Boosting profitability through increased sales is a tried and true method of delivering profits.

“The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.” – Henry Ford"
Photo by Karsten Winegeart

There are two ways you can boost profitability through increased sales:

  1. you can find more customers
  2. you can sell more to the customers you have

Finding Your Best Customers:

One way to improve profitability is to find more customers. According to Ian Kingwill, depending upon your industry, it can cost between 4 and 10 times more to acquire a new customer than it does to retain or sell to an existing one.

Knowing who your best customers are, what they buy and when they buy it is can improve the profitability of your business.

Your customers will fall into one of four categories:

  1. high sales volume – high profit
  2. low sales volume- high profit
  3. high sales volume – low profit
  4. low sales volume-low profit

Obviously, those customers in the first category – the high sales volume – high profit ones – are your best customers.

They’re your VIPs and should be treated as such. While we adore customers in this  category, our goal with them is to keep them happy and buying.  Our goal is to move customers from the other categories into this one.

It might surprise you that I’m recommending you focus your efforts on moving customers from the low sales volume/ high profit category to the high sales volume/high profit category.

You should pay careful attention to the customers in the ow sales volume/high profit category

Finding ways of getting these low volume/high profit customers to buy more or buy more often should be your top priority.  This can also GREATLY improve your overall profitability.

You should determine why these customers are low volume.  Could up-selling and cross selling opportunities move them into the first category?  Could offering a new product or service can improve the purchase frequency with low volume customers?

Sell More to Current Customers

Your first priority should be focusing on ways to sell more to your current customers.  Adding complementary products and services will not only improve profits but my help to move more customers in VIP status category of high sales volume/high profit.

Finding New Customers:

Once you’ve identified your best customers, and implemented ways to move them into the VIP category, you can  then focus on pursuing new customers.

Because of the work you’ve already done classifying your current customers, you now know the characteristics of your VIP customers.  You can begin targeting people who have a similar profile to your VIP customers.  You may find these customers within your current market or you may consider moving into new markets in pursuit of these customers.

For example, let’s say you sell widgets to goat breeders.  During your classification, you notice that Angora goat breeders make up a majority of your VIP customers.   You also notice that Pygmy goat breeders are in the low volume, low profit quadrant.

So as you begin finding new customers, one target audience you can pursue is Angora goat breeders.  However, you might also want to consider breeders of other animals whose hair is harvested like sheep, yak and llamas.

Finding New Customers IRL:

I’ll admit to extensive cheating in the above example.  First, I cheated on the product.  Widgets was always the product being sold in my cost accounting courses in college. It’s assumed to be a tangible object, but that’s about all that’s defined about it.  I know you don’t sell widgets.

However, the second cheat is by far more frustrating.  I’ll admit to choosing goat breeders because it provides a really clear cut way to segment customers.  In real life (IRL), it’s just not that simple.

I’ve actually worked with hundreds of business owners one on one.   I know that when you look at your customer base, all you can see is people.  At this point, you get frustrated with me and my “stupid” advice.  I get it.

However, let me tell you that if all you see are people when you look at your customers, it’s because you haven’t put into place a way to segment your customers.

When a customer buys a product, you take the money and move on to the next sale.  There usually isn’t time to fuss and analyze the demographic profile of every customer.

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