Need to increase profits in your business? Here are six ways to increase profits that are designed to push your thinking by expanding upon proven best practices. Any one of these ideas can immediately improve your bottom line.
1. Identify Your Ideal Customer
Brainstorm the profile of an “ideal customer” no matter what your business. Get a profile in your mind of your ideal customer — the customer that you most would want to serve, and paint the picture of what their life might be like. Invent details seemingly unrelated to what you sell or what service you provide. Knowing the detailed profile of an ideal customer for your particular business allows you to create the best marketing messaging, store environment and operations details that will yield the highest response and profits for the least amount of effort and time. It reveals ideas for improvements you might make to more closely match customer desires.
Your ideal customer is the customer your business is designed to most perfectly serve; that subgroup of customers that is both most profitable and easiest to deal with. For example, if you are a grocery store, is the most profitable customer the stay-at-home mom or the after work 7-9PM rush crowd? If you are a coffee shop, think of your ideal customer in terms of where they are arriving from when they visit your business and what their general occupation might be. If your coffee shop is downtown in a large city this ideal customer will be very different than if you are in a small town. If you are a car dealership, identify aspects of your product line that match the lifestyle of your most profitable customer. A Cadillac dealership has a vastly different ideal customer than a car dealer selling Mazdas.
Once you have your ideal customer profile in mind think outside the realm of just your business to what messages might attract this person. Matching advertising messages with details of your ideal customer’s life is how to target an audience. The downtown coffee shop might advertise “3 Minute Coffee” with the message that most customers wait no more than 3 minutes to receive their order targeted at busy professionals. The used car dealership might advertise prior customer testimonials or relaxed financing terms whereas the Mercedes dealership might advertise luxurious aspects of their service department.
Identifying your ideal customer allows you to narrow your focus to a smaller set of prospects that are more likely to buy from you profitably. It saves you time and effort by not going after a less profitable market and allows you to better serve those customers that are much less effort. This generates positive testimonials and word-of-mouth advertising. Focus on a smaller target audience of your ideal customer shrinks effort and increases profits.
2. Originate Customers Under a Microscope
For many businesses, getting new customers is costly and requires much effort. Often new marketing campaigns provide little more than a learning experience. As a small business, use the ideal customer profile you developed to isolate marketing campaigns that speak directly to this target audience and then track results meticulously. If you don’t know the precise effectiveness of a campaign or ad design you could end up paying for it over and over for years.
Many businesses advertise because they believe they have to or the phone won’t ring, not realizing that a large percentage of their advertising is ineffective. There’s an old saying in marketing: “Half of all marketing dollars are wasted but no one knows which half.” Methods to track marketing effectiveness (called marketing analytics) measure the effective “half” of your marketing and allow you to not spend money on the half that is not effective.
Online retailers have the most sophisticated marketing analytics tools in history. These tools tell them how their customers find them, where their customer lives, what time they purchased, what pages they came from and much more. This information is used to hone ever more effective, exactly targeted marketing messages. If you’re marketing online (such as buying Pay-Per-Click traffic for a website), make sure to have solid marketing analytics tools in place and make sure you know how to use them. These tools are like eyes or even binoculars compared to potentially “blind” offline marketing much of which still exists today.
Offline analytics techniques are much lower tech but still effective. Get multiple toll-free phone numbers or put special “department codes” on direct mail to track results of specific advertising efforts. Further, take some of the lessons of online customer acquisition and retention and see if there are ways to apply them to your offline business. Social networks are pushing companies to become more transparent and human in dealing with customers. Use testimonial letters or success stories from the use of your product or service to increase your “transparency” and humanness both on and offline.
Never spend a dollar on marketing that doesn’t have a measurement mechanism attached to it. I’m often amazed at how many ads I see published week after week with no apparent tracking mechanism. How do businesses that pay for direct mail, display or even online advertising without the ability to measure their effectiveness know they are not wasting their money? Further, if an ad campaign is producing customers but doesn’t have a precise way to measure how many and from where, how can a business test new ad campaigns to see if one can be developed that would perform better? You must attach some unique piece of information to all the marketing you pay for so you can drop or change campaigns with poor results. Always test. “Marketing” is another word for “testing.” This one tip alone can save you thousands of dollars in wasted advertising.
