How understanding these three ways can help you take your business from where it is to where you want it to be.  

Introduction 

          In good times, bad times, and in-between times businesses are always looking for ways to increase sales volume.  After all, sales volume is the fuel that powers a business.  Nothing happens until somebody sells something.  

And if you’re like most business owners and managers you spend a lot of time and energy searching for ways to grow your sales.  Sure, you spend time working to manage and control your costs, both fixed and variable.  You spend time working to increase productivity and efficiencies within your business.  And you spend time working hard to allocate the resources you have at your disposal, putting them to work in their highest and best use.

But at the end of the day so much of your success (or lack thereof) depends on your sales volume and whether it’s growing, shrinking, or is flat.  If your business is currently profitable and possesses the capacity to handle additional sales then a good portion of each new sales dollar flows straight through to the bottom line.  You company, of course, benefits two ways from these increased profits.  Not only does it provide shareholders with a higher return but also increasing profits generally translate into higher business valuation (or stock value). Of course, if your business is unprofitable a higher sales volume can be the key to moving out of the red.  Certainly it’s not the only way, but finding ways to increase sales volume should be high on the priority list of every struggling firm, particularly small and medium sized businesses. There’s another facet connected with the desire to increase sales volume that many business owners and managers don’t realize.  The truth is that there are two ways to increase profits – increase sales and/or reduce costs.  However, there is a limit on how much a firm can increase profitability through reducing costs.  You can’t reduce your costs below zero.  But that’s not true with respect to increasing sales where there is no limit (at least theoretically). And even in practical application for most businesses (again, particularly in smaller businesses) there is vastly more potential in increasing sales than in decreasing costs. 

          But very often the apparently simple goal of growing the firm’s sales proves difficult for the owner or manager.  The usual knee-jerk response is to increase the advertising budget, bring in a trainer to work with the sales staff, or perhaps evaluate a geographic expansion.  All these are well and good and some or all might have a place in a sales growth plan.  However, the foundation of developing a rock-solid sales growth plan lies in understanding the principles that make up The Only Three Ways to Grow Your Sales.  Once you realize both the simplicity and the power of these three ways then not only will you have a clearer picture of what needs to be done but you’ll also improve the chances of actually achieving the sales growth you desire.

The Only Three Ways to Grow Your Sales

Here it is – the only three ways to grow your sales volume.

1.   Increase the number of customers or clients 

2.   Increase the average transaction value or average sales ticket 

3.   Increase the frequency of repurchase 

Why are these the only three ways to increase your sales?  That’s because these are the only three components of your sales volume.  Let’s look at a simple example. 

Assume for a moment that your business has 1,000 customers, that, on average, each customer’s purchase was $100, and each of these 1,000 customers, on average, purchased from you two times each year.  In this hypothetical example your annual sales volume would be

 1,000 * $100 * 2 = $200,000 

Now that’s pretty simple, isn’t it?  When you multiply these three components together you get your annual sales volume.  But please… please…don’t let the simplicity of this formula mask the power and the flexibility that it provides.  When you fully grasp this power and flexibility of this concept you’ll find all kinds of opportunities that are there for the taking.  

The Power of the Formula 

          As you saw above, your annual sales volume is the product of multiplying the number of customers you have times the average transaction value times the average frequency of purchase.  Again, that’s pretty simple.  But let’s look for a minute at the power that’s contained therein. 

          The power at the heart of this formula is that the results you can achieve through increases in each of these three components are exponential, not arithmetic.  To illustrate this, let’s go back to our example above – 1,000 customers, $100 average transaction value, and 2 purchases per year.  Assume for a moment that there are actions you can take that would yield a 10% increase in each of these three components.  You could increase your active customers from 1,000 to 1,100.  You could increase your average transaction value from $100 to $100.  And you could increase your purchase frequency from 2 times per year to 2.2 times per year.  What would your sales volume be?

