By Graham Acreman
Your revenue is arguably the single most important metric that you need to keep an eye on. It can tell you everything you need to know about your business. If your revenue is growing it means the market is responding to your offering, that there's room for growth, and that your marketing tactics are paying off.
Growing revenue allows you to pay for the critical components of expansion: new people, better equipment, research and development, and so on. It's the key to long-term growth.
There are many aspects to sales, but when it comes right down to it, there are only four core ways to increase your company's revenue:
- Get new customers,
- Get your customers to buy more frequently,
- Get them to increase their average spend,
- Increase your prices.
Let's explore each one in more detail.
Pillar 1: Getting new customers
New and growing companies are mostly focused on getting new customers. If you want to expand your business, you need to cultivate a base of loyal customers who will keep coming back. And to do that, you need to strengthen your relationship with them through top-notch service.
Incentives are another effective tool to attract more customers. Many businesses often offer discounts, promotions, and in-house programs to cement their customers' loyalty.
Pillar 2: Increasing purchase frequency
Another way to increase your revenue is to get your customers to buy from your business more often. You want to turn one-time customers into returning ones, and your returning customers to buy more frequently.
If your average customer buys from you once a year, you want to try to get them to buy two to four times a year. If they buy monthly, how can you encourage them to buy bi-weekly? The frequencies will vary by industry but the strategy can work across the board.
One tactic for increasing purchase frequency is to offer additional services. Or create “Occasions” that would justify more buying.
Alternatively, you could start a loyalty program. Customers are more likely to return to your business if you offer exclusive benefits and member-only promotions.
Pillars 3: Increasing average customer spend
So you’ve built a growing customer base and you have them buying from you more often. The next thing you want to focus on is to get them to spend more per transaction.
The trick to upping a customer’s average spending is to upsell and cross-sell. Encourage your customers to buy a better or upgraded version of the product or service they want to buy. You can also introduce them to products or services that are related to their purchase.
Think of McDonalds - If a customer orders a hamburger, ask them if they would like cheese. Or to add fries. Or to make it a combo. You get the idea.
Pillar 4: Raising prices
Price increases are often forgotten or overlooked but they should be a regular part of your company’s strategy. Many business owners put off raising their prices until it’s too late, which can affect customer satisfaction and loyalty.
If you raise your prices consistently and incrementally (e.g. 3% per annum), you can maintain or even increase your margins as your operations become more efficient. Small increases spread out over time are also less conspicuous and easier to swallow than one big price increase.
Consider this scenario: You haven’t increased prices for years and your margins grow smaller with each passing year. At some point, you’ll need to increase your prices to keep the business alive, and when you do, the price increase is higher than it might have been if you had just done it in increments.
The bottom line
Most businesses are usually focused on the first pillar. While no doubt important, this represents just one piece of the puzzle. The larger your customer base, the more you need to integrate the other three pillars into your plan.
Look at it this way: If you have 1,000 customers spending $100 per month your annual revenue is $1.2 million. A 10% increase in your customer base increases your revenue by $120,000 to $1.32 million. You can also get the same results with a 10% increase in average customer spending (from $100 to $110). And that’s just two of the four pillars.
Imagine the possibilities if you can grow your customer base, get them to buy more often, spend more per transaction, and raise your prices..
You can always set your strategy based on your goals and corporate philosophy. The key is to make a conscientious decision about each pillar.
This four-pillar strategy is simple, effective, and rooted in clear and measurable methodologies.
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