This is the fourth in a series on the four ways to grow your business.
Again, those four ways are:
1. INCREASE THE NUMBER OF CUSTOMERS (OF THE TYPE YOU WANT)
2. INCREASE THE BUYING FREQUENCY
3. INCREASE THE AVERAGE DOLLAR VALUE OF A SALE
4. INCREASE THE EFFECTIVENESS OF OPERATION
In this article we’ll look at strategies for increasing the average dollar value of each sale you make. It’s amazing how much time and money businesses spend on getting new customers. When, with a little planning and creativity, they can increase sales and profits from customers they’re already dealing with.
Have you ever calculated the average dollar value of a sale in your business? It’s surprising how few business owners know what that number is. And when you think about it, it’s really not that hard to figure out. You simply divide the total sales amount by the number of sales transactions (invoices, orders, etc.) for a given period (a day, week, month, etc.).
Why is this number so important? Again, let me emphasize the most important business development principle: “What you can measure you can manage”. You cannot begin to manage an area until you start tracking the numbers.
The following are four general strategies to make sure you make the most out of every sales opportunity:
Up selling and cross selling – We’ve all seen examples of this strategy with fast food restaurants when you’re asked, “Would you like some fries with that?” But this technique can be applied to any business. First, identify those products or services that can add to or compliment the sale of your products (you may find that you’ll want to expand your product line to take advantage of natural cross selling opportunities). Then develop a system (or script) to insure that every sales person knows how to ask the right questions. A great example is the paint store who developed a checklist of items a person’s needs when they’re painting their home. By going through this list with each customer they almost always identified additional items that had been overlooked (at the same time they may have saved the customer an extra trip back to the store). As with any new system, test it, test it, test it. Find out what it does to the average dollar value of a sale.
Sales training – This is the most obvious and yet most overlooked strategy. Your team members must be trained to answer questions, solve customer problems and inform/educate the customer about the benefits of your products. The better trained your team members are, the greater the likelihood they’ll be able to point out other products or services that would benefit the customer. The most successful businesses invest heavily in this area. Most struggling businesses say they don’t have the time or money. No wonder they’re struggling. Take a tip from the “Men’s Wearhouse” who developed their own customized training program called “Suits University”.
Incentives – Monetary incentives can be a great way to keep your team members focused on increasing the average sale value. When developing an incentive program keep these three things in mind: 1. Involve your team members in the development of the program. Listen to their ideas. 2. Keep the program TEAM focused, not INDIVIDUAL focused. You’ll get better results when everyone is pulling together and not out for their own good. 3. Continue to monitor the effectiveness of the program. Even the best systems may not succeed forever. Don’t be afraid to drop something if it’s not working.
Packaging or bundling – This is another way of up selling or cross selling. By bundling your products or services together you create a greater perceived value on the part of the customer. In some instances, you can throw in items of little cost that will add to the perceived value (and sales price) of the package. Again, look for products or services that go together naturally. Today customers are willing to pay a little extra for convenience. By putting packages together for the customer, you may help simplify the buying process and add value to each sale.
Now you have some idea to test in your business. But your first step is to compute your “average dollar value of a sale” (if you don’t already know it”. Then you can begin to regularly measure the results you’re getting as you implement various strategies. You might want to measure your performance on a daily, weekly or monthly basis.
As you start experiencing positive results, you’ll begin to hone in on the systems that work best in your business. Now that’s working ON your business, not just IN it.
LSL is committed to helping our small business clients succeed. That’s why we created the P3 Group. The P3 Group of accountants and advisors want to be your Peak Performance Partners by providing, compliance, performance and strategic services that will help your business reach its full potential and run smoothly with, or without you. Call us to schedule a free consultation and business performance assessment.
Next article: Strategy #4 – Increasing Effectiveness of Operation
This article submitted by Gary Cates, CPA Partner.
The 4 Ways To Grow Your Business Article #3- Strategies for Increasing Average Sale Value PDF
