Jan 26, 2015 | Marketing, Sales
Avoid These 3 Mistakes and Increase Your Average Dollar Sale
My focus is helping you grow your business and achieve your goals – be that reaching a certain profit level, a quality of life or the ability to sell the business and retire. For any of these goals, creating a consistent, high level of profits is critical. So we’re on step 3 this week of reviewing the 5 Steps to Increased Profits framework – focusing on one of the five steps each week.
As a review, the five key profit-generating metrics are: Lead Generation, Conversion Rate, Average Dollar Sale, Average Number of Transactions, and Profit Margins.
I’ve highlighted the five keys in the following equation:
Lead Generation
x
Conversion Rate
=
# Customers
x
Avg. Dollar Sale
x
Avg. # Transactions
=
Revenues
x
Profit Margins
=
Profits
This week we’re focusing on Average Dollar Sale – this is the average amount of each transaction in your business. If you focus on increasing your average dollar sale, you won’t need to spend more on generating more leads. It’s a much more cost-effective way to increase profits. Over the past 20 years in which ActionCOACH has been working with business owners, we have developed over 70 ways to improve your average dollar sale.
It’s easier to increase your average dollar sale than you might realize. The main reason is that this happens with an existing customer-one that already knows you, likes you, and trusts you.
Because it’s at least six times easier to sell to an existing customer than a total stranger, here are some common mistakes to avoid:
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You assume your customer knows every product or service you have available.
Most customers are doing business with you in one area and would be pleased to give you the business in a related product or service if they only knew about it. For example, the same insurance agent that handles your car insurance can also sell homeowner’s, boat, motorcycle, RV, etc. Every business has multiple products that complement existing ones and deepen the relationship. All you have to do is ask: “By the way, did you know that we also have…?” You will be shocked at how many say: “I didn’t know you did that!” On average 5% of customers would give their business to a friend. Why not get that 5% increase from your friends?
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You fail to offer an upgrade.
Again, many businesses, including yours, have premium products or services available. At the point in time that your customer decides to purchase, it only makes sense to offer the opportunity to upgrade. Fast-food restaurants proved the wisdom of asking a customer: “Would you like to supersize that?” or “Would you like ____ with that?” A few years ago when a client operated a supermarket, we participated in a scratch-off lottery ticket promotion. For two weeks the cashier asked every customer: “Would you like a scratch-off lottery ticket with that?” Our ticket sales increased exponentially versus the previous period. And it costs nothing to ask. What could you offer your customers as an additional up-sell?
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You offer what you think your customer will buy even if it’s less than what they really need.
This is where “pre-qualifying” goes awry. It is usually a function of you or your Team’s limiting belief around sales. I remember the wise advice of a professional fund-raiser who said: “Always be willing to ask for too much.” The reasoning here is three-fold. First, you just might get the higher amount! Second, you compliment your customer by implying that they are financially capable of a higher level. Last, you give yourself a “fall back” that is still a good value for both of you. Increasing your average dollar sale takes some commitment, training and practice.
Make the commitment to improve your business, invest the time and effort to train your Team, and remember that professional salespeople need practice to keep their skills sharp. The effort you put into this will pay dividends both short and long-term.
Jan 19, 2015 | Marketing, Sales
Increasing Profits with Sales Conversion
My focus is helping you achieve your business goals – be that a certain profit level, a quality of life or the ability to sell the business and retire. For any of these goals, creating a consistent, high level of profits is critical. So last week we started reviewing the 5 Steps to Increased Profits framework – focusing on one of the five steps each week.
As a review, the five key profit-generating metrics are: Lead Generation, Conversion Rate, Average Dollar Sale, Average Number of Transactions, and Profit Margins.
I’ve highlighted the five keys in the following equation:
Lead Generation
x
Conversion Rate
=
# Customers
x
Avg. Dollar Sale
x
Avg. # Transactions
=
Revenues
x
Profit Margins
=
Profits
This week we’re focusing on Sales Conversion Rate – this is the percentage of your leads that you convert into customers. If you focus on increasing your sales conversion rate, you won’t need to spend more on generating more leads. It’s a much more cost-effective way to increase profits. Over the past 20 years in which ActionCOACH has been working with business owners, we have developed over 80 ways to improve your sales conversion. Here are my top seven:
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Written Guarantee:
What are your customer’s key frustrations in buying from you, or from your industry? What could you guarantee that would eliminate or reduce the risk of that frustration? For example, a hairdresser that guarantees ‘you will like your haircut and so will 98 per cent of your friends’. For an attorney the guarantee could be a fixed price — You’ll get for patent filed for $5k.
