How do you generate the most revenue from every customer, client, patient or guest?
There are 2 key components; increasing the Average Dollar Sale (ADS) and the Number of Transactions per Client.
While there are dozens of strategies for improving each of these for your business, you must first know what those numbers are now, and put in place systems and processes for tracking them for every new and existing customer.
So, by now, you’re asking, “why do I have to write everything down and track it, if I just do better, I don’t need to waste my time with all of that record keeping garbage?” Using this or some other excuse is why most businesses don’t keep the records they need to. It is also why more than 55% of all businesses fail in the first 5 years.
The simplest answer is, the only way you can get better, is by knowing where you are. The only way you can know where you are is by having a written record of your data, information and financials.
Once you know your current performance in these areas, and have processes for tracking your future performance, only then can you begin to test and measure current and new strategies in order to identify which are the most effective.
How do you calculate your average dollar sale? To start, divide your total sales income or revenue by the number of sales, purchases or transaction you have. That's you Average Dollar Sale (ADS) and your starting point. To get the most value from this component going forward, you want to track each and every sale or transaction you make to each and every customer, client, patient or guest.
Number of Transactions per Client
So now that you have your ADS, you must know how many transactions or items are purchased by each client. Multiplied them together and multiply that result by your total number of clients, customers, patients or guests, and you have your total sales income or revenue.
If you have an online business, it is probably very easy to calculate the average number of transactions per customer. If you have a retail store, perhaps you have to look at a copy of each day’s receipts. If you are in the financial services business, you may need to do a search for how many products and services there are for each client by name, date of birth, social security number, or family unit.
Whatever your business, Number of Transactions is a powerful component to skyrocket your sales income and your profits!
Why is this so important? Bain & Company (Mitt Romney’s private equity firm) reports that it costs 7 times more to get a new customer than to keep an existing customer! So, once you have someone who is already in your store, office, website, or wherever you sell your products and services, why not HELP THEM to buy more of what they want and need, FROM YOU! They are already there, and it costs little, or nothing to have them buy more, and your profits can go up exponentially!
Well, if this makes so much sense, why doesn’t every business do it? Fear, laziness and stupidity. Fear that if they ask someone to buy something else, they will cancel their order and go away. Want to know the 6 most profitable words in business? “Would you like fries with that?” Those 6 simple words make McDonalds millions of dollars every day in increased sales. I have never heard of someone storming out and cancelling their order, so would should you?
Many businesses have an order taker mentality, they are simply lazy. They expect the customer to figure out exactly what they want and to buy it, without the business or a sales associate demonstrating any initiative at all. They fail to understand the definition of Professional Selling, “helping others to buy what they want and need.”
When you go to your doctor, do you do place an order for medication or surgery or does he ask you questions and you tell her your symptoms, problems or complaints? So be a smart and professional diagnostician, just like your doctor, and ask a lot of great questions to uncover what “hurts”, “is broken”, “is wanted”, and most importantly, “is truly needed.”
Working with a privately owned paint store a few years ago, we discovered that the average customer bought 2 cans of paint. Then they would come back, once, twice, three times, to get the other things they needed, paint brushes, rollers, drop cloths, etc. Or, they suspected, if they were closed or inconvenient, their (now former) customers went to one of the big home supply stores or department stores.
So we had them institute a 1 page, 66 item check list of the most frequently used items when painting. When their customer came to the wait on line at the register with their 2 cans a paint, a sales associate would hand them a pen and a clip board with this list on it, and were greeted, “Thank you so much for doing business with us. What we have found is that when people are painting, they often forget things they need to be able to do a great paint job. For your convenience, we’ve prepared a checklist of the most common items that people need when painting their home. This will save you a lot of time, so you don’t have to stop and go back and forth and buy things later. After you’ve filled it out, you can wait right here, we’ll have Joe, our runner, get all the items, so you don’t have to run around the store looking for them.” The average person gratefully purchased 16 additional items (in addition to their 2 cans of paint)!
Using this strategy, this privately owned million dollar plus business grew six-fold in only 3 ½ years. Guess which item had the lowest profit? Exactly! The paint. They made more selling a paintbrush!
TIP – Make it easy for your new and existing businesses to buy more from you and to come back again and again. Are you in a competitive market where you top selling items have low margins? What else can you sell “help your customers to buy” that will double, triple, quadruple your profits, or more?