It goes without saying that managers are preoccupied with how to grow their business and deliver results to stakeholders. In highly competitive markets it can also present serious challenges as managers struggle for how to achieve growth.
My research shows there are three ways to grow a business, no matter what business that could be. For most people the effort is usually to increase the number of people buying. Of course when more people buy from you, the business will grow but there are two even more powerful ways of making growth happen.
Aside from increasing the number of people that buy from you, you can also increase the average value of each transaction as well as increase the frequency of each purchase.
Increase the number of paying customers and clients:
There are three basic things you can do to increase your client or customer base.
First you can increase your lead generation through advertising, referrals, lowering your price to acquire new clients at break even up front and make profit later, increasing the perceived value of your offering through customer education, developing a unique selling point, effective use of the social media and sponsoring events that will endear your brand to your intended audience. There are of course other ways this can be done. But the central idea is to make it easy for people to buy from you.
Secondly, you can increase your customer loyalty by delivering higher than expected level of services and building relationship with your customers through regular communications. When you deliver superior services and have an active relationship with your customers, they stay with you and buy more and more from you. This way you increase your sales unit which will translate to growth for your business.
Thirdly, you can increase the number of sales enquiries you turn into successful sales. By increasing sales skills levels of your staff you make make it easy and possible for more people to buy from you. You can also sale to a customer at an amount less than your published price. That means acquiring clients at breakeven up front and make a profit on the back end. Other ways include making risk-free offers, trial offers, and advertising.
This way you increase your client base which leads to more sales, more profit and of course growth. But this is all many business leaders know about business growth ignoring the other two even more powerful even ways of facilitating business growth.
Increasing the transactional value of each purchase:
The average transactional value is the average amount of money that a buyer spends with you in a single purchase. To determine your average transactional value, weigh the total value of transactions against the total number of transactions. This is so important because you can have so many people buying from you yet not selling as much as you ought to. The true profitability of your business begins when you learn to increase the average transactional value of your clients.
One fundamental way of increasing the average transactional value is to design your business in a way that makes cross-selling and up-selling easy. Cross-selling is when you sale multiple products or services to your new or existing customers. This begins by having an intelligent sales team well versed in selling skills and human psychology. You will require a sales team that thinks strategically otherwise you will loose money without realizing that. Who knows how much you’ve lost already.
There are other ways of increasing the average transactional value like, using point-of-sale promotions, packaging complementary products and services together, increasing your pricing and hence your profit margins and changing your product or service profile. I intend to deal with all of these on this column so you can understand simple ways to skyrocket your business results.
How to increase your average transactional value.
Obviously cross-selling and up-selling holds numerous benefits to any company in terms of increasing the average transactional value which as I identified last week is an often ignored, and may be even unknown way of growing a business. You see, it’s relatively easier to sale to someone who’s already known your brand than a first time customer. This lowers your incremental cost of selling considerably.
In fact, a 2015 Bain and Company analysis of the US telecommunications industry found that up to 60% of customers split their services across multiple providers for mobile phone, landline, TV or Internet services. For a certain telecoms provider, getting just 10% of its customers to switch one service from a competitor was worth up to $480 million of incremental annual revenue.
Current trends even make it a lot easier to cross sell. You see, cross selling is a concept that is generally driven by the knowledge of a customer. Knowing your customer well is the key to having them not just buy more of your offerings but buy profitably too. The more customer-centric your company is, the more the average transactional value of your customers increases. So if you will focus on innovative ways of adding greater value to your customers by seeking to know them more, then your business will grow more.
Consider the case of the Texas based USAA. The company leverages its access to copious customer data to inform personalized cross-selling and up-selling. Through deep data mining from multiple sources, they are able to spot signature events in customers’ lives. Those events trigger USAA to contact the customer at just the right time with just the right offer, such as auto insurance when a customer’s daughter is about to turn 16. As a result, USAA outperforms most competitors in the number of products held by its customers. Imagine what impact it would make for instance if a bank can be acquainted with its customers so well to know when they give birth to a new child, calls to congratulate and suggest opening an account for the child’s education!
