Question #49: What One Thing Can Grow or Change Sales the Fastest?

Answer: There are three ways you can grow your business. Let us explain.

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What One Thing Can Grow or Change Sales the Fastest?

Answer: There are three ways you can grow your business.

• New customers,
• Higher dollar value per sale, and
• Higher frequency in between orders

Those are the three ways you can build your business.

If you think about how to grow it from the bottom up you need new customers, you need a way to get higher dollar value.

• If you're a professional speaker you get more per speaking gig.
• If you're a consumer products company you get more dollars per purchase.
• If you're an independent professional that works by the hour you get a higher dollar value per hour that’s what’ higher dollar value is, higher monetary value.

Then higher frequency in between purchases or services, which means if people are buying once a month, then they buy twice a month and you make more money, even if you're dollar value stays the same.

If people are buying from you twice a month or they're hiring you twice a month, then hiring you three times or three and a half times on average a month; how do you do a half?  Over the average, over the course of the year that you can average out into a half if you want and even to a quarter.

The higher frequency, you make more money over the course of the year or lifetime of that customer.  There’s something called LTV, which is lifetime value.  The lifetime value of a customer is fairly difficult to figure out accurately.

Annual value is very simple to figure out.  Annual value is taking the total gross volume of sales and dividing it by the total number of customers.

Let’s say you have $100,000 in sales and let’s say you have 1,000 customers, so you take $100,000 divided by 1,000 customers.  The annual value per customer would be $100.  If you have $100,000 in sales and you have 100 customers then that means each customer’s annual value would be worth $1,000.

Why is that important?  Because the way that you're going to measure success in your business is either to get new customers, to raise the dollar value of each transaction or to raise the frequency in between transactions.

Of those three ways, new customers, higher dollar value or higher frequency, the one that people focus on most is new customers.

How do I get a new customer?  Why?  I don't know, maybe it’s sexier.  We're getting new customers, more people love us and we're going to boost sales, yet that’s the hardest way to increase your revenue.

The easiest, fastest way bar none to increase revenue is to have a higher dollar value and the easiest way to do that is to raise your price.  There’s an amazing thing that happens when you raise your price.  If you're a fee paid speaker you raise your price.

I raise my price by 20%.  You can raise your price by more or by less.  I recommend 20% at a time.  For example, if you charge $10,000 for a speech I would raise the fee to $12,000, $10,000 plus an additional $2,000 or a 20% increase.

Why?  First of all, what will happen through supply and demand, if you have an elastic demand, which most companies and independent professionals do, is you’ll have fewer takers, but you’ll be making more money.

In fact, if you have fewer takers you have fewer problem children, fewer people to deal with and you end up making more money.  As long as I have more than one, I prefer to have fewer clients and make more money.

My model as an information marketer is selling higher end information products to fewer people.  Some people sell lower end information products let’s say less than $100 to lots and lots of people.

There’s a benefit to that and that is, if you lose a few customers you're not going to lose a lot of sale, but there’s also the flip side.  The challenge with that is you have more customer service and when people are buying lower dollars amount products you have higher customer service issues.

If you don’t have a customer service department then it’s not an issue, but you're not going to be in business for very long if you don’t have client care, which I think everyone should.

In looking at what the easiest way is to boost sales and this is the most academic, it’s been under your nose all along is increase your price that’s the easiest way.  If you feel that the market is soft right now, like you're not getting enough business as it is, price has very little to do with it.

In fact, you can raise your price and end up generating more dollar volume and getting more customers, because you’ll be perceived differently.  It has happened to me and to colleagues; it may happen to you as well.

You can grandfather, I’m using that as a verb, your existing clients and that means you can give them your existing price on an hourly basis, a per speech or per service basis for three months   Then you can make an announcement to everyone else and this is what I recommend to my students when they ask how do I raise my price.

You grandfather everyone for a month, two months, three months; I like to grandfather them for three months and then everyone else the price has gone up.  Now your existing clients, students, patients or customers whatever you call them, they feel as though they privileged decision-making, because they don’t have to change.

They don’t have to make a new decision; they have 90 days to do it and you can ease them into the new price.  Everyone else gets the higher price so everyone else is not going to be upset with you, because for them the price is not being raised.  They haven’t been spoiled with the lower price.

If you went from a $10,000 speaking fee, if you're a professional speaker to $12,000, all the new clients wouldn’t know any different and the old clients are happy with you, because they're still at $10,000 for at least three months.

Here’s what happens and this has been my experience.  When you make a price increase like this you end up getting more frequency from existing clients.  Why?  Because they know the price is going out so they pre-purchase.

If you have a pre-purchasing agreement with people, as long as they're pre-purchasing within the next three months they can pre-purchase for a while.  Let’s say they can pre-purchase for the next year or two, they may be purchasing for two or three years for service in the next three months.

