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There’s a magic ingredient that those in the know have found to be massively profitable for business over the years — especially now. Tracey Dooley shows how you can cash in on it, too…
Anyone involved in running a small business will tell you the truth: boy, oh boy, it can be tough. As business-owners, we’re often so busy wearing many different hats and working IN our businesses that it can be nigh on difficult to find the time to work ON our businesses — that is, to strategically add business growth.
And yet increasing the profitability of your business needn’t take up much time. What’s more, it can reward you rather well . . . IF you know what to concentrate on.
There are two areas of profitability that most business professionals overlook (no matter whether we’re talking offline or online). As a result, they end up out of pocket. And we’re talking big money. Money that could have easily been coming in for just a few hours’ work.
Supply & Key Performance Indicators
Before we get to the actual KPIs (key performance indicators), let’s take a quick look at what a KPI is. A key performance indicator is a measure of performance that allows you to monitor the ‘health’ and therefore profitability of your business. KPIs can show you how effective your marketing, PR and sales campaigns are at any given time, but especially over the longer term.
The main value of any KPI is to allow you to take corrective action before it’s too late. So, for example, if your KPIs are indicating a downward trend, then you should make practical changes to your campaign[s] to turn around the situation. If you ignore your KPIs, then you are simply wasting valuable business resources . . . not least your money.
The KPI that most businesses get wrong is their conversion rate.
Many small-business owners think their conversion rates are much higher than they actually are. So it’s a good idea to accurately measure (or start measuring) your conversion rates.
How do you do that?
Simple. It’s just a question of totting up the number of people who respond to any given marketing or sales message. It might be the number of website visitors who complete an online survey, for example.
What Does Your Conversion Rate REALLY Mean?
Another example is newsletter subscriptions. Suppose you publish a monthly ezine (and I strongly recommend you do, at least once monthly). All you need do is to divide the number of people who have subscribed to your online newsletter/ezine by the number of unique visitors that viewed your ezine registration page. That will give you your conversion rate.
To make it really easy, I suggest you use your web host’s analytics program or try Google Analytics, which won’t cost you a penny if you install it yourself.
By the way, don’t just measure your conversion rates; instead, you need to ANALYSE what they really mean to you and your business. For example, consider the following statement:
“The conversion rate for our top 10 key words has increased considerably in the last two months.”
So what? What does that mean, exactly? Nothing, really. It gives facts, but not SPECIFICS. But if we change that statement to:
“Our pay-per-click (PPC) campaign is converting at least three out of every 10 visitors, and we should re-allocate funds to the top seven keywords that show the most promise.”
Do you see the difference? The latter statement is helpful; it gives arecommendation for ACTION.
Small Changes, Big Results
* Change your offer to make it more attractive.
* Create a follow-up system for ‘unconverted’ prospects AND communicate with them on a regular basis.
* Improve your sales skills or train up your team.
* Offer a free trial and/or a solid guarantee.
What’s the point? Well, apart from all that I’ve said so far (you have been listening, haven’t you?!), you can significantly increase your revenue and even your average order value.
Let’s look at some figures:
What’s 200 unique sales with an average order value of £100? Exactly £20,000.
Sounds like a lot, right? It is.
But let’s say that those 200 new customers came from a marketing campaign that attracted 5,000 leads. That means just 200 of those turned into actual customers. With that your conversion rate is just 1 in 25, or 4%.
So what would happen, then, if you put in place some of the measures above and increased your rate ever so slightly from, say, 4% to 7%?
Your customer numbers would jump to 300, which would end up bringing in an extra £10,000 in sales, or a total of £30,000 (instead of £20,000).
And if you managed to tweak your campaign so it produced a 30% response rate (possible), instead of the original 4%, then you would be seeing 1,500 new customers and a substantial £130,000 increase in sales. That’s a total of £150,000.
Hopefully, you can see just how important this KPI can be to your bottom line.
Increased Sales Transactions
Now let’s take a quick look at another important business metric. By doing making one or more seemingly insignificant changes, I’m going to show you just how easy it can be to increase youraverage order value from £100 to £120.
For the purposes of this exercise, I’m going to assume you have already put in place some measures to increase your conversion rates and while a 30% increase is more than achievable with the right strategy, we’ll use the more conservative 6% conversion rate. That means your customer numbers are currently sitting at 300 with a total revenue of £30,000.
When you increase your average transaction value from £100 to £120 your revenue leaps to £36,000 a healthy 80% increase from the £20,000 starting figure.
Or, to put it another way, an extra £16,000 in your pocket.
Please don’t mistake these kind of results as pure hyperbole. One of my clients has experienced some incredible results by cross-selling other products to their customers. And another business-owner is doing well since I helped implement a ‘suggestive (aka soft) selling’ campaign.
So what can YOU do?
Here are some ideas to get you started:
* Up-sell to a more premium-priced package before the order takes place for example, you might offer a gold’ and ‘silver’ option, where you communicate the value of upgrading to the more expensive gold package.
* Offer a ‘bounce-back’ that is, a follow-up offer, often presented as a time-limited discount or voucher, that is sent to the customer just after the sale.
* Cross-sell other services or products that complement what you’re selling. These can be your own or those of a joint-venture/alliance partner.
* Increase your prices by a nominal amount. I suggest 10-20%.
* Create great-value ‘bundle’ packages.
These are just some ideas that will hopefully get those creative juices started. There are others that may be more suited to your business model. The point is to try at least one of the above initiatives . . . and do it well. KPIs were developed for a reason. Use them.
By Tracey Dooley, CopyWriter | Editor | Proofreader
Need help implementing some of the above ideas, or want to work with me to discover how your marketing can get better results with minimal effort? My Powerfully Effective Marketing Sessions can help you start off — and keep you — on the right track:
(Why struggle needlessly when you can get expert affordable mentoring and have fun attracting clients easily?)
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