The Law of Compounding Reasons that Small Changes can Yield Big Results.
Let’s say you had the mandate to increase revenue by $48,000 this year. It might sound like a lot. But if your average revenue is, say, $500 per sale, that would mean you would need to have only 8 more sales per month, or 2 more per week. Just the small change of adding a couple more sales each week can drastically change your profits by the end of the year.
The same law applies to your overall business. Small changes in just a few KEY areas of your business can add up to BIG changes throughout the entire company.
Did you know that a mere 15% increase in:
- Average profit per transaction Lead conversion
- Sales to current and past customers
can more than DOUBLE your business? Well, I’m here to tell you it can and I want to show you how. Let’s not waste any more time chit-chatting, we’re going to jump right in to some strategies you can start using today to increase your customers’ lifecycle and explode your backend profits.
We’ll be covering 2 different strategies, each one has the potential by itself to bring you backend profits your forecasting has only dreamed of. Each one of these systems will focus on present and past customers.
So let’s get going.
1. Increase Prices / Margins
The first strategy is something that is probably the simplest form of increasing your backend profits, and that is just raising prices. As long as costs stay the same, an increase in margins will add profit to your bottom line.
But with this you will want to start small…you don’t want to turn loyal customers away by having huge price hikes.
The most important aspect here, and the reason why so many try raising prices and fail, is that you have to TEST your price increases. For 20% of your customers, increase prices by 1%. For the next group of 20%, increase prices by 2%…and so on. Monitor which groups give push-back and if you can’t find a way to increase the perceived value of your product or service, drop them back a % or offer an incentive.
The key here is to gently increase your profits without causing any customers to defect and look toward your competition for their solution. Customers who are very happy with your products and services should not have too much of a problem with a small increase, and will continue their relationship with your company.
2. Increase Profit Per Transaction
A great strategy to use when someone is in the purchase process is to offer them an upsell. McDonald’s has this down to a science! The classic, “Would you like fries with that?” and “Can we supersize that for you?” questions are upsells that spell cha-CHING!
Impulse items at the checkout counter…a scone or cookie with your Starbucks…floor mats with your 2016 Chevy Silverado 2500HD. Each one of these add-ons is an upsell that adds a significant amount of profit to each purchase. And of course, those all add up to huge overall profits.
One of the most unfortunate oversights that many businesses make is not taking advantage of this very simple opportunity to increase sales during a purchase. Many simply never thought about it. And a large percentage of them think they don’t have anything to offer as an upsell at the time of purchase.
Well, regardless of how many products and services you currently sell, you should ALWAYS have a way to give your customer an upsell. Some examples:
- Offer a package deal if they buy one or more complimentary products right now (ie. amazon.com’s “Frequently Bought Together” strategy)
- Offer a discount off the monthly rate if they pay for 6 or 12 months right now (ie. HostGator’s “Starting at $3.96* per month!” hook)
- Offer to add products to the purchase now to make it easier for them. This way they won’t have to come back and buy it/them separately (The floor mats, service contract, DVD player upsell strategy used by your local Chevy Dealership)
- Create essential packages that significantly increase product usability and include items they would have had to buy separately in order for the product to perform (ie. Best Buy’s packages of computer, monitor, and printer)
These strategies work whether you are a B2C or B2B. Become proactive about what your customer is going to need in the future (like software upgrades or service) or what other offers will compliment what they are buying and will significantly increase their user experience.
These are tactics you can do right this second to increase profits starting today…but it’s vital that you come at them with the frame of mind that you are doing this to build your Client Lifetime Value, not gauging them for a quick buck. Long term bucks last much longer than short term ones! Was this post helpful? Visit the other posts in the Fresno SEO Company series!
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