How to Add Value to Your Business
- You know the current average number of transactions for your business
- You know how to calculate customer acquisition costs per campaign
- You have improved your customer service standards and are working on other strategies to encourage repeat business.
Increase the perceived value of your products and services to boost the average amount customers spend in your store.
Increasing the average amount of money customers spend in store is the last chance you have to increase the total amount of money that flows into your business. Don’t get overwhelmed, you can start small – it’s amazing how small increases can add up to big results.
Adding actual and perceived value to your products or services is the primary way you can boost how much each person spends in store. These are usually little changes or bonuses that don’t cost you very much, but make the customer feel that their money stretches farther at your business. This encourages them to spend more to get more.
Of course, the amount that you’ll be able to upsell or add-on to your customer’s purchases will depend on the business or industry you’re in. It’s much easier to get someone to buy an extra sharpie market than it is to get them to buy an extra piece of furniture or a DVD player for their TV. But generally, everyone can find a way to boost their average dollar sale.
In this E-Class we will cover:
- How your average dollar sale impacts the bottom line of your business
- How to calculate and monitor your average dollar sale
- How to train your staff to increase your average dollar sale
- Other strategies for increasing your average dollar sale
Boost the amount each customer spends in your business, and you’ll see a large impact on your bottom line.
Your total revenue is the product of how many customers you have, how many times they purchase from you, and how much they spend.
# CUSTOMERS X # TRANSACTIONS X $ AVERAGE SALE = $ Revenue
So, if you have 360 customers in a month, who each purchase from you an average of 1.5 times, and spend approximately $100 each time they do, your gross revenue will be $54,000.
Like I said earlier, increasing your average dollar sale is the last factor in the revenue equation that you can influence in your favor. You want to look for opportunities to have each customer spend more than they intended when they walked in your store – even if just by a small amount. This is why the point of sale at nearly every business I can think of has a handful of low-price items to encourage impulse purchases.
In the example below, take a look at how a 10% and 30% increase in your average dollar sale can impact your overall profit. In this case, the average dollar sale started at $140, so a 10% increase is $14, and a 30% increase is $42 dollars. If the product was an MP3 player, a $14 increase could be a pack of extra batteries or a better set of headphones. A $42 increase could be a better MP3 product with more music storage.
|Starting Point||10% Increase||30% Increase|
|Conversion Rate||30%||Conversion Rate||30%||Conversion Rate||30%|
|Average Dollar Sale||$140||Average Dollar Sale||$154
|Average Dollar Sale||$182
Set a reasonable target for yourself, and you’ll see the same increase in your bottom line. A overall 10% increase in your average dollar sale – assuming your margins are unaffected – will generate a 10% increase in profit.
What is the average dollar sale in your business?
The easiest way to calculate your average dollar sale is to divide your total revenue (before you factor in your margins) by the total number of transactions in the same time period.
$ revenue / # transactions = $ average dollar sale
For example, if my total monthly revenue was $76,000 and 1745 transactions were processed through my point of sale, my average dollar sale would be $43.55.
This is another measure that will fluctuate from business to business, industry to industry. Remember that you’re not trying to reach a “good” average dollar sale, you’re trying to increase your average dollar sale by a reasonable increment for your business.
Once you know what your average dollar sale is, set yourself a reasonable target based on the opportunities that exist in your business for boosting sales. A great way to do this is to involve your sales staff – these are the people on the front lines who know your customers and types of products or services they would benefit from.
You will also need to train and develop your sales team to maximize the total value of every sale they close.
Train your sales staff on the sales process from beginning to close.
Everyone can benefit from additional sales training, including so-called ‘naturals’ and your star salesperson. Make sales training a regular part of how you run your business, and you’ll have a stronger team of more focused people.
You’ll spend an entire E-Class on your sales process, but here are some tips to review with your staff in the meantime:
- No one likes to be sold – including your customers. Find ways to make their decision to purchase seem like their idea. Educate your customers on the merits of the product or service you offer, and connect those merits to their needs. The more they believe you are working to meet their needs and solve their problem, the more responsive they will be to additional product suggestions.
- Be clear when addressing objections, and present one or two solutions at a time. Being over-eager to blurt out the answer, or suggesting too many alternate products can be overwhelming and confusing to the customer, which will deter them from purchasing.
- Make sure each staff member knows how to up-sell, cross-sell and down-sell to close and boost sales.
- Follow through to the end of the sale. Work through the sales process (understand the problem, offer solutions, address objections, close) then suggest additional or complementary products and head straight to the point of sale to complete the transaction.
- The success of your sales process and your ability to up-sell is based on trust and credibility. Work with your team on finding ways to build instant trust with each client you deal with, just like we discussed in the E-Class on conversion rates.
