The part 2 of this 3-part series, I outlined the 2nd way to grow your business; Increase the number of times your client buys. Here's your chance to catch up:
As a reminder, there are only 3 ways to grow a business (adapted from The Sticking Point Solution by Jay Abraham):
- Grow the number of clients you have
- Increase the amount each client spends with you
- Increase the frequency with which your customers will buy from you
3rd and Final; Increase Avg. Transaction Value
You and your team (you should have a team at this point) have done a shit ton of work to attract all your new clients and then were able to nurture them to buy at least one more time per year. Your work's not done yet. The really great companies who optimize and maximize their sales efforts, work very hard to increase the average transaction value. In simple terms, they make the most out of every sale opportunity.
When I am looking at buying a business, I love to find those companies who only ever focus on getting new clients. I absolutely love when the owners and management forget about frequency and average transaction value. That's because I know that there are a TON of untapped sales there and can buy their business for a lot less than it's probably wscarorth. Don't be that type of business owner. You need to be able to squeeze every drop of profit possible in your business. You're worth it.
WHAT'S YOUR VERSION OF 'WOULD YOU LIKE FRIES WITH THAT?'
I had spent a few years (well maybe more than a few) working in restaurants while I was going to University. That was where I was first introduced to the art of increasing average transaction size. Though it's better known as an 'upsell' in that industry. McDonald's pioneered the suggestive upsell when they rolled out 'Would you like fries with that?'
Now I don't give a shit if you like McDonald's, love it or even hate it. You might even be one of those closet junkies that refuses to admit that you stop through the drive through on your way home and scarf down a cheeseburger and small fries and ditch the bag in the alley so you don't have to admit you will eat there once in a while (you know who you are). My point is you have probably at least heard this famous phrase.
This is the single most successful upsell known in the world.
So back in my restaurant days, it didn't take me long to figure out that my income was 100% dependent on my ability to upsell at the table. If you are thinking that a restaurant server makes more money by providing better service, you're totally wrong. They need to provide a decent level of service but anything more than that is for pride; not money. In that business, most people generally always tip the same. A 20% tipper usually tips 20% and a 10% tipper the same. They may add 5% here or there but on a $100 check, it's peanuts.
What I am getting at is I could make waaaaay more money from getting my tables to buy more than I was busting my balls to go way above and beyond for an extra 2% (for some reason people have a mental block with the % of a tip and rarely go over 25% regardless of the check amount). So I became the lobster king. I worked in a high-end seafood restaurant where the average entree price was about $28. My average entree sale was $78!
I became very good at offereing a lobster tail as an add on to the meal... for $36 per tail! Now if I could sell a $55 steak and add the lobster, the entree was upwards $91 never mind the wine sale I could make, the dessert and after-dinner drinks. My per guest average was about $97 per person compared to $53 for the rest of my colleagues. I was making an average of $8 more per guest in tips than everyone else.... and doing half the work.
Before you start to judge me as a greasy salesman without morals, I was very good at the service side where my average tip % was over 18% (when accpeted standard is 15%). It's important to give great service but all I am trying to say is that you could totally bust your rump and your clients will only appreciate it to certain level (lookup: Law of Marginal Utility).
Just suppose that you are able to enrich their experience 10x through a thoughtful upsell AND it costs YOU very little extra effort, would you do it? My guess is no. You won't change and your business will stay flat.
For the 2 or 3 of all my readers who will, what is your version of 'would you like fries with that?'
I have a list of about 32 different ways to increase transaction average in my blackbook. Here are a couple of places where you can start:
- Premium version of the same service
- Gold/Platinum level
- Priority Scheduling/Status
These are a few ways you can increase the average transaction value and START to make the most out of every sale opportunity. If you want to learn how some of these work, leave a comment below with your question and I will be happy to share.
YOU NEED TO GIVE A SHIT ABOUT THIS
because the numbers are staggering. Here is how all of these fit together... by the numbers.
Let's assume that:
100 clients, who buy 10x per year spend $100 per transaction. Your annual revenue is $100,000 (100x$100X10).
If you spend just a little bit of effort and improve ONE area by 10%, such as getting 110 clients next year, you would see an increase of 10% or $10k (110x10x$100 = $110,000). There is nothing wrong with this. Many companies have 10% growth targets and seem to do fine. But hopefully you want to do better than just FINE.
You put in just a tiny bit more effort and improve each area by 10%. You get 110 clients to buy 11x and spend $110. We agree that a 10% increase across the board is not a ton of effort on your part. So how much do you think the increase is???? Not 10%!
110 Clients x 11 purchases x $110 per purchase = $133,100 or ~+33%!
(See what i just did there)
You can't afford NOT to look at this in your business. Let's face it... if you don't, there is someone like me who is going to buy a business in your space and begin competing with you. Or someone you already compete with just read this blog and is implementing right now.
Here's the beauty.... it's simple. Every piece of your marketing and sales effort should be geared towards maximizing and optimizing (in the words of Jay Abraham) each of:
- Growing number of new clients
- Increasing purchase frequency
- Increasing average transaction value
Thanks for reading.
P.s. If you like what you read, please share and tell everyone why you liked it. If you feel that this was garbage, please share that too and why you thought so. I would love to engage either way!