3 Steps to Increase Your Average Revenue Per Customer
by Marshall Childs
Posted on Wednesday Sep 13, 2017 at 10:00AM in Finance
One of the best ways to boost your business revenue is simply to get more money from your existing customers. According to a statistic from Totango, many businesses surveyed spent just 21 percent of their marketing budget on existing customers, even though that group makes up 61 percent of those businesses' evenue.
Obviously, every business wants an increase in its customer base. However, one of the fundamental mistakes many businesses make is focusing on acquiring new leads rather than paying attention to existing customers. This approach not only alienates and encourages your existing customers to look elsewhere, but research has also shown that it is more expensive.
Here are some easy but effective ways to maximize the amount of revenue you can get from each of your existing customers without limiting your options for winning over new ones.
Do you ever notice that whenever you visit McDonald's, your bill exceeds your budget or intended purchase? The fast food giant increases your transaction simply by offering complementary products to go with your order ("Fries with that?") That way, you spend more, and McDonald's earns more. You get to eat more, to your satisfaction, and McDonald’s gets more money.
Multiple ways of idoing the same thing -- increasing the average transaction size for each customer -- include:
Cross-selling. This is the act of attaching other services or products from your business at the checkout stage for each customer. It is not meant to replace the main product; rather, the new offer or product complements the main purchase.
For example, for a business like Namecheap, while a customer is paying for a new domain name and hosting privileges, cross-selling can be used to include an SSL certificate (which is necessary) or a personalized email service. This leaves the customer no choice but to take the extra offer, which increases the transaction size and revenue for Namecheap.
Retail giants such as Amazon and eBay regularly boost their revenue by using this technique at the end of a customer's product purchase.
Takeaway: Meet with the marketing team and analyze your business offerings. Then, brainstorm necessities that complement your main business offering, which you can cross-sell to your customers.
Up-selling: Up-selling is a marketing technique that involves pushing customers to go for a more expensive package or offer, or promising more value. A marketer or salesperson can influence a customer into buying the latest version of an item instead of the less-expensive current model by highlighting the new features on the latest version and displaying the latest product pages.
Up-selling might sound selfish, but at the end, you'll have happier, more satisfied customers. According to sales guru Jeffrey Gitomer, "Up-selling helps your customers win since you’re delivering more value."
This technique is often used by SaaS companies, such as Buffer, Godaddy and other brands offering consumables.
Takeaway: Understand your product; timing determines everything. Up-sell your customer at the point of purchase, offering a detailed demonstration and preferably a video to show the benefit of the upgrade.
Today, customers not only want to be treated specially but also expect a lot from customer service representatives as well.
According to research by Media Post, “Seventy-one percent of consumers have ended a relationship due to a poor customer service experience. Alterately: "Seventy-eight of consumers say their most satisfying experience occurred because of a capable and competent customer service representative.”
Today, offering personalized customer service isn’t difficult. All that is required is a digital system that captures customers' information in one place. A help desk software like Zendesk or Freshdesk, or a customer-relationship management (CRM) software that integrates with full contact, enables you to gain and keep comprehensive records about customers, their past interactions with your business, their names, phone number, social media profiles, interest, etc.
Customers will remember your business if you remember their names. That's a fact. According to studies about brain activation, a person's name is the sweetest sound that a person can hear. Customers are utterly passionate about hearing their names; it makes them loyal to your brand and they will gladly pay more for whatever you're offering.
Ensuring that you give your customers individual experiences is an important part of making them feel special and loyal to your brand. It may be hard to scale, but if you care about your customers, individual experiences are vital part of winning them over.
Takeaway: There’s a lot of difference between receiving an automated email with a “DO-NOT-REPLY” subject versus an email from “Jane” that says, “Hey John, thank you for your purchase today!” Keep in mind, also, that loyal customers are a great deal less sensitive to higher prices than irregular or entirely new customers.
Depending on your product and services, sending little gifts of appreciation with elements of surprise and delight to your best customers can be a superb means of telling them to come back.
Everyone loves a good surprise. Giving your customers an unexpected gift also plays to the social rule of reciprocity, which describes the instinct to respond to a positive action with another positive action.
You can use this to your advantage by sending your best customers small unexpected gifts. This gives them the impression that you went the extra mile for them because they are important to you.
Take a look at this Reddit post where the owner of an auto-body shop sent out a handwritten "Thank You" note to a customer. The customer was so thrilled that he posted the "Thank You" note to Reddit, which ended up receiving more than 1,500 upvotes and almost 800 comments.
Takeaway: This simple gesture not only created a likely customer for life but also became an amazing referral marketing tool for the sender, Jimyz Automotive, an auto-body shop probably few people previously knew about.
A customer appreciation gesture like this one has the capacity to produce enormous results. You can do something similar with only a small investment by taking your time to get the cards, write and send them.
Though you can make millions from your existing customers directly, you can also use them as a great source for getting new customers to grow your business.
Since people are inclined to professionally and personally connect with others like them, giving existing customers a strong referral incentive can be a big win for your business.
Dropbox, Uber, Erin Condren Design, Eat Purely and others have successfully used referral incentives to build their businesses by offering both their existing and new customers an incentive for sharing their products and services with the people they know.
Ensure that you own referral system is easy to execute by offering a valuable incentive; then sit back and watch your customers help you build your customer base and increase your revenue.
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