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Use Sales Scripts:
These are absolutely essential whatever business you’re in. Once you find the right (or very close to right) way to sell something to someone, why change it? Write down exactly what you said, and then do that every time. And make sure your team does the same. Every customer is different, but the objective is always the same: match the product to the buyer. You should have scripts for everything – from answering the phone to saying good-bye.
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Define Your Unique Value Proposition:
This one is critical. If there’s nothing different about you, people will only buy from you because of convenience, or price, nothing more. Added to that, you’ll never be able to raise your prices; if there’s anyone doing it cheaper, people will buy from them. You need to work out what is special about you, and then articulate it clearly and communicate it loudly.
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Benefits and Testimonials:
Create a sheet (and a page on your website) that you can give to every person who meets with you. It contains the 4 most important benefits of your product, or the 7 reasons yours is a better choice for them. It should include testimonials – that is, direct quotes from your past customers about how good you are. A video testimonial is the most powerful way of communicating all that you do for your customers. If you say it about yourself it’s a lie, if someone else says it about you, its true.
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Use a Defined Sales Process
In order to determine the optimum way to sell to your customers, you have to create a process to do it consistently. Only then can you find the best way. If you’re always shooting from the hip, or your sales team is all doing something different, you’ll never know what works the best to generate the most profit.
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Provide Something Extra:
To seal the deal, throw in something they didn’t expect – something that gives them the perception that they are getting a great deal. Then place a time limit on it, which pressures them into making a decision. Make sure it’s something that they will value highly which doesn’t cost you very much — i.e.: high perceived value, low cost to you.
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Provide Quality Products:
People will buy quality when it’s affordable and they perceive a high value. Sell value not price. By providing the best, you put yourself a cut above everyone else.
To learn more about the 5 Steps to increased profits, come to one of my seminars or workshops.
Dec 15, 2014 | Finance, Sales
Discounts vs Profits – How discounting affects your bottom line.
Do you have (or have you ever experienced) one of those salespeople who thinks that giving a discount is the easiest, quickest way to make a sale? Of course, they may be right, but what about the profit (your profit) they’re giving away?
If your product has a profit margin of 30% and your salespeople give a 10% discount to make the sale, you’re losing a massive, one-third (33%) of the available profit!
During a seminar for the buyers of a large retail group with branches all over the country, an attendee shared the following tactic: “My job is easy. I just let the salesperson make a full sales presentation. I ask questions and listen to their explanations. When they’re finished, I simply say, ‘I’d like to place an order with you, but your prices are too high…’ and I then simply sit there and enjoy myself, because the once-confident salesperson suddenly doesn’t know what to do or say next. With much less conviction and enthusiasm, they may repeat the benefits and features of their products, but most of them get in to see me by giving me a lower price in the first place. Whatever new price they offer, I usually respond by saying, ‘You’ll have to do better than that!’ And more often than not, they do…in fact, do better than that! I get lower prices by just sitting there, enjoying the game!”
If you are selling, or have others selling for you, you must protect your price and your margins. Teach your sales people to talk about the unique benefits of buying from you, and not to hesitate or stutter when a buyer insists on a lower price. Start negotiating! Start using tactics to hold firm on your prices. Sell value…perceived and real
Here’s Why:
Do you think it’s possible to work 50% less and earn the same income from selling? You bet it is! Here’s how:
Suppose your company sells pumps, with selling price of $10,000 per unit. Assume that your net cost per pump is $7,000. That means that the net profit on each pump would be $3,000. If you sell ten pumps at the full price, the net profit for your company will be $30,000.
Compare this with selling ten pumps, but this time at a discount of ten percent. The total selling price for ten pumps is then $90,000. The net cost for ten pumps remains at $70,000. The net profit has decreased to only $20,000 compared to the original transaction $30,000 where no discount was given. With only a 10% discount you’ve just lost one-third of your profit.
If your company continued to sell at ten percent discount, then you’d have to sell 15 pumps to achieve a net profit of $30,000. Here’s how it looks:
Sales Discount Gross Sales Net cost Profit
10 0% $100,000 $70,000 $30,000
10 10% $90,000 $70,000 $20,000
15 10% $135,000 $105,000 $30,000
What lessons can you learn from this example?
A ten percent discount means your company must sell 50% more units (15 instead of 10) to earn the same profit dollars.
