Boosting profitability through increased sales is a tried and true method of delivering profits.
There are two ways you can boost profitability through increased sales:
- you can find more customers
- 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:
- high sales volume – high profit
- high sales volume – low profit
- low sales volume- high profit
- low sales volume-low profit
Obviously, those customers in upper right hand corner of the grid – the high sales volume – high profit quadrant are your best customers. They’re your VIPs and should be treated as such.
Next in line would be those in the lower right hand corner of the grid. These are customers with low sales volume and high profit. You should pay careful attention to the customers in this quadrant. Find ways of moving these customers from the lower right hand quadrant to the upper right hand corner. This can also GREATLY improve your overall profitability.
Finally, you should also see how you can move customers from the top left corner to the top right corner. .
Sell More to Current Customers
Consider up-selling and cross selling opportunities with customers in the two right hand quadrants. Offering a new product or service can improve the sales volume of low volume customers. Offering a product or service with higher profit margins can move a customer to the upper right hand quadrant quickly and easily. As a bonus, you may also find that a new product or service can move customers from the dreaded fourth quadrant – low sales volume and low profit.
Our Marketing Magic Button is a great tool your business can use to move customers into the highly prized VIP customer category.
Finding New Customers:
Once you’ve identified your best customers, and implemented ways to move them into the VIP quadrant of the grid, 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.
If all you see are people, it’s because you haven’t put into place a way to segment your customers.
I get it.
When a customer buys a product, you take the money and move on to the next sale. There isn’t time to fuss and analyze the demographic profile of every customer.
You don’t have time to put into place fancy segmentation analysis systems, but you’d like to know more about how to move customers into the top right hand corner of the grid above.
We may be able to help.