of 2000 customers with an average transaction amount of $2000, and an average tow transaction per customer per year. Compare what happens if all three elements are increased at first by just 10 percent, then 25 percent.
Now,
2000 customers X $2000 percent average transaction X 2 percent per year per customer=$8,000,000
If we were to increase the turnover by just 10 percent in each strategy area, The business would look like this:
2200 customers X $2200 per average transaction X2.2 purchases per year per customer=$10,648,000.
At 25 percent increase, the business would look like this.
2500 customers X 2500 per average transaction X 2.5 purchases per year per customer=$15,625,000.
A 10 percent increase in each element has produced not a 10 percent growth in the business but a 33 percent growth. If we had not realized this, and just focused on attracting new customers (strategy 1), there would have been an increase of only 110 percent.
A 25 percent growth in each leads to a massive 95 percent growth overall. This 95 percent sound remarkable, yet for any business, it is easily achievable with these three pronged approach.
What can you do to implement the three strategies?
1- Adding value, or creating a new USP
2- Increasing your prices.
3- Increasing loyalty and repeat business
4- Cross-selling or sell other products in your range.
5- Up-selling or increase the value of what is sold.
6- Converting more prospects into paying customers.
These six ideas fall under the three strategies we looked at previously.
1st. Attract new customers.
-Add value or create new USP.
-Convert more prospects.
2nd. Generate more revenue on each sale.
-Increase your prices.
-Up-sell each customer.
-Cross-sell.
3rd. Make your customers buy again.
-Increase loyalty and repeat business.
I have discussed about adding value and increasing prices when I talked about developing your USP. In this article, I will focus on cross-selling and up-selling.
Cross-selling involves building a range of secondary products and services that your customers will want. Having developed a good relationship with the customer, you can introduce them to the products or services that are still similar to those they initially came to buy. For example, a customer may decide to buy a hammer, in this case, that is the primary product or what is called the front end, and instead of going elsewhere to buy nails, you introduce the nails and then he buys them, that is the secondary product or back end, which is explained as cross-selling.
Up-selling is seeking to increase the value of what you sell. You do this when you have the opportunity of offering a customer a slightly different product from what they first thought they needed, when that different product meets their needs more exactly and is more profitable for you. But don’t try to push something that the customer doesn’t want. The key point here again is: you have to be sure you understand your customers’ needs, and that you are genuinely giving them something they want. THANKS.
