When profit declines, business owners react in various ways. Some look to cut expenses while others look to get more leads and customers by investing in advertising and other lead generation strategies. While controlling expenses is important whether profit is up or down, cost cutting is typically a short-term fix – you can only cut so much and still have a business.
While a business requires a steady flow of leads to sustain growth and replace lost customers, lead generation strategies are typically the most costly methods to grow revenue.
So what should you do? Before you invest time and money generating new leads, know and understand the other factors that drive your revenue: sales conversion rate, number of transactions and average dollar sale.
For many businesses, these are untapped profit opportunities – lots of room for improvement at substantially lower costs!
Sales conversion rate is simply how many leads you or your salespeople convert to paying customers. Think of it as an efficiency measure for sales. What is your sales conversion rate? If you don’t know, track it. After all, leads that are not converted to sales are a waste of time and money!
Tips to improve your sales conversion rate:
1. Clearly define your ideal customer(s) and understand what is important to them. Without clear targets, every lead looks like a ‘great opportunity’.
2. Recognize your company’s strengths and weaknesses. Be honest with yourself. What do you do well from the customers’ perspective and profitably? If you are not sure, ask your ideal customers. Then focus on prospects that NEED what you do well and be willing to let go of the others.
3. Differentiate yourself with a guarantee. If you consistently deliver critical benefits for your target customers, a guarantee is a great way to improve sales conversion because it reduces the buyer’s perceived risk. The key to an effective guarantee – make sure your delivery is consistent and make sure it is relevant or important to your target market.
4. Create a sales management system – a consistent approach you use for every lead. Know the key touches and steps and where prospects are in your sales process.
5. Know why customers buy – what benefits customers get when purchasing your products or services. Ensure sales messages and discussions communicate this. Remember, prospects may ask about features – but they buy benefits.
6. Set sales and milestone goals and track them. Key events in the sales cycle, such as face-to-face meetings or requests for quotes, are indicators of progress. Tracking tells you where prospects fall off so you can improve your sales system. Remember, what you measure, you can manage and improve.
The number of transactions relates to frequency – how many times your customers purchase from you over a specific time period, typically one year.
The average dollar sale represents how much customers spend each time they do purchase. What would your bottom line look like if your customers made one additional purchase each year or bought one more product or service when they purchased from you?
For most owners, the answer is ‘substantially better than it does right now’. The key – small improvements in these areas can increase revenue without acquiring new customers. Tap into your existing customer base and watch your profits grow.
Here are some proven ideas to improve the number of transactions and average dollar sale:
1. Develop or maintain your customer database so you can keep in touch or quickly respond to sales opportunities.
2. Stay connected with your customers – by phone, mail or email. While the frequency may vary, every customer should receive a ‘touch’ at least once per quarter.
3. Make valuable customers feel more appreciated than non-customers or prospects – While new customers are critical to growth, make sure current customers get some VIP treatment. Programs, offers or specials just for current customers work well.
4. Look for opportunities to sell multiple products or services – educate customers on the range of services you offer, create checklists of typical add-on offerings for key products or services, bundle or package products and services, implement sales scripts, free trials, special offers on additional services with primary purchase.
5. Train your team in sales and service – and WOW your customers with consistent delivery so you create raving fans who spend more and buy more often!
On a final note, know the numbers! If you want to improve sales conversion, number of transactions or your average dollar sale – track it, set goals, implement a strategy and celebrate your teams’ success. Your bottom line will thank you!
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Where’s My Cash Gone?