Provide Incentives for your team
- Give your sales staff a reason to work for higher sales, and you’ll have a team of people supporting your business growth efforts. Would you work harder to make someone else money? Absolutely not. If you want to leverage the sales talent of your team, you have to build in a performance-based system to reward strong work.
- Be generous with your rewards – token gestures will have the opposite effect you’re looking for. Consider rewarding both high performers, and those who have demonstrated great improvement, as this will motivate staff to keep improving. You can also reward staff on an individual and team basis.
- Incentive programs can include bonus checks, gifts and gift certificates, recognition awards, or a combination for meeting agreed-to sales targets. We’ll look in detail at staff rewards programs in upcoming E-Classes.
Once you’ve trained your staff, implement one or all of these strategies to add perceived value and increase your average dollar sale.
Package products or services
- Package products to increase your customers’ perception of value. Bundles and packages are perceived as having a higher value than the sum of individual items and customers will feel they’ve received something for free.
- Use packages to revive interest in old or new products, or to move old product out of your store. This will work for services as well, as long as the offer or package is given an end date and there is a sense of urgency. For a spa, you could package manicures and pedicures and reduce the cost by $5 for limited time. Customers coming in for a manicure only may be encouraged to book both services and take advantage of the perceived discount or increased value.
- Package products or services so that they are intuitive, like socks and running shoes or razors and shaving cream. Make sure that the products relate to or complement each other. Packages that don’t make sense to you won’t make sense to your customers.
- Create starter kits to ease customers into new products, and boost the dollar value of the sale at the same time. Any new activity or tool could feasibly have it’s own starter kit, like painting, camping, running, a new computer or skin care line.
- Use your list of up-sell items to create packages. If you always encourage customers to buy leather protector with their winter boots, consider marking up the cost of the boots and including the protector for “free.”
Charge for convenience.
- Offer to ship or deliver your products or services for a small fee, or provide free shipping or delivery on purchases over a certain dollar amount. Many customers will pay a little extra for convenience services, as long at the fee is within a reasonable range.
- Set up service contracts or in-store warranty programs, and charge for them. This works well with electronics, appliances and other products that may require regular servicing or tech support. It is more convenient for the customer to deal with you instead of the manufacturer, so most client will be happy to pay a small amount more for the service.
Give visual reminders through merchandising.
- Use checklists next to product signage to suggest additional complementary or required items. For example, if a customer is purchasing a printer, do they have the USB cord, paper and ink they’ll need to get it set up?
- Always have impulse products available at the point of sale. Failing to do this usually means saying no to hundreds or thousands of dollars in revenue. Even hardware stores have displays of candy and personal maintenance – completely unrelated items – at their point of sale to boost each sale that goes through the till.
- Post reminder or suggestion stickers on products for passive up-sells. On printer paper, suggest ink cartridges and vice versa. If items are part of a set or particular line of items, put a sticker on the product that says “I’m a part of a set!”
- Ensure your store layout and merchandise displays are conducive to complementary purchases. Place batteries next to items that require them, and other items together if they make sense as a single purchase. If you can’t put all like items together, use strip tags to give items like batteries a second location.
- Organize your products in order of price from basic to premium, and label them as such. Customers who come in looking for the high end or budget products will be able to quickly identify which is which, and your sales team will be able to easily explain the benefits and differences between each.
Provide financial incentives to spend more.
- Offer a bonus gift or in-store credit for purchases over a certain value, and put that value at about 25% more than your average dollar sale. For example, all customers who spend $100 will receive a $20 gift card for their next purchase. Or, all customers who spend more than $50 will get free shipping.
- Stop discounting, and find ways to add more and charge more without spending more. Instead of a discount, can you package two items together and charge a price just slightly lower than the cost of the two individually?
- If your business is catalogue or order based, establish a minimum amount per order. This could be as low as $25 or $30, depending on your business, but it will reduce the number of small orders that come through and your cost to process them.
- Provide easy access to credit and financing options, especially if you sell high-priced items. Use these credit facilities to provide “no payments for 90 days” and similar offers. This strategy usually boosts the average sale of big ticket items like appliances and electronics because customers will opt for the higher end model.
Small increases in each transaction can have a big impact on your profit at the end of the day.
As you can see, there are endless ways to boost your average dollar sale. Choose a few strategies that you think make sense for your business and your customers, and evaluate how well they work. The idea here is to make it as easy as possible to pad your revenues with a little extra cash through the till.
In the next E-Class you’ll look at the final factor in the five-step process – profit margins. This is the last chance you have to boost your bottom line and maximize the profit you generate from your efforts in the last four steps.
Thanks for tuning in!