Interestingly, recent trends has broken the barriers to knowing customers. For example easy access to customer data along with greater computing power to analyse this data makes it more feasible to profile customers effectively. Also online and mobile channels enable companies to communicate with their customers with ease. This communications can be strategically managed to help customers cross buy and up buy. Such observation of customers behaviour and predictions based on that is the power behind such ideas like Amazon anticipatory shipping.
The opportunities offered by these changes in trend should be maximized for business growth. The executive should understand that the major benefit of these changes in the trend is the chance to understand the customer better and that for only one reason – to serve them better.
To cross sell and up sell effectively, here are some ideas that will help you:
1. Focus more on the customer rather than the profit and loss account. While adopting a short term profit and loss approach may help the company meet its monthly, quarterly and yearly targets, it may also rob the company of the chance of maximizing its relationship with its customers. If you attract the right customers and retain them you will meet your expectations and exceed them.
2. Create a reliable and as-accurate-as-possible profile of your customers. Most companies rely on customer relationship management systems that only provides a cursory data largely insufficient for cross selling. With exponential growth in data availability coupled with super computing power for data analysis, you should combine internal and external data to build quality customer profiles that will serve you better.
3. Become mission oriented in your customer growth pursuit. Move from having generalized and vague mission to specific, measurable goals. Rather than stating you want to target teenagers in Lagos with your product, specify your target to teenagers in Lagos, who go to cinema and have a smart phone, for example.
Increasing your transaction frequency
When I began this series I stated that there are three ways to grow a business. Most people only know about increasing their client base as a means of business growth. While that is powerful on its own, neglecting to increase the transactional value of these clients will mean shooting yourself on the feet. But even that is not enough, you still have to add the last element, and that is increasing the frequency at which your clients buy. With this three any business can grow and become a giant business.
There are a number of things you can do to increase the frequency at which your clients buy from you. Through my research I have identified five ways which when properly applied in a any business will cause an exponential increase in the frequency at which clients buy: developing a back end of products that you can go back to your clients with, communicating with your clients regularly, organising special events, programming clients, strategic pricing. We will discuss each of them briefly here:
Developing a backend of products for your clients:
Becoming customer centric is about focusing on your customers. By understanding that your business is really about them you will gain new insights about how to serve them better. You will create more products you can go back to your customers with. Your customers already have needs, its your responsibility to find it. This way they have things to come back for.
Communicating with your clients:
Keep the line open, your clients like it. Talk with them as frequently as you can, not just when you want to notify them of new arrivals or new offers. Customer relationship management has never being easier today with the our era of data explosion. You have much more information about your clients right under your nose. For example if you friend them on Facebook, you have easy access to key information like their birthday, wedding anniversary and many things they care about. You must use this to your business advantage. Just make them know you care.
Organising special events:
Customers week, member’s special package, limited pre-release, indoor sales, clearance sales, open days, product exhibitions are all special events designed to get clients come back and buy. Such special events are important. They give you a chance to connect with your clients, gather information about their preferences, answer their questions and make them buy. When you create a special event you are giving your clients a reason to come back.
If you drive a Toyota car the chances you will speak well of Toyota cars and recommend them to your friends will of course be very high especially if the car really delivered on your perception of it before you bought. The reason is because Toyota has effectively programmed you. A proper positioning of your brand is key to business growth and programming your clients to see you the way you want is a continuous project. When you create a new system of service delivery, talk about it, don’t just assume they will know. If your market conditions or new technology enables you to offer a lower price, do it before your competitors do. Don’t let your company play the catch up game, lead the market.
Managing price perception, not just pricing structure and actual price points has become a critical capability for firms especially those in consumer markets. Through a number of strategies you can create a healthy perception about how your clients perceive you in terms of pricing. This way they want to come to you whenever they buy since they think your offer is unbeatable.
Dr Brian Reuben is one of the most sought after thought leaders on the subject of Strategy in Nigeria. He speaks at business events globally. He has advised and mentored senior executives in several organisations including Africa-Reinsurance Corporation, Savile Energy Luxembourg, Department of Petroleum Resources, Trident Energy United Kingdom, BusinessDay, Dolphin Telecom among others.