 1,100 * 110 * 2.2 = $266,200 

          Do you notice what just happened?  An increase of only 10% in each of these three components resulted not in a 10% sales increase, not in just a 30% sales increase, but through the power of exponential growth generated a sales increase of 33%.  How difficult would it be for your business to engineer a small 10% increase in each of these three areas?  For many firms it could be rather easy with just a little focused effort. 

          But let’s take our example out a little further.  Let’s say that you could increase your active customer base from the 1,000 in our initial example to, say, 1,300 (understanding that this increase of 300 represents only about one new customer per day, plus or minus).  And assume you had methods that might increase the average ticket from $100 to $125, again, something that is very realistic given the tools that we’re going to talk about in a moment.  Finally, you add to your marketing mix strategies that would increase the average purchase frequency from two times per year to three times annually.  What are your results?  Well,

 1,300 * $125 * 3 = $487,500 

          So simply by adding one new active customer per day, enticing them to purchase an extra $25 on average each time they bought from you, and getting them to purchase from you just one extra time per year you’ve increased your annual sales volume almost 250%.  That’s the exponential power of compounding you can realize from these three sales volume components.  Pretty powerful stuff, wouldn’t you agree? 

          What you’ve done is taken one big number (you’re $200,00 annual sales volume), broken it down into its components, worked to increase each of the three components just a little, and by doing this you’ve created significant sales volume increases.  It’s a lot easier to achieve success by working on the pieces of the puzzle individually. 

          But it gets even better.  In addition to the power of exponential compounding, this system offers you flexibility in achieving your target sales numbers in an almost infinite number of ways.  Let’s look at the flexibility aspect.  

The Flexibility of the Formula 

          If you don’t know this from your own personal experience, you’ve surely heard it many times…it’s easier to re-sell an existing customer than to acquire a new customer.  It’s true.  Acquiring a new customer can be a very expensive proposition.  Depending on the nature of your business and industry, gaining a new client is the end result of a lot of expensive work.  You would likely have to invest a lot in marketing and advertising costs.  You might have to increase your sales staff or invest in additional training for your existing staff.  You might even have to structure your proposition in such a way that you only break even or actually lose money on the first sale in order to gain that new customer.  Yes, earning customers can be expensive. 

          What if you don’t have the resources to invest in increased advertising?  What if you don’t have the ability to increase or better train your sales staff right now?  What if the nature of your industry or company is such that you can’t afford to break even or lose money on the initial sale?   

          The answer is simple.  You focus more of your sales growth efforts on the other two components – increasing your average ticket and/or increasing your frequency of repurchase. 

          The same holds true of you’re limited in one of the latter two components.  You focus on the other two.  Even if there are constraints on two of these three components in your particular business or industry, there is still a third component where you can concentrate the majority of your time, money, and resources in an effort to generate sales growth increases.  

For the vast majority of businesses, however, it is possible to realize gains in all three areas.  But you get to decide what is most appropriate for your business; you get to decide where the lowest hanging fruit might be.  If one is not right or not feasible for your situation, you still have options.  You still have actions you can take.  You don’t have to just sit back and hope that your sales will increase. 
 

Tools To Increase Each Component

Let’s take a look at just a few of the tools that are available to help generate increases in each of these three areas.  Keep in mind that some won’t apply to you but, in all likelihood, several will be applicable and offer a high probability of success.

Increasing the number of customers – as we talked about above, this can be an expensive proposition, but not necessarily so.  In fact, many of the tools listed below can be implemented at little or no cost.   

Understand that there are three basic categories of prospects that are candidates for your products or services.  These are: 

1. The prospect that does not now use your products or services, but who should be using them.

2. The prospect that has just come to realize the he or she has a need for your product or service.

3.  The prospect that is now purchasing your product or service but is buying from someone else.

This last of these three is usually the largest pool of prospects.  Yes, you would be going after your competitor’s customers.  But rest assured that your competitor is coming after your customers every single day.  That’s just the nature of business. 

What makes winning customers from this last pool of prospects so difficult is that fact that we human beings truly are so much creatures of habit.  We all get in the habit of purchasing specific brands.  We all get in the habit of purchasing the things we need and want from specific sellers. 
Again, we’re just creatures of habit and that is what makes winning customers from the group in # 3 above so difficult – you’re having to change somebody’s habit.  That can be extremely hard to do…but not impossible. 