Talk about a boost in revenue and they're pre-purchasing it from you.  Just by virtue of your prices going up can be a great boost in frequency as well. That’s why when people ask me between new customers, higher dollar value per transaction and higher frequency, which is the easiest?  The easiest is always the higher dollar value.  The easiest is to raise the price.

If you want the fastest, easiest, most economical way to boost your revenue without spending an extra dime on advertising or marketing costs, raise your price.

It doesn't take courage, it takes common sense.  Just do it and watch what happens 20% is a fair amount that’s the easiest way.

The second easiest way is raising the frequency.  For example you go to Sam’s, which is a club chain just like Costco or BJ’s is a club chain.  Sam’s is run by Wal-Mart.

With Sam’s they’ve maintained a dollar value per ticket purchase.  They sell flat screen TVs and diamonds, which is consistent with what I just said, it's easy for them to maintain a ticket or the dollar value per purchase, per transaction.

Every time someone goes through a cash register, a $400 billion company, of the Fortune 500 they are number one.  It's easier for them to maintain the ticket then the frequency that's why the frequency is the second way I recommend in boosting revenue.

Getting someone to purchase a second as time, now that's not an up-sell.  That's another transaction after another time that they've come to your shopping cart online, they've visited you in a retail store or have called you up that’s a second transaction.

It's very important to make that distinction between that and an up-sell, because an up-sell is one transaction where you're boosting revenue.  That's an easy way to increase revenue, but that is dealing with dollar value, boosting dollar value.

I told you earlier that dollar value boosts are the easiest.   An up-sell will get you that, as well as raising price.  However, increasing frequency is not as simple, because it requires more behavior; it requires a second visit after the transaction or after the time they've purchased from you online or offline.

Higher frequency is the second way I recommend.  That is easier than getting a new customer.  Why?  Because getting a new customer requires a lot more behavioral change.  Remember, marketing is often behavior modification.

A behavior change is very difficult.  For someone to go from someone else to you or from another company to you is a lot tougher then increasing the dollar value per transaction of an existing customer, student, client or patients depending on the business you're in and it's more difficult than increasing the number of frequency purchases in between orders.

If you look at your entire business life and there are new customers, higher dollar value and higher frequency, you're going to grow your business.  If you just look at higher dollar value and higher frequency every time you get a new customer you're going to be a lot more efficient and effective.

If you've already trained your customers to have high dollar value and come back more frequently that means every time a new customer comes through your machine, through your sales process they'll be in the zone of generating more income for you.

That's why I focus on new customers last any time idea of anyone advice to grow their business.

High dollar value, raise your ticket or increase your ticket through up-sells, that's the easiest way to grow your business if there’s one thing you were going to change.

The second thing you would change is increase the frequency.

Ask yourself how can I increase the frequency between purchases?

The third is how do I get new customers?  The easiest way is ask for referrals.  If you have people who have high dollar value purchase and high frequency they're the best people to refer new customers to you.

The other best source for new customers to finalize the question and more on to the next one is a competitor.  Your competitors are your best source for new customers.  Why?  Because you cannot create demand, you can argue over it, think about it, debate over it, but you can’t create demand.

Proctor and Gamble can’t create demand.  Apple Computer could not create demand.  All you can do is re-channel and re-direct it.  You have to look at where the demand is in the marketplace and channel it over to you.

That’s where competitive advantage comes in.  That’s where unique selling proposition comes in unique to what?  Unique to your competitor.

Sam Walton spent more time in his competitor’s stores than he did in his own.  Why?  That’s where all the great ideas were.  That’s where all the creative imitation happens is in your competitor’s store.  It’s not stealing its research.

If you go to many competitors and you see what they're doing that is original that is creative and unique.  Most people are like ostriches they put their head in the sand and they only look at their own business and that’s blind.

Look at your competitors.  It will broaden your mind.  It will expand your mind and it will give you new ideas.  I’ve been using the professional speaker example.  Look at what other professional speakers are doing.  Get their professional speaking packet.

By being different from them you are being original.  You may be the same and you don’t even know it.  The only way you're going to know what’s available out there is knowing what the demand is and the only way to know the demand is to go to your competitors online and offline.

With the online world it’s so much easier to do competitive analysis now.  In fact, when you're going to submit a business plan, one of the key factors is competitive analysis that's what you want to do.  Where is your advantage?  It’s the easiest place to get new customers.

• The easiest way to get new customers is through existing customers or through your competitors.
• The easiest way to increase your dollar value per transaction is to increase your price or to have an up-sell or cross sell per transaction.
• The easiest way to have higher frequency between purchases is to remind people to keep coming back.

It’s more difficult than increasing the average order per sale, but it’s easier than getting a new customer, because getting a new customer requires a new behavior change.