3. Fire Low Value Customers
Once you know your ideal customer, this next step should be easier. Get rid of the bulk of your customers that are not ideal. These are the ones that take most of your time to deal with and produce a fraction of your revenues. As counterintuitive as this sounds, this can actually help your business grow.
In most businesses, 20% of the customers produce 80% of the revenue. That means that 80% of customers produce the other 20% of revenue. Get rid of that bottom 80% and design your marketing to acquire more of the ideal customer that is in the 20%. Take a close look at the entire profile of all your customers and look for ways of reducing the time-wasting low-average-revenue customers and attracting more of the top 20% that are really paying the bills. All businesses have some clients that cost more to deal with than they pay. Your job is to identify who these customers are and ways to dismiss dealing with them at all.
This technique is loosely related to your own time management. Take a close look at what you spend most of your day doing. Are you offering a low-margin product or service that soaks up a lot or even most of your time? I knew a tailoring business that added cleaning services. Going into the laundry business kept the owners from timely delivery of tailoring jobs and probably produced far less revenue. Additionally, most complaints came from cleaning customers. Make sure adding services to your business really adds “frictionless” revenue — revenue that doesn’t require a lot more of your time, energy or resources to acquire. The higher the level of complaints or problems in selling a product or service, the higher the “friction” and the lower the after-cost revenue.
4. Problems and Complaints are Gifts
Having said that there is valuable information in the dissatisfied or even disgruntled customer that you can use to immediately and effectively improve your business. You can’t hire a consultant or expert that can tell you what a disgruntled customer can tell you.
Customers have less patience than ever. Competitive businesses often have customers operating in “one strike, you’re out” mode. Amazon.com lost my purchase history and I couldn’t reach them on the phone. I don’t do business with them now; one strike, they’re out in my mind. There are just too many alternatives these days.
If your business is in any way a “repeat” type of business as Amazon.com’s is, think about the lifetime value of a customer, not just their value from a current sale. Can you afford to lose high average revenue customers? Often just one mistake is all it takes.
All companies should have well-defined business processes to provide customers with a clear interface to voice complaints. Gathering information from and listening to your customers lets you quickly find ways to grow your business, especially listening to those with complaints. When dealing with such customers realize that there are ten or more others out there with the same complaint. Really listen to them (assuming they’re rational) and make the resolution to their issue a priority immediately. Then turn the situation into an advantage by following up and showing the customer how you’ve resolved the problem. The customer will likely be pleasantly surprised and will give your business word-of-mouth advertising from that point on.
Some online businesses have turned the concept inside out. Retailers like Newegg.com and Buy.com have deep product review content for most products they offer and they publish both positive and negative comments. Even if negative comments about a product have to do with the retailer they publish it. This is commendable and untraditionally transparent, but studies have shown that 39 percent of those who bought from sites with reviews cited the reviews as the primary factor that influenced the purchase [1] and negative comments are needed for believability.
Are there ways you can communicate the resolution of a problem to your customers such that it increases trust in your customer base? For example, a furniture store receiving complaints about late delivery could advertise “24 hour delivery guaranteed.” An auto dealership sees that someone complained about the state of their waiting room could clean it up, install or add entertainment electronics, offer Internet access and advertise the improvements. Online retailers can install or enhance a “support ticket” system. In today’s economic climate of CEOs and politicians that seem less trustworthy than ever, leveraging the resolutions to your customer complaints can help your business stand out, and the information learned from complaints can be invaluable to increasing your profits.
5. Up-selling, “Proximity” Selling and Premium Product Offerings
I’ve had my car repaired at two different local mechanic shops in as many years. In neither case did the person writing the estimate look at any part of the car other than what I mentioned. I don’t know much about cars, and was looking for advice I could trust. These auto repair businesses had a major opportunity to upsell me yet neither one did. Missing upsell opportunities is like leaving unclaimed money on the table.
Analyze your average customer in whatever business you’re in and push your thinking to visualize their total experience with the purchase of your product or service. What are the things that “go-with” your product or service? A graphic artist might team up with a web designer to have a more full service offering. If you sell carpeting and flooring for homes can you in some way partner with a local home improvement or interior design business? Even further, can you get your business located in close physical proximity to other meaningfully related businesses to make the customer’s job easier?
