This post is part of our Insights for SMBs series. Read all posts in the series here on the Clover blog.
Understanding basic concepts behind revenue and expenses can help small businesses make more profitable marketing decisions.
Total sales are comprised of three variables: the number of customers, the average amount spent per transaction, and the frequency that each customer purchases an item. As businesses think about strategies for increasing their revenue, they should break down these strategies to one or more of these variables to see which of them has the best chance of driving up overall revenue.
Increasing customer volume
The more customers a business has, the higher sales will be. In light of this, there are standard ways to increase customer volume such as:
1. Tap local markets. Foot traffic and nearby office complexes can be great resources to grow a customer base. Flyers, hawkers, signage and music are great ways to catch people’s attention and draw them inside.
2. Try new promotions. Promotions can help pull in traffic by offering deals worth stopping in for. For specific ideas, check out 5 Simple and Inexpensive Marketing Tips.
A less obvious way to increase volume is to improve business efficiency. Faster lines are attractive to customers, especially during rush or peak hours. There are several ways to do this:
3. Increase staff. Coffee shops that offer quick service in the morning before work are more likely to attract and keep loyal customers. Consider whether the cost of an extra person or two during your two-hour peak time will enable you to do enough business to justify the cost of staffing up.
4. Expand revenue per unit of space. Restaurants with more tables can accommodate more customers during the dinner hour. This is true for any service industry, such as more stations at a hair salon.
5. Add more ways to buy. Curbside pickup, self-service kiosks, preordering food, online check-in, or even online sales are several ways a business can increase efficiency and, therefore, increase the number of customers they service. Think about how much capacity you’ll need to add in order to take advantage of each of these tools.
Increase the Average Ticket Size
Ticket size is the average amount customers spend with each visit or transaction. The most obvious way to increase ticket size is to increase prices, but that can backfire especially in businesses that are very price-sensitive. Here are a few other ideas to increase the amount each customer spends.
6. Feature more profitable items prominently. Restaurants can feature items like high-margin cocktails, wines and desserts. Retail stores can feature profitable items prominently in window or floor displays and in promotions.
7. Display impulse items near check-out. Catch customers when they are in the buying mood by featuring small, but attractive items right as they are paying.
8. Train staff to upsell. The best sales staff ask questions to find out more about the customer and why they are making a purchase decision. Knowing the problem a customer is trying to solve helps you sell more and offer a more customized, customer-focused experience.
9. Encourage staff to cross-sell items. Is it a gift? Perhaps they need a gift card or wrapping paper. Does that dress match a belt or earrings? Do they want a croissant with their coffee? Maybe they’d like a flavor added to their drink. Do they need socks or shoe cleaner for their new shoes? Whatever they are buying, point out obvious additions to their purchase.
10. Bundle items to increase the likelihood of buying more. Bundling items suggests combinations customers might not have thought of and subtly encourages them to buy more. Instead of offering free drinks at a bar, offer beer buckets with ice for a small additional fee or finger food. Offer a cheese pairing with a wine tasting, or perhaps a taster dish meant to be shared with small amounts of each dessert. Bundle Discounts and other bundling apps can help set up this kind of promotion easily.
Increase the Frequency of Sales
A third way to increase overall sales is to encourage current customers to make purchases more often. Punch Card Rewards and other loyalty programs aren’t the only way to increase the frequency of sales. Here are a few other ways to increase the frequency of sales:
11. Offer monthly subscription services. Determine whether any of your products or services could be offered as a monthly subscription service. Massage Therapy, for example, offers a monthly rate that encourages customers to think of their services as a wellness strategy, not a once-in-awhile luxury item. Cafes can offer something healthy like a daily vitamin smoothie or a heart-healthy lunch special.
12. Reward early service. For services that are known repeats, encourage customers to come in early. For example, women who color their hair typically come back 6 weeks later to treat their roots. Salons can encourage them to come in week 4 instead of waiting a full 6 weeks. If they consistently do this the salon will get 4 more sales over the course of a year.
13. Organize and remind customers. Simplify your customers’ lives by helping them organize their purchases and plan ahead. For example, instead of waiting until taxes are due, accountants can offer a monthly financial check in with customers. Not only will this spread business into off-peak time periods, it may be a service customers are willing to pay more for. Birthday reminder emails are a great way for florists and other businesses to get repeat business.
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