A ten percent discount means someone has to work 50% harder to earn the company the same dollars.
By not giving discounts, in essence the company can “work” 50% less and earn the same income.
In spite of this, you might still think, “But, if I don’t give discounts, I’ll lose sales! It’s an industry norm to give them…everyone does. If I don’t give discounts, they’ll go to the competition!”
And you may, of course, be right. You may lose a few deals if you don’t give discounts… but the good news is you can afford to…and still make the same or more profit. OR, you can work on your Unique Selling Proposition so that your customers see the value you uniquely offer, and are willing to pay for it.
Dec 8, 2014 | Sales
How to become a Sales Master …
Being a business owner requires many different skills but one of the most important is the ability to sell. However, the majority of people in business do not consider themselves to be ‘natural’ salespeople. Even those that come from a sales background may not consider themselves great sales people and even those that do, will eventually have to build a sales team of people.
For those of us who want to become better at sales, or teach our team to do so, there is one tool that can not only help us become more confident with selling but allow us to consistently replicate what we do. So as we grow we have more and more people getting the same great results as we have. That tool is creating a successful sales process.
If you’ve ever watched the US Masters Golf Tournament, you’ve seen a successful, repeatable process. Although these golfers obviously have a lot of talent, they also have a process that they follow to ensure they are successful and they practice over and over to ensure they can perform consistently well. You wouldn’t expect Phil Mickelson to be able to come out and perform at his peak if he hadn’t swung a club for months. As Arnold Palmer once said “the more I practice the luckier I get”. So do professional golfers practice a different thing every time they go out? Of course not; they find what works for them and refine it until it is in their subconscious and seems effortless. Sometimes we forget about the time, effort and dedication professional sports people put in to become as good as they are.
Well, the same is true for mastering sales. Yes, there is an element of skill to becoming a great salesperson, but like all skills you can learn them, it just means that some people learn faster than others, but if you have the determination and discipline, these will more than compensate for any lack of skill. We break becoming a master of sales down into four simple stages:
The first stage is to understand what selling is about. Many people have the belief that sales is a bad thing because they hate being sold to and have probably had a bad experience of a bad salesperson in the past. Jeffery Gittomer says “People like to buy but they do not like to be sold too”, so if you change your sales belief to one of “professionally helping people to buy” then suddenly sales can take on a whole new meaning.
The second stage is to improve your skill at sales, and like all skills there are two ways to do this and the best way is to use both. Education, via reading; courses; DVD’s and CD’s and real life practice. “Just Do It” as NIKE says.
The third stage is to build your sales process and the best framework I have found for my clients created by one of the best sales trainers in the world, Tom Hopkins, and comes from his book “How to Master the Art of Selling”.
The sales process involves 4 steps, Build Trust, Find the Need, Show How You can Help and Hurry to a Close ,and has to be carried out in that order.
If you have not built Trust with your prospect then you will never sell to them, and this is the feeling you get when you are being sold to. How to build trust is a topic I will be covering in a future article.
Need has to come before Help, because if we do not truly understand what the prospects needs and wants are then how can we be sure what we are offering to help with is actually the right thing. The only way to really know the need is to ask questions and listen. Have you ever met a sales person who rabbits on how wonderful their product is before they have asked you a single question?
The penultimate step is to successfully educate and communicate how your product/service can help them meet their need. It might be fantastic but if they do not understand then they will not buy.
Only when you have completed all three of the previous steps can you attempt to close the sale, but close it you must. If you work hard on steps 1-3, helping them buy will be easy and natural, but if you forget then all that work is wasted, you rarely get a second chance.
The fourth stage to becoming a master is constant and never ending improvement or Kaizen as the Japanese call it. In your sales process, your main feedback source will be your Key Performance Indicators, such as conversion rate, number of transactions, average per sale. So you need to constantly analyze these figures and then set new goals and plans to improve them. Sometimes you’ll need help to see what is going right and what is wrong and this is why more and more business people are following the lead of sports stars and getting themselves a coach who can provide independent and professional feedback. As the old saying goes “you cannot see your own bald spot”.
So if you want to build a great business you have to build a great sales process, the question is when are you going to take action and become a Sales Master!
Nov 10, 2014 | Marketing, Sales
Holiday networking, should I or shouldn’t I?
As the holiday season is upon us (I know!!), many of you are wondering if this is a good time to market your business. After all, isn’t everyone preoccupied with shopping and waiting until next year to make business decisions?
