By Randy Gunter
It’s always gratifying when clients have record-breaking sales performances. Although we would love to take all thecredit for this, it really is more about their leadership and attitude than anything else.
For most companies, the end of ta quarter becomes a measuring stick on their success, and also signifies a time to reevaluate their business objectives and strategies. Most are looking at one main goal: increase profits. For that reason, I’d like to share basic thoughts on increasing profits that should work for most businesses. I’m doing it in the context of a retail establishment, but the principles are the same for business-to-business (B2B) or other consumer oriented businesses (B2C).
And, to be honest, there is nothing ground-breaking here. This is all common business knowledge, but being reminded of basic business principles is probably a good idea when planning out the rest of the year.
Ways to increase profits
There are really only three ways to increase profits:
- Charge more
- Decrease costs
- Sell more
Charging more for your products can increase profits if you maintain the volume that you sold before. The problem comes in that by charging more you could decrease the numbers of units sold. However, sometimes charging more can be a strategy that changes perceptions and can actually increase sales. Pricing is always a little tricky. I’ve always felt that you should err on the side of charging more, you can always create deals for people afterwards.
Decreasing costs is another way to increase profits. If you can sell as much as you did before, but it doesn’t cost you as much to provide those products, basic math means that your profits will go up. Here are some ideas for decreasing costs to think about as you review your growth plans…
Going Green/Saving Money
Can you cut down on expenses by using less electricity? Energy efficient LEDs use a fraction of the wattage as incandescents. (We recommend buying “daylight” bulbs as they simulate natural sunlight better.) How about zone heating or timers to lower the heating of unused space during off hours during the winter? Think about electrical and heating expenses in this next year’s planning. It’s good for the environment and for your bank account!
Staying open longer
This may seem counterintuitive, how is this decreasing costs? Well think about it this way, you are paying for every square foot of your building. Anytime it is not open, it cannot pay for itself, so this is a cost. If you stay open later, you simply need to sell enough to pay for the costs of staying open at that time plus a little profit. This obviously could be included in our “sell more” section, but wanted to include it here to get you to think about every square foot as a cost.
Okay, this is going to be controversial, I know it before I even write it. And please believe me that I don’t recommend paying anyone anything but good, competitive wages. I believe that you attract quality people by having a reputation of treating your employees well, and in turn, your business grows with hard-working people that are happy to work for you. But, sometimes you can find some people that are looking for a chance to prove themselves and are willing to work for a little less just for the opportunity. Have you considered hiring someone with a disability? How about a retired person? Looking beyond the ordinary talent pool can offer benefits in many ways.
Looking at how you can decrease other costs can involve some creative thinking. Can you buy more from a supplier and get a better price because of it? Can you partner up with another business and pool your buying power, getting a better deal because of it? Can you buy used products (and recycle, another green initiative) allowing you to save money? Although we like the idea of buying locally, we all have to face the fact that the world has changed to more of a global community, and with the internet about anything can be purchased from anywhere. How does this affect you? Does it help you?
As a marketing company, we look for ways to decrease our client’s costs. Above I talked about pooling with other companies to get better deals on supplies, can you also partner up with another company and have a joint promotion, splitting the costs but both benefitting from the marketing effort? Or, can PR be more effective than ads? Can you gang print and save money on printing? Anyone that has been to my seminars knows that I’m always looking at ways to save money on your marketing. (And I typically share these ideas when I meet with people.)
All in all, there’s probably something that you are doing that can be rethought to bring down expenses. Can you buy a trash compactor and have garbage pickup decreased? Can you use new technologies to lower your phone bills? The act of exploring your expenses and brainstorming cost-saving ideas is probably worthwhile for every business.
Okay, this is the part I like because it most directly relates to what we do…marketing! When you increase sales, good things happen. At least as long as you can maintain your level of service for your customers.
