P6M3 Increasing Customer Spend

The full title of this module in Revenue Regeneration is…

Increasing Customer Spend and Transaction Profits

It’s always worth remembering that it’s profit and contribution which is important and not the deceptively sneaky and potentially misleading top line sales number.

The Third Growth Factor

  • More customers * more purchases * higher contributions on transactions
  • Based on
  • Focusing in on customers needs and wants
  • Building a strong trusted relationship
  • A bigger share of your customer’s wallet

Sad Words… Missed Opportunities

Customer “I have just bought the new Super widget 379 from Widget Offers Ltd”
You “But we sell those. You could have got it from us.”
Customer “Sorry but I didn’t realise that you sold super widgets as well as the OK widgets we’ve been buying from you for years. You never said.”
Rule – Assume customers don’t know what you sell unless you keep telling them

Higher Value Purchases

  • Upsells & cross-sells – first Hidden Profit module
  • Better quality version of the same product– from standard to premium – Glazer Kennedy
  • Promote existing products the customer could buy
  • Introduce new products and services the customer could and should buy (plus alliances)
  • Expand across the family e.g. gym membership – single, couple, family

Introducing Extra Products

  • After first sale – Jay Abraham concentric circles
  • Ongoing – Peter Thomson Magic Matrix
  • Grid of customers by products & services
  • Who buys what? Where are the gaps?
  • Fill in the gaps -messages, sales calls,
  • Special offers & free trials
  • Discount coupon on high value spend
  • Limited availability – quantity & time
  • Catalogues

Customer Product Grid

The Customer Product Grid is one of my very favourite techniques for taking a fresh look at a business or for spotting profit potential in a new business.

Quite simply, you look at how your customers buy different products (or if necessary product groups and types).

And then focus in on the numbers.

First the gaps – what don’t customers buy that they should?

Second look for inconsistencies – where a big customer buys lots of one product but little or none of another, despite the fact the two products go together like strawberries and cream.

I’ve been using this Customer Product Grid for over twenty years but I love what Peter Thomson (yes he is another of my mentors) calls it – the Magic Matrix!

Because that’s exactly what it is.

It shines a light on your opportunities for extra profit… just like magic. I really wish I’d thought of the name Magic Matrix.

There are many different ways you can use the Customer Product Grid or Magic Matrix and I’ve given the clues away at the bottom of the diagram.

First, there are the numbers you put in the Customer Product Grid.

Sales are useful, interesting and easy… and they’ll certainly show up the gaps.

But a contribution / profit number is even better and a contribution and contribution margin % better still.

Completed Customer Product Grid

Let’s take a look at an example.

I’ve chosen to enter the contribution in money and an estimate of the profit potential from that customer. You’ll be getting just about all the business you can from some customers for a product… but other businesses who use you to stock up if their regular supplier lets them down.

I’ve blanked out the Not Applicables and the Not Interested to help focus on the easy battles and the low hanging fruit.

Then I’ve highlighted the top targets for extra profit with the green shading and I’m recording where we are in terms of marketing message – or potentially sales process/pipeline.

Fine Tuning Your Business

  • Grade customers – what is an ideal customer and how close are they to the ideal?
  • Grade products – which products are very competitive, competitive and weak?
  • Target great customers and best products
  • Fire bad customers and weak products
  • Eliminate weaknesses, make strengths better
  • Remember 80/20 rule

    Customer – Product Competitor Grid

    This is another very revealing exercise if you are competing in a market with a small number of competitors who buy regularly. I’ve done this with businesses selling steel and electrical products.

    You take each customer and estimate which competitor has what share of the customer’s wallet across the different product groups. If all the competitors sell the same products, you don’t need to go down to product levels.

    Step by step you build up a picture of your market and you can identify weak competitors to pick off and strong competitors to avoid… or at least act cautiously around. You don’t want to cause a price war.

    Mapping Your Customer Product Portfolio

    Throw away any ideas that all customers are good… unless you are very lucky.

    Some stink the house out with manipulative buying that squeezes profit out of your business, disruptive work practices that turn a “must do urgent” order into a “hold that back” piece of made especially for them inventory and pay so late, even your bank manager cries.

    Let’s map out your customer-product portfolio and see what it looks like.

    Managing Your Customer Portfolio

    • Where is the profit?
    • Best products and customers have highest profit margins – where is the big money?
    • Worst products uncompetitive unless heavily discounted, worst customers very demanding.
    • Can worst products be improved or replaced with products from alliance partners to stop a competitor gaining an “in”?
    • Can you afford to fire your worst customers?

    What To Do – Existing Customers

    • Prepare magic matrix of products & customers
    • Identify opportunities for cross-selling & first focus on the best
    • Decide offers – price, incentive, risk reversal
    • Prepare marketing message / sales script
    • Test & improve
    • Keep following up, train & systemise

    What To Do – New Customers

    • Identify logical opportunities for cross-selling & upselling based on first purchase
    • Build into your customer opportunity sheet – see Pillar 5 Step 1 Qualifying
    • Prepare sequence of educational messages and offers for upsell/cross-sell path
    • Test and improve
    • Check on satisfaction, listen to needs and add to sequence as necessary.

    Other Ideas For Increasing Average Transaction Profit

    • Re-position the business as more upmarket
    • Increase prices and takeaway unnecessary discounts – incentivise sales staff on profit
    • Create irresistible bundles
    • Increase units of purchase / minimum order
    • Point of sale promotions for impulse buys
    • Cut variable costs – better buying, efficiency
    • Make it easy to buy – browse, lists, suggestions, payment, make “new” easy to see

    No comments yet... Be the first to leave a reply!

    Leave a Reply