Are there products or services seemingly far removed from what you offer that may be linked in the customer’s mind? Starbucks sells coffee, coffee makers and CDs of music presumably suited to listening to while drinking coffee. How far can you stretch the “constellation” of products or services around your product or service? Visualize all aspects of your customer’s use of your product. Offer other products or services related to the use of your core product(s). A pet store near the beach can sell kites and Frisbees, a golf supply shop can offer golf cart repair, a divorce lawyer could team up with a grief counselor, an online retailer offers related products or services during or after the checkout process. Stretch your thinking around the use of your product to get ideas for expanding what your business offers.
In the stream of your ongoing customers, some of course have more money than others. Of those that are on the “more” side, a few have a lot of money. Can you offer more “levels” of your product or service? If you are an author on a popular topic, make up a “Live Presentation” or “Personal Consultation” product for a premium price far above the price of your book. What product can you create that is what you would consider very high priced? If you are a restaurant business, add banquet services if you have the facilities, catering if not, then consider creating catering packages like a catered wedding package where you offer not only the food but wedding planning services as well. If you are retailing online, adding a premium product and emailing your customer base can turn your business around overnight. Offering premium products often can increase your reputation among all your customers.
Try to create the highest priced product you can think of. There’s an old saying in sales, “if you fish for minnows, you end up with a bucket of minnows but if you fish for whales you end up with a boatfull.” If you have a loyal customer base as most businesses do there will be a few customers that will purchase even the highest priced premium products from you.
6. Reduce Employee Theft
70% of theft in many retail businesses can be attributed to employees, yet many of these companies spend up to four times more on deterrents to catch the 30% coming from outside the company. Reducing employee theft involves focusing on employees around the place and time of an identified incident, then rallying support from them in a “neighborhood watch” fashion. Interview each employee separately and explain the business consequences of employee theft to encourage their support, consequences like the eroded ability of the business to promote and give raises and that 30% of all business bankruptcies occur because of employee theft.[2] Employees know each other better than any investigator ever could, and often employees know who is acting differently or suspiciously. Simply asking each employee separately who they think stole a particular item often will yield a near-unanimous suspect.
Employee time theft is much more insidious and costs US businesses billions. In 2006 employee time theft was estimated to be $137 billion. Time theft is a problem for every small business and is becoming more prevalent.[3]
Employee time theft during work hours is the most insidious of all. It can range from too many or lengthy personal phone calls to surfing non-work related websites to late arrivals and early departures. Aside from the small percentage of people you will likely hire that are just inherently lazy, the level of an employee’s satisfaction with their job and their employer is the strongest determinant of whether and the amount of at-work employee time theft.
At-work time theft can be reduced by altering your relationship with your employees. Managers should provide employees with goals and the resources to achieve them. As such, employees are encouraged to work toward goals especially if some monetary or other reward-based incentive is attached. Goals can be explicit measurement of a unit of work like number and amount of sales for salespeople, but also could be creative such as rewarding employees for customer praise.
Explicit measures like time and attendance tracking can help both employer and employee. Setting up an employee time tracking system or employee time clock can provide the employer with full attendance transparency, and one product by Kneson Software called Clock Real Time shows when employees arrive and depart for breaks, lunch and the entire day immediately. Time tracking software also helps employees by keeping accurate and exact record of their attendance thereby eliminating the possibility of wage disputes. Attendance goals can be created and time tracking software like Clock Real Time can measure and report employee performance. Attendance incentives can be used to motivate improved attendance behavior by employees and clearly report those with the best attendance for reward. More information about Clock Real Time can be found at www.ClockRealTime.com.
REFERENCES
1. “What Works on the Web,” Gifts & Decorative Accessories 108.3 (March 1, 2007): p14.
2. Bassett, James W. “How to Solve Employee Theft” Jewelers Circular Keystone 180.2 (Feb 1, 2009): p.51.
3. Atkinson, William. “Stealing time. (theft in workplace).” Risk Management, Nov 2006 v53 i11 p48(4)
Tags: attendance incentives, employee time tracking software, increase profits, make money, time and attendance software, wage disputes