In order to sell more, there are certain things you can do:
- Increase traffic/exposure
- Offer incentives
- Offer new opportunities/products
- Sell more per transaction
- Make the offer/Ask for the sale
You can increase traffic in two ways:
- Bring in new customers
- Increase buying opportunities for your current customers
The most common way that people create an uptick in sales is to bring in new customers. This is typically done with marketing. People won’t buy from you if they don’t know who you are. Bringing in new customers starts with defining who your target is (who is likely to buy), educating them on who you are and what you sell, and creating a compelling reason to stop by and give you a try. This is the “what’s in it for me?” question (from the customer’s point of view.) We use it as the ultimate test in analyzing whether your advertising and marketing materials are appropriate for your audience.
One of the most overlooked components of increasing traffic is simply giving your current customers reasons to shop more. A loyalty program is one way to increase their patronage. Let’s face it, they’ve already experienced your store and like it, so let’s give them reasons to shop more frequently. Also, don’t forget that your current customers are a good resource for bringing in new customers.
When most people think of incentives, they usually think of “sale pricing”. That is certainly a way that gets people’s attention—price and value is important. But don’t stop there, we like to think of “incentives” as a way to influence the decision to buy, where the buyer may not have made the purchase otherwise or are doing so in a more favorable time frame for the seller. Think creatively. Can you offer a special opportunity for customers where they can hear from an expert in the field and participate in a special event at your store? (Think cooking class—where you are then going to sell them all the fresh ingredients for the dish that they just learned to cook.) Or how about an extra gift when they purchase something else? Or a special offer when they bring in their friends to shop at your store? Incentives don’t just have to be discounts, what items of value can you offer your customers beyond just a discount?
Another way to increase sales is to offer something you haven’t offered before. Typically this is something that fits the needs of your customers while not straying too far from the brand image of your store. We don’t think that a coffee shop should start trying to sell computers. But if their customers come in to use the free wifi while having a cup of coffee, and there are quite a few people that come in by themselves, selling cool headphones to use with their computers might be something of interest. What is it that your customers want that you can provide for them (and be profitable while doing it)?
Sometimes you simply have to educate people on what your product is in order to get them to buy. Why is what you are selling better than the competitors? Or maybe the competitor’s product doesn’t even play into it, why buy your product rather than buying nothing at all? Back to our mantra: “what’s in it for me?” or “why should I care?” We need to educate our customers. Education can be done in many ways: create a blog or podcast, provide sampling, provide printed educational materials or videos. Don’t buy in to the notion that people don’t read anymore; people are more educated about products than ever before. You have to find a way to get your marketing materials in front of your prospects.
Sell more per transaction/make the offer/ask for the sale
It has become a punchline: “Do you want fries with that?” Although everyone jokes about McDonalds, no one is joking about their success. The idea of increasing sales at the register is a smart idea. It’s not exclusive to fast food: “do you need batteries”, “do you want to purchase a warranty”, “this tie would look great with that jacket”. The idea of suggesting suitable additional items is a way to increase sales. And when done correctly, I think people are genuinely appreciative. When it becomes a problem is when sales people are forced to utter a phrase that they aren’t comfortable saying. So when the salesperson (or McDonalds’ counter person) doesn’t believe in what they are saying, it comes through as a chore to them and then becomes annoying to you. But, if your people truly believe that they can offer something of value, and your customer would appreciate owning the product that they are suggesting, this is a wonderful way to increase sales and profits.
I recall one time my wife and I were in a store where they were offering a sampling of one of their products. The salesperson was right there when I asked my wife whether she liked the product. The salesperson heard her say she did and he heard my reply that I liked it too. And then he didn’t do anything else. A simple “can I show you where to find the product” or “can I get one and take it to the counter” would probably have made a sale. Instead, we walked around the store some more and forgot about it, leaving the store without making the purchase.
Although it isn’t retail related, a study done in the agricultural world revealed that the number one reason that customers bought a certain product was simply that they were asked by the salesperson to make the purchase. Don’t be afraid to ask your customer if they would like to buy what you’re selling!
I know that everything here you have probably heard before, but I still think a review of these ideas as you look into your growth plans is appropriate. Sometimes we know what to do—we just forget to act on those things that we know, and a reminder is in order.