So let’s look at some of these customer acquisition tools.  Understand that this is not a complete list.  It’s only a sample of some of the things you can do to grow your customer base. 

Advertising – this is the first thing that comes to mind for many when talking about increasing the number of customers.  And it surely has a place.  But it’s just one item in the list of customer acquisition tools that you have available to you.

Referral Systems – you’ve heard that word-of-mouth is the best kind of advertising and very often that is true.  So what could you do to set up a formal referral system in your business?  For examples, Realtors often say that word-of-mouth referrals generate most of their business.  But few have a formalized system in place to encourage and track referrals.  Can you set up a system in your business to win new customers through referrals?  Oh, by the way, this is one of those little or no cost customer acquisition tools.

Guarantees – here again is low-cost way to win new customers.  It’s based on the premise that there is some part of your product or service that you can guarantee.  In fact you may be doing it already and if you are you need to shout it from the rooftops.  It sets you apart from those who refuse to offer customers any kind of guarantee.  Understand that it doesn’t have to be a full money-back-if-not-satisfied guarantee – that just isn’t feasible for some businesses.  But with a certainty there is some kind of guarantee that you can make that 1) is important to your customers and 2) is not being offered by your competition.  It may be something as simple as a guarantee to return a phone call within one hour.  Just find something you can guarantee, again, something that is important to your customers.  One note about full satisfaction guarantees – many businesses feel that a full guarantee will cause them to go broke.  Well, if you provide shoddy merchandise or service you may be right.  But assuming you sell a quality product or service then more often than not you’ll find that increased sales from a growing customer base will dwarf the amount of returns.

Unique Selling Proposition – as with the guarantee, here’s another zero or low-cost way to win customers.  Your Unique Selling Proposition (USP) is simply the promise that you make to your customers that sets you apart from all your competitors.  It’s your point of differentiation and it belongs only to you.  Are you the cheapest?  Are you the fastest?  Are you the most convenient?  Do you stock the most desired brands?  Whatever you can provide that’s important to your customers, but sure to say it over and over and over again.

Acquiring Customers At Break Even – if your business is a type that tends to keep a customer for a long period of time then it very well might make sense for you to acquire a new customer at break even (or maybe even at a loss).  Let’s say you knew with relative certainty that, on average, a customer would provide your firm $100 in annual profits and would, on average, buy from you for five years. Would you be willing to spend $20 or $50 or $100 as a front-end inducement to gain this $500 stream of income over the next five years?  You probably would.  The classic example of this is the Columbia Record Club that would offer a prospect maybe ten albums for a penny with the stipulation that he or she would buy a minimum of maybe six albums over the next two years.  Columbia knows how much a new member will spend during the life of the buying relationship and knows that investing in that discount up front will return big rewards down the road.  A lot of this, too, is aimed toward changing habits, getting the prospect in the habit of purchasing from you instead of from your competitor.

Public Relations – here’s another zero or low-cost way to win new customers.  Have you ever heard stories about a product or a business that was mentioned on the Oprah Winfrey Show and sales went through the roof?  It happens every day, somewhere, somehow.  There are a lot of guides available to steer you through the ins and outs of making public relations work for your business.  For many it’s any instant gold mine.

Education Your Prospects – very often people are silently begging to know more about your products and services.  The more you can educate your prospects about why your product or service is better for them than what they can get elsewhere, the better the odds of your winning over more to purchase from you.  By the way, if you can’t tell a prospect why you should be their first choice (or maybe their only choice), then get to work and figure it out.

Training Your Sales Staff – in many businesses it’s the salesperson that can provide the difference between turning an inquiry into a new customer of losing that prospect forever.  There are many free and low-cost guides available for helping your sales staff become more proficient.  It’s usually worth the time and effort to invest in this kind of training. 

Again, this isn’t a comprehensive list but should give you some ideas of how to get started growing your customer base.  

