Supersize the sale
It is no secret that selling to existing customers is easier than finding new ones. Often though you make a single sale to a customer and then never hear from them again. The internet makes it too easy for people to shop around every time they need something. It is less widely known that for most companies 80% of their revenues come from 20% of their customers.
Review your own customer database and prove this to yourself; the 80/20 rule could be 70/30 or even 90/10 but it is almost always there ready to be exploited. What you must do is find the right balance and maximise every sale.
If you were to send out 5000 leaflets you could expect a response rate of 1% - 2%; you then have to convert those responses into sales, that depends on your sales ability but let’s work on 20%. At the time we went to print a 5000 piece leaflet drop would cost around £400. Using the figures above, 20% of 2% of 5000 is 20 sales. That is a cost of £20 per sale, depending on what you sell that could be very good or less than cost effective. The way to make sure this is profitable is to make the value of each sale as high as possible.
So I would like to explain the Costa effect. If you have a local coffee shop, one that is part of a chain is more likely to back up this story, then it is coffee time, I know, sometimes research is tough.
The Costa effect
- “A Latte please”
- “Medium or large?” No mention of small here, upping the potential sale by 10% or more
- If the order had been for chocolate then the additional offer would have been cream and marshmallows
- “Any cakes or pastries with that?” You had to walk past a selection of these just to reach the counter so there is a chance you are already clutching a little something that will double the value of their sale.
The question is, how will you turn this into a sales technique to suit your own business?
Product |
Complementary Product |
Add-on 1 |
Add-on 2 |
Option 1 |
Product 1 |
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Product 2 |
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Service 1 |
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This is a simple table and it should be possible for you to produce something similar for your own products. For direct selling you should make sure every person involved knows this list and uses it every time. For web selling you have to bring these additional products to the customer’s attention, if they don’t know about them they cannot choose to buy them. Give them the chance to add them in the shopping cart or at the very least have a line that says “customers who bought this product also bought…”
There is a danger in this strategy, it is too easy to start badgering customers so hard to take a full suite of products that they turn away and buy nothing. It is a balancing act that every experienced sales person knows and one you have to learn as well.
If you keep a database of customers and what they have bought you have a chance to make some fast, incremental revenue. Run a report of all the customers showing what they bought and when. Build the table below.
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Main purchase |
Option 1 |
Option 2 |
Option 3 |
Total |
Customer 1 |
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Customer 2 |
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Customer 3 |
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Customer 4 |
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Total |
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Where a customer has bought an option, put an X in that box. Where the option was not purchased put in the value for the potential sale. If options are exclusive, an either or then only put in the value of the most expensive and leave the cheaper option empty or it will skew the results we are looking for.
Now you can let the spreadsheet fill in the totals at the ends of the rows and columns. This will tell you:
- How much incremental value you can get from each customer, you can sort on this to bring the most profitable customers to the top
- How much total revenue you can get if you go out and sell all those additional options to your existing customer base.
One other thing you may be able to do with this data is discover which types of customer spend the most money with you. If you can discover that, you can target your marketing to bring in more of those customers.
This is another area where you are likely to find the 80/20 rule raising its head again. Many companies find that 80% of their revenues flow from just 20% of their customers. If you sell to business you will probably find that much of your revenues come from just a few types of business.