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4 Ways to Grow Your Business—#3 Increase Your Average Sale

First things first

1. Win new customers of the right type.

2. Increase the number of times they deal with you.

3. Increase your average sale or ‘transaction value.’

4. Improve the effectiveness and processes within your business to ensure achievement of the first 3!

Most business owners focus their marketing energy on winning customers. However, getting your customers to come back to your business more often is vital to the long-term health and profitability of your business. As is increasing your average sale. And that’s what you’ll learn more about here.

You see, people often won’t know or won’t think about other items or services that might add to the first product or service they intend to purchase and so they’ll need you to make suggestions. Suggestions that would increase the average sale for your business.

After all, customers come to you for help and guidance. It’s important, then, to let them know about all their options, including additional services or products that can add to their original purchase.

Every time you fail to do that, it’s a sales opportunity gone begging!

You paid good money to get that phone to ring or that customer to inquire. It’s important to make the most the effort for your customers and your business. And most businesses frequently let the customer come in, select what they want, and leave. Many do so without making any suggestions about what might add to the original purchase. 

In fact, increasing your average sale makes that transaction all the more profitable. You see, the cost of winning that new customer was already covered in the original purchase item. Anything over and above this is a plus—profit for you.

So what is your ‘average sale’ or ‘average transaction value’?

Simply, it is total value of sales divided by the number of customers you dealt with.

For example:

You might have turned over $4,286 in the last week. On checking your records, like your order book or the number of transactions recorded for the week on your register, you might have sold to 62 customers. 

This would mean $4,286 divided by 62 is your average sale for that week. So approximately $69.13 is the average sale.

Consider for a moment what happens to that weekly sales figure if, by better merchandising or cross-selling additional items, for example, you could increase that figure to $74.60. That’s only an additional $5.47 to each customer, not much by any stretch of the imagination. And yet it takes your weekly turnover from $4,286 to $4,625.50. 

Now, this difference ($339.50 per week) might not seem like much of a difference or anything to make a big song and dance about, but think again.

Calculate that difference—$339.50 by 52 weeks—and it’s nothing to sneeze at! 

Go ahead and do that now. In this example alone, it means an additional $17,654 in turnover. Who knows what it could mean for your business!

This is even more important when you consider that $17,654 is almost entirely profit.

You paid to get the customer to your business anyway and you already had the staff to serve them for their original inquiry, so the only additional cost is the hard cost to you of delivering the extra product or service sold at the same time as the sale for the original purchase! Making that additional figure—just $5.47 and $17,654—a very profitable addition indeed!

Once again, there are many, many ways to get your customers to spend more when they deal with you. To make it easier for you, we’ve given you some key strategies and some topics you could be working through with us.

Some easy ways to increase your average sale

Often the best place to start when it comes to increasing the average transaction value is to identify ‘cross-selling’ opportunities. 

Cross-selling occurs when you sell other products or services from your product or service range in addition to your customer’s initial inquiry. Suggestive selling is another term often used here, that is, an additional item or service is suggested to the customer at the time of sale.

To help you create cross-selling opportunities in your business, go to every major product or service and ask:

‘What else can we offer the customer to go with this purchase?’

‘What else could we offer that would add value and make the use of this product or service better?’

‘What else, when coupled with this product or service, would help them get the most out of it?’

From here you can create ‘cross-selling checklists’ for each item. These checklists would give your team members guidance about what best to suggest to customers. 

It should also become compulsory, a performance standard for every single sale.

For instance, McDonald’s make a point of cross-selling every single time, don’t they? They ask, ‘Would you like fries or a drink with that?’ Or ‘Would you like an apple pie with your burger?’ McDonald’s knows full well the financial value of cross-selling and is not about to take any chances. So much so that if a team member fails to cross-sell 3 times within the same shift, they’re reprimanded, retrained, or in some cases fired!

Another way to increase your average sale is to upsell inquirers from, for example, the budget item to the middle-priced item.

One great way to do that is to offer your products or services in 3 or more tiers, along the lines of ‘good,’ ‘better,’ and ‘best,’ or ‘gold,’ ‘silver,’ and ‘bronze.’ Your ‘good’ product or service might actually be your budget product or service, the one for the price-conscious buyer. Your ‘better’ product or service is the one you actually want the majority of people to buy, and your ‘best’ will appeal to those who are happy to spend a little more for a lot more!

Or, if you have a broad range of products or services, always make a recommendation on 3 that could suit. Then go through and explain that the first is good, the second is better and probably ideal, and the third is the best in that range. 

Statistics show most people will select the item in the middle. 

Another way to increase sales is to ‘package’ together products and products, products and services, or services and services. In packaging items or services together—that is bundling them into one single purchase—usually you add value to the customer.

For example, an electrical retailer might offer 6 free blank videotapes with any purchase of a video recorder. Instead of discounting the price by 20% with any purchase, a manufacturer might offer installation valued at $245. Or a health professional service-based business might package together a health assessment and 8 sessions for the price of 6. All this is designed to make your products and services more attractive and to add value to the customers. Better yet, your average sale will increase.

Following on from that, merchandising can also increase your average sale. Signage, ticketing, presentation, and packaging; establishing particular sales points within the premises; mapping out (walking) traffic flow through stores; and having some easy-to-sell items by the register or your office can be other great merchandising ploys to increase your average sale.

Having educational information about your products, services, or business available to your customers could build their confidence in you and so increase the sale value. As could having various sales tools on hand, like a list of testimonials from happy customers, references, the ‘6 questions’ test, and more.

In fact, it’s a great idea to develop a sales system. That is, a way of selling that constantly involves cross-selling, upselling, and packaging. In this way, you know that every single team member is following the same system.

Surprisingly, on-hold messages about your business can spark a customer’s interest in something else you do and as such increase the average sale. For example, imagine calling a business about a specific product or service. Unfortunately, you’re put on hold for a moment, but you learn about other products or services offered by the business. Products or services you may not otherwise have known about.

And finally, the all-important issues of margins and price.

To increase your average sale, you must have a full grip on your margins and what they really mean to your back pocket. Avoiding discounting and price wars is all-important to maintain and increase your average sale. 

Consider these facts uncovered by extensive research and you will have to agree.

If your present margin is 35% and you reduce your prices by 10%, to produce the same profit as you would have BEFORE the discount, your sales volume must increase by a staggering 40%. That’s not to make any more money, only to get back to where you were BEFORE you offered the discount!

And let’s face it, a measly 10% discount isn’t going to excite an extra 40% in sales, is it?

Conversely, if your present margin is 35% and you increased your prices by 10%, your sales may reduce by up to as much as 22% to produce the same profit. Chances are this simply wouldn’t be the case, either.

Let’s explore why a little further.

If your business provides better quality advice and products or more detailed services than competitors, it’s not apples for apples, is it?

This means you may be able to entertain the thought of increasing some of your prices. It’s your higher level of servicing over a lower level available from competitors. Most times, people only shop on price because it’s been how we’ve been trained to find what we want. 

Statistics show only 15% of the market actually purchase on the basis of price.

Oddly enough, sales can sometimes increase with a price increase. Your products or services seem more valuable all of a sudden! This is particularly true if you create sales and marketing tools to educate customers about the value they’ll receive.

Obviously, increasing your price could be a great way to increase your average sale and could be worth further investigation for your business. 

Even on briefly reviewing these ideas, you may have discovered some ideas you may not have tried in your business. To really increase your average sale and grow this profit point for your business, it will be critical that you really learn, understand, and implement these ideas in full. 

Your Action Plan: Increase your ‘average sale’ by reviewing these ideas in more depth