Increasing The Average Transaction Value – this tool may be the easiest to implement of the three being discussed.  All that’s involved is offering your customer something advantageous to them at the time of purchase.  Examples abound in business today such as retailers’ “purchase-with-purchase” programs, “upselling” a customer to a higher-end product, and “cross-selling” when complementary products are suggested.  Perhaps the masters at increasing the average transaction value are automobile dealers.  A dealer will have already struck a deal on a car with a purchaser but before the buyer leaves the lot he’ll be offered an extended warranty, financing, dealer-installed options, credit life and disability insurance, a pre-paid maintenance program, and so much more.  Other experts are fast food restaurants (“you want fries with that) and movie theaters ($7 for a box of popcorn…ouch).  But all of these are designed to increase the average transaction value (and profit) and are employed successfully in so many places.  Can you put any of the following to work in your firm? 

          Upselling – as mentioned above, upselling is simply suggesting to a customer that he or she might be better served and derive more satisfaction or utility through purchasing a higher end version of the basic product. 

          Cross-selling – this is the process of selling additional merchandise or services to the client at the time of transaction.  Maybe it’s the scarf that goes with the sweater being purchased.  Perhaps it can be a software package that can be used with the computer being bought.  Whatever it is, it adds to the transaction value.

          Packaging Complementary Products and Services Together – this mechanism is simply a variation of upselling and cross-selling with the exception that the “package” is put together for the customer in advance.  Think about the gift box packages with cheeses, sausages, hams, crackers, gourmet mustard, and the like.  It’s already packaged for you so you don’t have to go to the trouble of putting all the pieces together yourself.

         
          These are just a few of the tools you have to increase the average transaction value.  Before we leave this section let’s look at some hypothetical numbers with this part of the formula.  We’ll go back to our very first example that uses an average transaction value of $100.  Let’s assume that after all costs of merchandise, all fixed overhead, all advertising and promotional costs, and every other direct and indirect costs is deducted that we have a $15 net profit in our pocket from this sale.  But maybe we can offer a purchase-with-purchase cross sell of an item that normally sells for $50 but with a $100 purchase the customer can buy this additional item for half price ($25).  And let’s assume that this item costs us $20 to purchase.  OK…what have we done.  First, we’ve taken our transaction value from $100 to $125 (a 25% increase).  And since we’ve allocated all of our overhead to the initial $100 purchase the only costs associated with the cross sell merchandise is the $20 cost of good we’ve increase our profit from $15 to $20 (a 33% increase).  If one out of four purchasers opt for the purchase-with-purchase special offer, just from this one promotion we’ve increased our overall average transaction value by 6.25% (25% / 4) and our overall profit by 8.25% (33% / 4).  And remember, the customer is already there, ready to buy, predisposed to buy, and likely to be receptive to a cross-sell, upsell, or some other mechanism that will give him or her a greater benefit while providing you additional sales and profit dollars.  It’s a win-win situation.

           Increasing The Frequency of Purchase – this is another way to grow your business that is often overlooked by many firms.  So many, many times a business serves a customer and then sits back and wait for that customer to return again for another purchase.  WRONG!  Understand that your customer doesn’t wake up each morning thinking about your business.  On top of that your customer is being bombarded daily with marketing and advertising from many companies, your competitors likely among them.  And still on top of that understand that it’s not uncommon for customers to feel unappreciated when they deal with a business and then never hear from them at all.  In this day and age when technology has made it so easy to talk with your customers regularly it’s absolutely inexcusable not to have a program in place that encourages your customer to come back to you over and over again.  You’re leaving big dollars on the table. 

          Here are just a few of the ways that you can increase the frequency of purchase from your existing customer base. 

          Communicating with your customers – this is so simple to do and often costs nothing except a little time.  You can use e-mail, blogs, or your website to talk with your current customers.  You can send a postcard or a personal letter.  You can pick up the phone and call them.  Sometimes it can let them know of a special event.  Other times you can announce limited time offers.  In other instances it might be just a “thank you for your business” note.  But talk with them.  Make them feel special (they are…they’re the lifeblood of your business).  Invite them back over and over and over again.  If you have a contact list for your customers, start using it.  If you don’t, start compiling one today.  It the most valuable asset most small businesses can have.