Let’s put one myth to rest forever: “The holiday season is a bad time to market your business.”
I want to suggest that the holidays are the BEST time to market your business – especially if you’re a professional service business owner.
Why?
Because even though networking is a good thing to do the rest of the year, it’s real natural over the holidays.
I have had more folks over the house in the last two weeks than I have for the whole year. What a great opportunity to meet old friends, clients and associates, discuss how the year went and share your goals for the coming year.
So how can you take advantage of holiday networking? Here are a few tips:
1. Accept all invitations. Remember that this opportunity to meet with so many people won’t come around again for another year. Also look around for holiday events at your professional organization, chamber of commerce or other business groups.
2. Go to the party prepared. Bring plenty of business cards and a pen. Make it a goal to make substantial connections with at least half a dozen people. In other words, a connection means a one-on-one talk that’s ten minutes or more.
3. There are two types of people you’ll connect with at a party (no, not drunk or sober) – people you know and people you don’t know. For those you know, ask sincerely how they are and how business has been this year. For those you don’t know, be prepared with your “elevator speech”. This is a description of how your profession may benefit them, not your job title.
4. Spend more time asking questions and listening than talking. This is really THE KEY to effective networking at parties. “How has business been going? How have the changes in the economy affected your business? What are your plans for growth in 2015? What kinds of clients are you looking for these days?”
5. Have a strategy for getting in touch. What good does it do if you connect with all these people and they never hear from you again? Don’t fall into the rut of suggesting you should get together for lunch sometime and never following up.
6. Follow-up with your new prospects after the party, if appropriate. If some topics came up that indicated there was a reason to talk further, give them a call in a few days with a very specific purpose. Make a specific follow-up plan and stick to it.
7. Keep an open mind. If you’re in the right place at the right time, you could make some very profitable business connections. If nothing happens right now, at least you’ve sowed some seeds for the future.
Happy Holidays! Get your New Year started off right by coming to GrowthClub planning session in December.
Oct 21, 2014 | Sales
Do you want fries with that? Or, how to add-on profits to your bottom line without spending a dime.
Most sales experts agree there are a certain number of key steps to take in making a sale; typically the steps are:
- Greet the customer (Acknowledge, qualify & open the sale, etc.)
- Probe to discover needs & wants (Ask questions, sales interview, etc.)
- Recommend product (Demonstrate, make alternative suggestion, etc.)
- Trial close (First attempt to open relationship, etc.)
- Handle objection (Overcome objection, re-state needs & wants, etc.)
- Ask for the order (Close sale, open the relationship, etc.)
- Farewell and follow through.
There are a variety of nuances In each of these seven steps which are important to ensuring you win the sale, gain a happy customer and maximize your profits.
One challenge is that, too frequently, the sales person and the prospect see it as an adversarial relationship.
Often an inexperienced or eager sales person is so relieved to receive a ‘Yes’ that it doesn’t even occur to him or her to make sure that the customer has everything they need to gain full benefit and satisfaction from the purchase. What a shame to all concerned! How many times have you left a store with a purchase that was exactly what you thought you wanted but then realized you didn’t pick everything you needed to complete your task. Let’s look at some examples:
- A camera with a small memory card
- A tennis racquet with no case to carry it in
- A computer without a backup system or the right software
- A can of paint with no brush, drop cloth or masking tape
- A new outfit without matching accessories
- And yes, a McDonald’s burger with no fries
By creating a script and/or checklist for every sale at your shop, you’ll not only help your customers to have a better experience but you’ll add dollars to your bottom line.
The first step is to understand that it’s OK to want to help your customer get the most benefit from doing business with you. It doesn’t help your customer if you let them get out of the store with just paint, when you know that they also need brushes, rollers, a drop cloth, masking tape, paint thinner etc..
McDonalds uses scripts that any 16-year-old can master. When you order a big mac and a coke, they’ll ask “do you want fries with that?”. They ask that question because 3 out of 10 people say yes. And fries are the second most profitable item on their menu, after soda. If you order the fries with your meal, guess what they ask? “Would you like an apple pie with that” and so on.
What about your business? Other than the main item you sell, whether it’s a service or a product doesn’t matter, what else can you offer them to create a better experience for your customer and more profits for you? You have to know what your most profitable items are, and you have to truly understand your customer. By asking qualified questions and learning the exact needs of the customers, both you and your customer will be more completely satisfied with your relationship.
Find out more about how to increase your average dollar sale at ActionClub.
