There are three ways to increase your revenues online (and offline for that matter)
You can increase your prices, you can get existing customers to buy more or you can get new customers. There is a lot that can be written about getting new customers but for this post I just want to focus on increasing prices and getting existing customers to buy more from you. I want to make a few simple observations that may help you with your planning.
Obviously the easiest thing to do from the three above is to increase prices. Many businesses would be scared stiff when asked to increase their prices. The automatic question would be
“How much business would be lost?”
Well if you understand the figures, it may surprise you. For example let us say that your margins were 20% i.e. for every €100 worth of goods you sold, you would make a profit of €20……
Now imagine that you increased your prices by 20%. You sell that basket of products for €120. Your cost of sales is still €80 which gives you a margin of €40.
You have now doubled your margin. But back to the question of how much business would be lost due to higher prices. In this example you doubled your margin. That means that you would need to lose over 50% of your business for this to lower your overall profits. Think about that. Fewer customers would probably also mean fewer headaches.
Now the figures will differ depending on how profitable your niche is but the fact is that most companies do not think strategically about pricing. They look at what their competitors are charging and automatically assume that their prices should be in and around those prices. They fail to test the market and determine what the market will truly pay.
Now for my next point let us assume that you are in an extremely price competitive niche and there is no scope to increase prices. What about getting more from existing customers?
In the online world there is always much talk of average visitor value, of average time on site and other metrics to ascertain the actions of the average visitor. As you will see from our other blog posts, we are big fans of data and how it helps to measure and improve key metrics on a site. However there is one important issue to point out. You should not focus your sales and marketing efforts on the average customer because the average customer does not exist. Your customer base will fall into various segments. Most likely you will have a small amount of very loyal customers and then a large cohort of people who buy from you infrequently. So where should you concentrate your efforts in your business? It is obvious that you should spend the maximum time, money and effort on ensuring that the loyal customers are happy and taken care of. These are the people who will come back over and over again. Most businesses obsess and spend the majority of their efforts in trying to acquire new customers while overlooking the fact that the real value is in their existing customers. Whether you are looking for new customers online or offline, the cost of new customer acquisition is continuing to rise. You need to ensure that you are making use of the asset that you have. These are the people have already decided to buy from you. You have already gotten them to overcome the barriers to buying. You have already taken them from being a lead, to a prospect and finally to a customer. For the small amount of extremely loyal customers, no expense should be spared in making sure that they are happy. Taking care of these people should really pay dividends and add to your bottom line over time.