Increasing the average dollar sale is the 4th step in the 5 ways chart we spoke about in an earlier blog. Let’s see what “Average Dollar Sale” means!
Average dollar sale is a simple metric that helps you to determine how much you earn from your customers. It allows you to create average figures for sales over any period.
You just need to know two things:
- Total revenue generated over the chosen time period.
- The number of customers you sold to during that time period.
- Divide the revenue by the number of customers and you have your average dollar sale.
For example, imagine that you’ve generated $255,000 of revenue for the month. During that month, you serviced 1,000 clients.
The calculation would look like this: $255,000 / 1000 = $255 per customer.
It’s an important metric to have because it tells a simple story. You’ll compare your average dollar sale against the price of your products to see how effective your sales efforts are.
Let’s assume that your average product costs $100. In this case, the average dollar sale above would be a great result. It suggests that you’re selling over 2.5 products per transaction to each of your customers.
However, if your average product costs about $300, this suggests that you’re not maximising your sales efforts. More customers buy your lower priced products than the $300 ones. How can you change that?
Follow these five tips, all of which have proven results, to improve your average transaction price.
1. Present additional related products
Once a customer has made a decision to purchase something from you, they have overcome there own objections and are psychologically more amenable to an additional purchase, especially if the next item is less than their already committed purchase. The most famous example of course is McDonald’s “do you want fries with that?” It works.
2. Offer an upgrade
Most businesses have premium products or services. When you’re at the movies, the concessionaires always ask if you would like to upsize to a larger drink or popcorn –with good reason. These incremental upcharges can significantly add to the top line and it costs nothing to ask. Consider what your business could offer that will provide additional value to the customer.
3. Increase your prices
It may seem counter-intuitive, not to mention scary, but don’t be afraid to raise your prices and avoid discounting to bump up your profitability. If you discount 10 percent, you have to sell 22 percent more of your product to maintain gross sales.
4. End prices with “9”
Why does Wal-Mart charge $25.99 instead of $26? Why were people willing to pay 99 cents for a song on iTunes? It lowers sales resistance. There is magic in, and numerous studies to support, the power of 9.
5. Provide contrasting pricing
I love this strategy. If you’ve ever walked into a luxury goods store you’ve seen some jaw-dropping pricing. Nearby, there will be spiffy items that are expensive but seem reasonable next to those “you’ve got to be kidding” prices. Nothing is cheap or expensive by itself – only in comparison. You may not even intend to sell the more expensive item but sales of the less expensive, but very profitable, item will be greater because of the contrast with the very expensive items.
Following these tactics will help you harness the power of leverage and allow you to increase your business efficiently and effectively.
Sources: Sheila Kloefkorn , ActionCOACH