In this blog series, we have put forth the concept that “It is likely less expensive to increase the average purchase from your current customers than to acquire new customers.” Surely you have heard this, but have you made it the centerpiece of your marketing strategy?

We discussed how to calculate “average purchase” in our last post.  (Visit the archive below) Using Joe’s Garage as an example, we did the math and found that it made financial sense to offer a special to his current customers.  From the customer’s perspective, getting a “special” deal makes them feel appreciated. Showing the customer you care about them is the first step to building loyalty.  And a loyal customer will spend more and/or more often.

The second step to building loyalty is to always treat the customer with respect.  The third is to always meet their expectations.  Provide what they are looking for at a fair price. So, how do we make our customers the centerpiece of our marketing strategy?  It’s as easy as 1 2 3!

Appreciation

• Greet customers with a smile
• Help them with their purchases
• Say thank you (verbally and in other creative ways like dropping a thank you note in their bag)

Respect

• Ask customers if they were satisfied with their experience
• Listen, always listen intently
• If you failed, make it right

Meeting Expectations

• Provide a broad selection (brand, size, price level, variety, etc…)
• Price competitively
• Always have it (or in the case of a service business, be able to provide it promptly)

Increasing the value of a customer begins with building loyalty and loyalty is a two way street. Grab a cup of coffee and make a list of ways to improve the customer’s experience.  Create a culture focused on great customer service.  It’s as easy as 1 2 3!

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If you follow our blog, you may recall we closed the previous post with this statement: “It is likely less expensive to increase the average purchase from your current customers than to acquire new customers.”

To calculate “average purchase” we need to divide a dollar amount of revenue by a number of customers.

To begin, consider what customer data is available to you. Choose the revenue period that makes the most sense for your type of business. For most, a year is the best choice as revenue likely fluctuates from month to month.  Next, determine how best to quantify “number of customers”. A service business may count the number of individual customers who purchased during the year whereas a retailer might not have this information. Instead, the retailer might use the number of sales transactions.

For example, consider Joe’s garage:

This value can be used to measure the success of Joe’s efforts to increase sales to his current customers. Perhaps he can offer them a quarterly maintenance package to change the oil and check the tires, fluids, and belts. If he charges $200 and 20% of his customers purchase the package:

Taking this a step further, Joe can evaluate the cost of marketing the maintenance package against the gross profit from the additional sales to see if it is worth the effort. Looking at it from a different angle, if the average customer purchase is $700, Joe would need to get 103 new customers to achieve the same dollar increase in sales. It would likely be very costly to achieve that result.

Do you know the value of your customer? It’s as easy as 1 2 3!

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It makes perfect sense.  Your current customers have already “chosen” your business.  Perhaps there are opportunities to better serve them.

1. Provide complimentary goods or services.  Be creative with ways to increase the sale through one stop shopping.  Have you noticed the project checklists hanging in the aisles of your area home improvement store?  They help customers remember to get the other items they need to complete the job.
2. Offer upgrades. Help customers see the value in a higher priced item by highlighting the differences.  If it is in your budget, wouldn’t you rather have the room with an ocean view and a hot tub?
3. Entice them to shop more often.  At a restaurant recently the waitress brought the check and a scratch off coupon for a discount off the next visit.  It’s hanging on my bulletin board reminding me to go again.

Take a few minutes to explore the possibilities.  It is likely less expensive to increase the average purchase from your current customers than to acquire new customers.  As easy as 1 2 3!

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Do you want more in 2012?  If you answered NO, stop here.  For the rest of us, the beginning of a new year brings a feeling of opportunity and the possibility of a fresh start.  In theory, I agree with the philosophical ramblings such as:

• Money can’t buy happiness
• Money is the root of all evil
• Money can’t buy you love

But, the accountant in me dictates a more practical view.  Money is simply a tool used to trade for products and services.  Money is not a dirty word.  And, if you believe it is possible to have too much…I say you have too little imagination.  If you hit the lottery and suddenly had $100 million dollars…think of all the good you could do!  (After the shopping spree of course!)

I have a passion for helping businesses and non-profits succeed.  It is how I make my living but it also makes me happy to help people using my particular skills.  I hope you are lucky enough to feel that way about your job.

So, getting to the point…How do you get more in 2012?  In theory, it is simple:

• Generate more revenue
• Minimize your expenses incurred in the process of generating revenue

In reality, you have to commit to making changes, planning, setting and working toward goals, tracking your progress and constantly evaluating your course.  In 2011 I started blogging with a series called “Plan 2 Profit”.  In 2012, the message and information is no less relevant.  You can find it archived at www.paisleysolutions.com/blog.

We at Paisley Solutions wish you all the best in 2012.  And if you find yourself with a little extra cash, buy yourself a little “true happiness” by helping someone or something.

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We have arrived at the end of our journey.  We have completed our exploration of the Profit Equation.

The Profit Equation:      Revenue – Expense = Profit

Since the end of a journey is always the beginning of the next, I will repeat the start of our first blog.

Success is sometimes a matter of luck but, in most cases, it is earned using a game plan that plays to your strengths and capitalizes on your resources.  In football, while the ultimate goal is to score more points than your opponent, a successful team executes their plan to

1. repeatedly move the sticks when on offense and
2. repeatedly disrupt the opponents ability to move the sticks when on defense

By maintaining possession of the ball you control of the game.

Success for your business depends on your ability to maintain possession of the money.  It depends on your ability to be profitable.

To every business standing at the entrance to 2012 and wondering what is in store, we at Paisley Solutions wish you the best!

Tip to stay focused on profitability in 2012:  Follow this link to download the PLAN 2 PROFIT Outline and start the new year with a plan!  Oh, and stay tuned to our blog.  Exciting things are on tap for 2012!

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