4 Strategies To Increase Your Average Revenue per Customer
by blackwoodimpact
The Benefits of Increasing Your Average Revenue Per Customer
Part of a Chief Revenue Officer’s (CRO’s) core responsibilities is to spearhead synergistic strategies that maximize growth from a marketing, sales, and operations standpoint. CROs have many tactics to choose from when it comes to increasing revenue. But one of the most effective methods is to focus on your existing customer base.
Numerous reports and studies have proven what marketers have long known; acquiring a new customer can cost at least 5 times as much (or more) than getting an existing client to buy from you again (1). Totango conducted a survey of companies that showed that respondents invested only 21% of their marketing budget on existing customers. Interestingly enough, 61% of those same respondents reported that repeat customers represented a majority of their revenue(2).
Clearly, investing in generating repeat business from existing clients is financially rewarding. Choosing to increase your average revenue per customer has many benefits, the chief being spending less on marketing to new prospects. Another great benefit is depending on how your products or services are manufactured or delivered, earning more may just be a matter of using what you already have without requiring additional time, labor, or raw material costs. You may only require a few strategic tweaks to repackage your products and services so that your customers immediately recognize the increased value and have no problems with investing more with you to get it.
The biggest challenge you will have is deciding which path your company should take to reach your revenue peak. Four strategies I believe will provide the sustainable increases you are looking for are the following: increasing your pricing, selling more of your best sellers, cross-selling/upselling, and improving your market penetration rate.
Strategy #1 – Increasing Your Pricing
The fastest way to increase revenue is to increase your prices. Do you know how a small incremental increase of 5%, 10%, or 15% will impact your revenue? You can easily find out with our Growth Opportunity Tool. While it is a little fun to play around with the numbers and watch them grow in a model, in real life, it may have a different impact. An abrupt price increase could overnight express your existing clients to your competitors. So here are some strategic approaches you can take to raising your fees.
For starters, you can offer your increased rates only to new customers while grandfathering existing clients into your old pricing forever. Alternatively, you can give existing clients a lengthy advanced notice (i.e.: 6 months) that a price increase is coming along with an explanation of why. Be sure to clearly communicate the benefits they will be experiencing along with the increased rates.
Another approach can be to increase the value of a popular product or service. It may be a little tougher to get existing clients to pay more for the same product or service. But if you have made significant enhancements and your product now has better features or more bonuses, your existing clients might be more apt to opt at a higher price point. A great “best practice” is to poll your existing customers to gauge their interest in new features and how much extra they would be willing to spend for them. If there is a demand for enhanced versions of your products and services, that would be a good sign that your clients might support at least an incremental price increase.
Strategy #2 – Sell More Of Your Best Sellers
Another great way to increase revenue is to sell more of what you already sell the most of. Your top sellers are popular for a reason. Conduct a customer satisfaction survey to learn more about why your clients were attracted to your most popular products or services. Find out what they value most. Then, put some more resources behind your best sellers.
Start by re-deploying your sales team. Identify who is the best at selling your best seller and have them focus exclusively on selling that product. Our Growth Opportunity Tool can help with that. You can also ask them to share their selling success secrets with the rest of your sales team. You may also consider hiring more salespeople to focus only on your bestseller. Finally, consider how you can make your best seller even more valuable to customers. Use the feedback gained from your clients to re-craft marketing messages that will be virtually guaranteed to speak to your ideal prospects. Make the enhancements and increase the price.
Strategy #3 – Cross-Selling and Upselling
One of the most successful techniques for helping clients spend more with you is by offering them related products or services that complement what they’ve already purchased. Cross-selling is offering additional products or services that can enhance the customer’s experience.
Online retailers like Amazon and GoDaddy are excellent at this tactic. Just when you have finished placing items in your shopping cart, a message pops up asking if you would like to add additional, related items to your purchase. On every product page, Amazon shows pictures of other products “frequently purchased together” with the item you are looking at.
The tactic works equally well off-line too. Have you ever gone to McDonald’s and was asked, “Would you like fries with that?” Or were you offered another food product to try? If you have ever checked out having spent more than you originally intended, that is cross-selling in action.
Upselling is offering your clients to upgrade their existing product or service with a package that delivers them even more benefits. This technique is a staple for service-based providers who can often offer more value without a huge increase in time or resources to deliver. Online sellers make use of this strategy, often offering a limited time discount on higher-tiered service. Even though they are not getting the full value, they have still successfully increased the amount of revenue they are getting from their existing customers.
Think creatively about your products and services. Here are some questions to guide your planning. What offerings can you group together that your customers will see at an increased value? Can you offer an even higher tier to your services? Are you open to offering a higher tier of service at a fractional increase in prices?
Strategy #4 – Improving Your Market Penetration
Rate A solid revenue growth plan will focus on both the short and long-term results. The previous strategies are ones that can be thought through, implemented, and generate visible results in as soon as a quarter or two. A great long-term strategy to consider is improving your market penetration rate. This won’t be the fastest to execute and see results on, but it is extremely effective over the long term.
In this scenario, your CRO and Marketing team will work closely together. You need to invest in clearly defining and understanding your niche. Identify the demographics and psychographics of the prospects who are most likely to want and need what you offer. Then, see if you can further identify micro-niches if necessary.
When you have a clear understanding of your target audience, you’ll want to enhance your marketing and branding messages to speak just to them. When you are able to clearly pinpoint exactly what they respond to, you will see an upswing in revenue. You will easily be able to sell more of your best sellers (Strategy #2). You might even employ Strategy #1 with new customers. You should always offer cross-selling and upselling opportunities at every transaction, not because it will make you more money, but because the increased value will make for a happier customer.
One resource you can have on your revenue enhancement journey is our Growth Opportunity Tool. It is an Excel model with live formulas to help you imagine various scenarios and plan out your strategies. It is absolutely free to download your copy today.