          Price inducement for frequency – how many of these have sprung up in the last twenty years?  Frequent buyers clubs are everywhere.  How many do you belong to?  You find them with airlines, hotels, and rental car companies.  You find them with all kinds of retail stores.  You find the with sandwich and coffee shops.  Again, they’re everywhere.  And there’s a reason for it….they work.  What kind of deal can you make your best customers?  Figure it out and watch the magic work as they come back over and over again.

          Programming purchases – some businesses are able to track when a customer might need additional products or services and can remind them of that need with a note.  Examples would include a vitamin shop, a car service shop, or a lawn maintenance company.  Any time you have a product or service that is used on a repetitive basis you have the ability to remind the customer when it’s time for more.  Better yet, set up an automatic replenishment with the customer at agree-to times (monthly, quarterly, etc.) and arrange to conveniently bill the charges to the customer’s credit card. 

          Put your mind to work and come up with all the ways you can get your customers to repurchase from you over and over throughout the year.  It’s the third leg of this powerful business growth formula and one that shouldn’t be overlooked or neglected.  After all, remember the truism about it being less expensive to sell to an existing customer than to acquire a new one.  Sell and then sell again.

Putting It All Together 

          We’ve covered a lot of ground here and we’ve really only scratched the surface of all the ways you can use to increase your customer base, your average ticket, and your frequency of purchase.  But you’ve seen how these are, indeed, the only three ways you can grow your sales.  You’ve also seen the exponential power that these three pillars of sales volume can give you when used together.  And you’ve seen just how flexible it can be to put together a plan that’s tailor-made for your own business and your particular situation.         

          So where do you start?  Well, you have to start with where you are right now and that means that if you don’t already have it you need to develop your baseline information.  You need to know how many active customers you have, how much they spend, on average, each time they purchase, and how often they purchase.  If you don’t have this information you need to take a little time and develop it.  If you can be absolutely certain for the numbers, even approximations will help you get started.  Every business has certain key indicators.  Sales volume and profits are key indicators for every business, large or small.  Many businesses have certain financial ratios that are key for them.  The health of your business may best be tracked using any number of key indicators.  But whatever metrics you have been using you should consider adding customer count, average ticket, and purchase frequency to the list.  It is, after all, the foundation for engineering significant to massive sales growth in your enterprise. 

          Now if you’re like most businesses, it’s difficult to implement a lot of different things all at once.  So to help you get started, to help you get some traction with this methodology, to help you start seeing results you’ll probably want to start small.  Choose one of the three areas and select one tactic to implement.  Choose one where you think there might be some low hanging fruit.  Put the tactic into action and see what happens.  If you decide you want to focus first on something designed to increase your average ticket, implement it and track what happens to your average transaction value.  Some things will work wonderfully.  Other things will be disappointing.  And still other things will never be right for your enterprise or your industry.  But it comes down to the never-ending cycle of testing, evaluating results, and implement the winners consistently in your business.  Without a doubt there are sweet spots in your business that can take your sales volume from where you are today to where you want to be.

Get started, find these sweet spots, and enjoy the rewards.  

How E-footprints Can Help 

          The sales growth strategies we’ve discussed here can most certainly work with an online business.  That’s true whether you firm is purely an online sales organization or whether you use the Internet to generate leads or traffic for your bricks-and-mortar business.  In all three areas of sales growth potential, the Internet can help you.  It can locate and acquire new customers for your business.  It can help you increase the average ticket.  It can also help tremendously in increase your frequency of purchase number.

            E-footprints can help you design a strategy for increasing one, two, or all three of these sales growth drivers.  We can also implement and manage the strategy for you.  Whatever specific area or areas you may need help with, E-footprints has the experience to both design it and to execute it. 

          Please click here and contact us today for a confidential, no-obligation discussion about your business, where it is today, and where you would like it to go.  Then get ready to enjoy the journey.