You've probably heard that it costs about five times more money to acquire new customers versus retaining existing ones. Obviously, the expense and effort of acquiring new customers can be worthwhile. That said, are you doing everything that you can to maximize profits based on your current customer base?
Your customers already value your product or service, so it’s extremely cost-effective to try to get them to buy more from you. Follow these 5 tips to get more from the customers that you already have cultivated.
1. Add higher revenue and margin items to your offerings.
There's a reason why fast food chains ask, "Do you want fries with that?" With a profit margin of around 75 percent, they are probably the most classic example of high-margin product add-ons. Your sales staff can easily increase profits by forming the habit of offering an extra pack of batteries or other related items when they sell electronic devices or a yearly website audit when creating a new website. So, when customers and clients make a purchase, have related products and services to suggest.
2. Incentivize more frequent purchases.
Sometimes, regular customers will buy your products or services more frequently if you just remind them that you're out there. For example, when a personal trainer calls customers to suggest that more frequent visits will help them reach the fitness goals that they've nearly achieved, the extra business can be significant.
Don't forget the value of loyalty programs, either. Caffeine-driven customers often stop by more frequently to get their cards punched when a free latte is in the offing. As a small business owner, you know your customers well. Target their current buying habits and untapped potential to identify the incentives that might encourage more sales.
Related Article: The Value of Customer Loyalty − Infographic
3. Clear low-margin products from your sales offerings.
Are all the products that you sell profitable enough? By necessity, you may need to devote some shelf space or service offerings to certain products and services that customers demand — or items like parts that support higher-profit items. But, when the acquisition, storage or performance costs don't justify selling certain items, maybe it's time to just say no.
Keep in mind that the real profits might reside with small companion products rather than the larger purchases. Think about the new battery-operated TENS device sold for pain relief. You might sell a device one time for about $100, which may represent a relatively moderate margin. But the repeat-purchase of required electrode pads, batteries and other parts typically have high margins. This can turn one-time customers into guaranteed, repeat high-margin sales opportunities.
4. Beat the competition and raise prices.
Knowing your competition is not just about staying within the pack. If you know what they do — and how well they do it — you may find that you do it better. Whether you advertise your company's superiority or if your customers already recognize it, they may willingly pay a premium price to continue buying the best.
Related Article: What Your Prices Say About Your Small Business
5. Vigilantly watch the expense side of sales.
Organic growth is vital to every company, but this doesn't mean that costs aren't important.
It's all about the margins. Perhaps, you can shave dollars off regular parts purchases by finding a new vendor. Or, if you have the available space for extra inventory, consider buying in bulk. If you can get comparable delivery and the same quality, these savings go directly to your profit margins.
Don't forget to look at processes and personnel. How much do you spend on unnecessary steps in product or service development? And, are you paying a high-priced employee to do work that can be performed just as well by an entry-level person? The cost savings of a tight operation translate into more money for your business without raising prices or adding more customers.
Take full advantage of all earnings opportunities.
Every business should continuously examine ways to sell more products or services. However, small businesses in particular need to keep a sharp eye on available resources before taking the steps needed to sell to more customers. Make sure that you're not leaving money on the table that can make a real difference to future growth.
Related Article: 10 Easy Ways to Quickly Boost Sales
About Carol Roth
Carol Roth is the creator of the Future File ® legacy planning system, “recovering” investment banker, billion-dollar dealmaker, investor, entrepreneur, national media personality and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett-produced technology competition show, America’s Greatest Makers and TV host and contributor, including
of Microsoft’s Office Small Business Academy. She is also an advisor to companies ranging from startups to major multi-national corporations and has an action figure made in her own likeness.
Bank of America, N.A. engages with Carol Roth to provide informational materials for your discussion or review purposes only. Carol Roth is a registered trademark, used pursuant to license. The third parties within articles are used under license from Carol Roth. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.