No matter what you may have heard, there are only four ways to grow any business. As you develop your marketing plan, make sure you develop strategies and tactics which address each of them. The four ways to build a business are:
Get new customers
As we said before, most entrepreneurs focus their time, energy and money here. The reasons they do it are obvious and we’re not suggesting that any company abandon new acquisition programs. Yet, we do advise that you pay more attention to the following three strategies for continued growth… because if your customers are running out of the back door faster than new ones are entering the front, you’ll soon be out of business.
Increase the average transaction amount ($)
Simply put, if your average transaction amount (one sale) is $10.00 search for ways to increase it. You’ll be amazed at how much slight increases will add to your bottom line. One way to do this is by offering natural add-ons to your products, like the famous McDonald’s tactic, “Would you like fries with your hamburger?”.
Increase the number of average transactions per customer
Let’s say that your average customer eats dinner at your restaurant once a month. Now imagine increasing this to twice a month? So, ask yourself what types of things you can do to encourage this behavior, such as offering loyalty discounts, creating daily specials, or providing live entertainment.
Improve customer loyalty
For example, if your average customer does business with your company for six months (before they take their business elsewhere) then increasing their “stay” by even a small amount could result in significantly higher gross revenues. That’s why, in addition to ensuring that your customers are delighted with your products and services as a standard, it is wise to institute solid retention programs aimed at hanging onto the valuable one.
Below you’ll find a 30,000-foot example of how this might look in action. But as you’ll see, it demonstrates how small increases in average customer behavior can have dramatic effects.
Let’s assume the following:
- I am a widget retailer.
- I have just acquired 300 new customers.
- Average Customer:
- 2 Transactions / Month.
- Remains loyal for 6 months.
Thus, I will earn about $36,000 in gross revenues from these 300 customers! (300 customers x $10 x 2 transactions x 6 months).
Now what happens if I …
- Increase the average transaction amount by $1?
Answer: My revenue increases by $3,600 to $39,600, a 10% improvement!
- Increase the average number of transactions per month from two to three?
Answer: My revenue increases by $18,000 to $54,000, a 50% improvement!
- Increase average length of stay from 6 months to 7 months?
Answer: My revenue increases by $6000 to $42,000, a 17% improvement.
- Increase all three by ONE?
Answer: My revenue increases by $27,600 to a whopping $ 63,600 a 77% increase!
This is a very simple, but powerful, model. It clearly illustrates how important it is to find ways to grow your business geometrically with the customers you already have, in short “Mine Your Own Business For Success”