The 4 Ways to Grow Your Business
Step 3 – Increase the Average Sale Value
Customers come to you for help and guidance. So it’s important to let them know about all the options, including additional products or services that are available to add on to the original purchase. You’ve put a lot of time and money into getting that customer in to your business in the first place, so why not leverage the return on that investment where you can?
Your average transaction value is a simple calculation. Take the total value of sales for a given period and divide it by the number of customers who purchased those things. Let’s look at an example:
Last week your business brought in $4,286. Checking your sales records shows that 62 customers actually purchased items last week. This means that $4286/62. or $69.13, is your average sale for the week.
What would happen if you were able to increase that average sale figure to $74.60; only an additional $5.47 per customer. it would take your weekly income from $4,286 to $4,626.50. Now the difference of $339.50 per week might not seem like much, but multiply it by 52 weeks a year and you get an additional $17,654! Now that’s something you just can’t ignore.
Increase The Average Sale Value – Employ Selling Strategies
Let’s talk about some selling strategies you can use to increase your average transaction value.
And by the way – when you have your team trained in a selling system as I suggested earlier, make sure it includes a routine for the use of these strategies since they can really add to the value of sales. Let’s look at how they work.
Increase The Average Sale Value – Cross Selling
Cross selling is when you sell other products or services from your range in addition to the customer’s original choice. Another term used to describe it is suggestive selling. You suggest additional items to complement the original purchase.
For example, McDonald’s makes it a point to cross sell every time you visit. They ask “Would you like fries or an apple pie to go with that Big Mac?” It’s so much a part of their culture and training, that if a team member fails to cross sell three times within a shift, they do some retraining.
To start you thinking about possible cross selling opportunities within your business, go back and look at your major product or service offerings and ask: What else could we offer to go with this item that would add value and help the customer get the most out of the purchase? You can then develop cross selling checklists for each item that will guide team members in making suggestions to customers.
Increase The Average Sale Value – Up-Selling
Another strategy to increase your average sale is to up-sell purchases from lower to higher priced items.
A great way to do that is to offer your products or services in three or more tiers, along the lines of good, better and best, or bronze, silver and gold. Your first tier might be your budget items, the ones for price-conscious buyers. Your second tier is the one you actually want the majority of customers to buy, and your third tier items will appeal to those who are happy to spend a little more for their value.
Train your team members to offer three options from your range of items, explaining the tiers. Statistics show that most people will select the second tier item.
Increase The Average Sale Value – Bundling
In bundling items or services together into one single purchase you add value to your customer. It’s designed to make your products and services more attractive, create a higher perceived value for the customer and increase your average transaction value.
For example, an electronics retailer might offer six free blank videotapes with any purchase of a VCR. Instead of discounting the price by 20%, a manufacturer might offer free installation. A health professional may bundle together a free assessment if you sign up for a certain number of sessions.
Take a look at your full range of products and services and see if there’s any opportunity to package things in this way in your business.
Increase The Average Sale Value – Smart Merchandising
Signage, ticketing, presentation and packaging, traffic flow, and point-of-sale displays are all types of merchandising that can increase your average sale. Having educational information about your products or services, and sales tools like testimonials or brochures, can help build customers’ confidence in your business and increase the average sale value.
Surprisingly, even your on-hold messages can spark a customer’s interest and result in an increase of the average sale. For example, if you call a business about a specific product or services and you’re put on hold for a moment. A recording comes on that tells you about other products or services that you may not otherwise have known about – causing you to ask for more information or come in and see for yourself.
Increase The Average Sale Value – Work Your Margins And Pricing
To increase your average sales, you must have a firm understanding of your margins and how they affect your bottom line. Avoiding discounting and price wars is important to maintain and increase your average sale value.
Let’s look at some examples:
If your present margin is 35% and you reduce your prices by 10%, to produce the same profit as before the discount, your sales volume must increase by 40%! That’s not to make more profit; it’s just to get back to where you were before the disount. And it’s not very likely that a 10% discount is going to spur an extra 40% in sales.
On the other hand, if your present margin is 35%, and you increase your prices by 10%, your sales can reduce by up to 22% to maintain the same profit. This probably wouldn’t happen either. Why? Because statistics show that only 15% of the market actually purchase on the basis of price alone. If you can differentiate yourself in the market, showing why your products or services are worth more, your sales could actually increase even with a price increase. What you offer suddenly seems more valuable. So increasing, rather than decreasing, your prices could be worth further investigation for your business.