Most successful businesses know that it's not enough to keep bringing in new customers. It's equally important, if not more, to provide more value to their clients to get an edge above the rest of the competition.Looking for ways on how to save money and minimize costs is fine, but all still means nothing if your profits aren't growing. That's exactly what the profit maximizers are meant to do. Stick around and find out where all the money’s at!
What is a profit maximizer?
A profit maximizer is any technique used to increase your customers' average order value and hence instant profit. Marketing every product separately is great and still makes plenty of money in its own right. But if you want to really upscale your game, creating multiple offers for your customers is an excellent way to rake in more money faster.Profit maximizers enable you to squeeze out more value from your current customers and potentially save much more that you would have spent marketing and advertising to get new customers as well as distribution to more customers. This means that even without changing ad spend or increasing product prices, you can generate more income with the same customers you already have. In other words…
Let’s take a look at some profit maximizers you can use on your business today.
1. Upselling
Upselling is a strategy where you pitch a higher-priced, superior version of what your customer has or intends to buy. Apart from being a higher model, the product can also be the same product but with extra added features that add its value. Upselling gives your customers a reason to spend some more while instilling a feeling of urgency, which together work like a charm!Upselling benefits your business by both increasing average order value and customer retention rates. When upselling is done well, customers turn into repeat clients since you’re solving problems they didn’t even know they had!
How to upsell
A study by Predictive Intent shows that only about 4% of customers convert through upselling. Only 4%! This means that the up sell has to be just right if you're to get any upsells at all.To get the most of this opportunity,
- Ensure that the upsell is not more than 25% more expensive than the original product
- Provide a context for buying the upsell. You need to answer the question, why should I buy this and not that?
- Promote your bestsellers, and show reviews of people who have bought the upsell if possible.
- Suggest products that are in the same category. For upselling, you need to make sure that the product solves the same problem as the original product. Otherwise, the upsell is out of the window!
Upselling, however, should be used to give more value to the customer and not to make a profit at their expense. Profits will still come, even more then, when the upsell is exactly what the customer wants.Tesla's purchase page is a great example of upselling combined with excellent UI design to ease the purchasing process.
This method tends to perform about 20% better than its closely related cousin, the Cross-sell, which we shall look at in a moment. But first…
2. Volume discounts
Just like the upsell, volume discounts increase the average order value by prompting the customer to buy more of the core product. It works by offering a slight discount on the bulk purchase so that the perceived value per unit is higher than buying the items individually.
Consumable commodities are a favourite for volume discounts. This is because there's still plenty of room to make a decent profit, and since the customer will still return to make the purchases at some point, you're actually doing them a favour.Bundling simplifies the purchase for the customer - rather than buy individual items, they can all be bought at once. The increased sales volume means your business has a greater profit-making opportunity and may even be an opportunity to eliminate stagnant inventory.Many subscription-based systems are a good example of volume discounts. You'll often see a monthly payment and a yearly one, for which the latter is discounted compared to the monthly charges. Taking a look at Grammarly's pricing, the annual plan offers the best value per month, followed by the quarterly plan and the monthly one.
3. Cross-selling
Cross-selling is convincing the existing customer to purchase another product to go with the product they’re buying. Unlike upselling, where the product is directly related to the product on sale, the cross-sell doesn't have to be so. Of course, the more related the items are, the better the conversion rates will be.Most of the products in cross-selling are complementary. For example, if you've bought a camera, you might need a tripod, lens cleaners, storage devices, battery chargers, you get the idea. The consumer often forgets these items, and cross-selling is a wonderful opportunity to provide value to them, which they didn't know they needed.
To make the most out of cross-selling,
- Ensure that the products are way cheaper than the product being bought. The idea is that these are extra accessories - make them at least 60% cheaper than the original purchase. The cheaper they are, the easier they are to buy.
- Go for related products that are essential but easily forgotten.
Cross-selling can be distracting at times, especially when used on the product page. Removing cross-sell options from the product page has been shown to increase orders by up to 5.6%. Amazon does this very well- the cross-sell is done after the purchase or after adding the item to the cart. It's also important not to promote too many products- increasing the complexity of the decision to be made often means no purchase.When searching for a camera, for example, Amazon conveniently provides just a few accessories you may need right below the core product. Notice that the accessories are way cheaper compared to the original purchase:
Another no-no is hiding preselected extras and hoping the customers will go through with the purchase. Cross-selling should be used to provide value, not con your clientele into buying what they didn't want to. It should be viewed as a gentle nudge to buy something they might need, not an aggressive way to push people into buying more.
4. Product bundling
Product bundling is where several related products are grouped and sold for one price. It works great for both products and services and brings in the most when high-profit products are combined with lesser value ones. Just as with Cross-selling and volume discounts, the customer intention is for the customer to buy more units and hence bring in more profits.Product bundling benefits your business by:
- Increasing order value
- Better inventory control
- Decreased marketing costs
Product bundles can be of various types. Pure bundles, new product bundles and buy-one-get-one bundles are the common ones. Inventory clearance and gifting bundles are also great seasonal bundles you can incorporate into your business.
Adobe Creative Cloud is an example of product bundling. Customers have the option of buying individual items as they see fit. Their bundle price for all their products, however, is where the best value is.
A growing new way to introduce bundling is by introducing free shipping for a set quantity of products. The consumer will be motivated to order more in order to qualify for the option. The best thing is, they build the bundle themselves, and you don't have to guess what works for them.
5. Recurring billing
Recurrent clients keep businesses alive. Converting your customers into repeat ones can improve your profits fast, as a new study done by Rosetta shows. Recurring customers spend more and purchase frequently, the research says.Subscription-based systems are easy to predict-the monthly revenue as well as the average customer lifetime value can be determined using previous data. While these work best with products that need frequent purchase/maintenance, they can also be implemented for almost any type of service, as long as the offering provides value to your business customers.Netflix and Spotify are great examples of companies that use this profit maximization technique.
Final thoughts
You don't need to have a hefty budget to get your sales growing fast. The above methods do not require a lot to put into the market, fortunately. Just a few of these tips, even one effectively applied, is enough to bring a change in your revenue figures.
