Most business focus only on one way to grow their businesses: get more customers. Usually this means expensive advertising campaigns that yield questionable results.
They don’t do anything with the two other ways to grow a business, even though those ways are less expensive than getting new customers. And, by focusing on all of the three ways to grow a business, they can achieve exponential results.
Say you have 100 customers who each purchase $1,000 on average from you each year. Your gross revenue last year was $100,000.
If you only focus on growing the number of customers by 10% – say by additional advertising or other marketing campaign – you’ll gross $110,000 next year. A 10% increase. Not bad, but you can do better.
How? Well, what if you also grew the average amount each customer purchased?
Growing the average purchase by 10% to $1,100 means your 110 customers purchase an average of $1,100, for a total gross revenue of $121,000 – a 21% total increase.
Getting better. And, you can do more.
Now, what if you could also increase the average number of times each purchased by 10%? Now your 110 customers are buying an average of $1,100 of products or services 1.1 times per year from you.
You’ve increased your sales to $133,100 – a 33.1% total increase.
Plus, the increase of the average purchase and the number of purchases are usually much easier than getting new customers in the first place.
Increasing the amount purchased and the number of purchases are based on the types of customers you have, what you offer to them and how you maintain your relationship with them.
First you must have the “right” customers.
You’ll probably notice that most of your profit (something like 80%) comes from very few of your customers (probably around 20% to 30%). Interestingly, these customers are usually the ones who value what you sell and willingly pay your prices for it. I call these “A” customers.
Keeping “A” customers, getting rid of the bad customers and getting more “A” customers will both increase the average purchase of each customer and reduce the need to get more new customers. It also makes your business more enjoyable and easier to work. Your “A” customers are much more likely to buy more and buy longer.
Getting rid of non-“A” customers can be tough. Many business owners are reluctant to send customers with money packing. But, doing so will free up time for your new “A” customers and result in business and profit growth. I know, its counter-intuitive, but it is true.
One way to do this, if you already have too much business, is to increase your prices. You’ll have fall out of the not-so-good customers. However, the increased revenue from those who remain will make up for the customers you lost
Also, because you now know what “A” customers are like, it’ll be easier to find and keep them and the new higher rates will create an overall gain.
Increasing the amount of each purchase can be accomplished a number of ways.
Consider packaging a product or service with additional services that might not normally be purchased at once.
Arrange for a good, better, best product or service structure. Offer larger units of products or services.
Or, arrange with a third party to provide complementary products or services to your customers with you receiving part of the purchase price (sort of like a commission).
Increasing the number of purchases is about keeping in touch with (i.e., marketing to) your “A” customers on a regular and consistent basis.
You might think that most customers no longer frequent a business because they were treated poorly or dissatisfied. That is not the case. Most leave because they were neglected.
This is very costly for your business. Once you’ve developed your relationship with a customer, it is much easier and less expensive to get that customer to do business with you again than it is to find a new customer.
Make sure your “A” customers hear from you at least quarterly. You don’t have to be fancy; a simple letter will do. Give them useful information or a valuable outcome, preferential treatment, free gifts or special deals. Make it worthwhile for them to keep doing business with you and make sure they remember you.
Don’t forget the other benefit of keeping in communication with your “A” customers. They hang around with other people who are like them and who could become new “A” customers for you. Because they’re happy with your product or service, they’re your best salespeople. Just asking for referrals from them can yield better results with far less expense than an advertising campaign.
Focusing on all three ways to grow a business will yield exponential results. And continuing and strengthening your relationship with existing customers will pay off for you and them.
Good Luck…