Are you selling each consumer a single product or service? If that’s the case, you could be missing out on a significant source of additional earnings in your company. Increasing the amount of things a customer buys and the regularity with which they buy – as well as upselling them to more expensive items – are well-established keys to profitability, and you should be leveraging them if you aren’t already.
Consider the following two possibilities:
You dash into the grocery to get a loaf of $1.99 Italian bread. To obtain it, you must first visit the produce area, where you will find basil plants for sale. You toss one into your shopping cart. You locate the Italian bread and realize you’ve run out of paper towels. Those can be found on the opposite side of the store. On the way, you notice that your favorite brand of yogurt is on sale, so you load up the basket with a few containers. You grab the paper towels and proceed to the store’s front counter to pay. As you wait in line, you see an end cap with soup on sale and fill your wagon with three cans. The $1.99 you intended to spend has ballooned to $28.97 when you check out.
Consider what occurs when you go to a retailer to purchase a new smartphone. After you’ve decided on a phone, the salesperson will ask whether you want a screen protector and a case for it, as well as insurance against accidental breakage or loss, and may try to persuade you to upgrade your current plan by adding another device and data line. Oh, and the new phone doesn’t come with a charger or earbuds, by the way. You’ll also require them. By the time you’re done, you’ve spent anywhere from $50 to several hundred dollars more on a smartphone that was already expensive.
You don’t have to sell food or phones to increase your company’s revenues. You don’t even need to sell to customers or sell tangible goods. It doesn’t matter what you’re selling if you use this method.
Why are back-end and add-on sales so lucrative?
The cost of acquiring a new consumer is high. Marketing costs might range from 1 to 12 percent of your budget, or even more, depending on your sector and other circumstances. Even if there are no out-of-pocket marketing costs (for example, recruiting new consumers through networking or cold calls), there is still a marketing cost associated with getting new clients. That cost includes your time as well as any fees associated with joining networking groups and attending events. If you charge $75 per hour for your services and it takes you 5 hours of networking or calling time to land a new customer, you’ve “spent” $375.
Your profit on the first sale to a customer is dramatically reduced as a result of the acquisition cost. However, if you can persuade the customer to purchase add-on items or remarket to them later by email or another low-cost technique, you can make more money with less marketing expense.
Let’s imagine you’re selling something for $70. Your customer acquisition cost is $25, and your product or service cost is $25 (for a total cost of $50). Each time a new customer purchases that product or service, you earn $20. Over the course of a month, you acquire 100 new clients, each of whom purchases that single $70 item. Your monthly profit would be $2000.
Imagine you’re selling a second product to those people at the same time they’re buying the first. Let’s say only 50 consumers out of a total of 100 make a purchase. The second item costs $35 and is sold for $80. That adds an extra $45 in profit to those 50 transactions, bringing the total profit to $2,250, more than tripling what you would have earned if you hadn’t offered anything extra to the first-time buyer.
Why is it so simple to sell to the same customer over and again?
Any consumer who purchases a product or service from you is likely to be a qualified prospect for future purchases of similar items or services. For starters, people require or desire what you offer. As a result, there’s no need to qualify them. Furthermore, if they are in the middle of a transaction, they may have done their homework and believe they are making the greatest decision imaginable. As a result, customers are more likely to trust your organization and believe that any add-on goods they purchase from you will be of the same high quality as the product they investigated.
When a new customer receives and is satisfied with their purchase, they are more likely to trust your company and will be more willing to make repeat purchases of the same item or purchase other items your company sells. In reality, as long as you keep in touch with your customers and they are happy with your products or services, they may buy from you year after year.
What else do you have to offer?
Retailers may easily recommend a sports top to go with leggings and place tiny accessories like headbands or shoelaces at the cashier. Restaurants are well-versed in recommending drinks, appetizers, and desserts as add-ons. What, on the other hand, can other businesses add?
Consider what comparable items or services clients might desire or need to solve that query for your own firm. In the summer, lawn services, for example, encourage clients to spend more by providing spring and fall yard cleanups, shrubbery trimming, mulching, and other services. During the winter, some businesses increase revenues by providing snow removal services and putting up holiday lights on clients’ homes.
The equipment and equipment that students will need to use can be sold by teachers and instructors. Advanced training courses or mastermind group membership could be sold by someone who provides group training sessions. If a website developer has the abilities, they could sell ongoing site maintenance or SEO services.
Finally, if you don’t have anything else to offer a customer, you might be able to earn extra money by referring them to reliable vendors who will pay you a commission for referrals.
Last but not least
To bring in new clients, every firm must market continuously. A firm withers and dies without fresh clients. However, getting those new clients to buy other products and make recurrent transactions is the key to long-term revenues.