by Dr Greg Chapman
When they ask: “Do you want fries with that?” McDonalds knows that about a third of their customers say yes. The marginal cost of the fries is small. Their overhead costs, which are quite considerable, the restaurant, staff and equipment have not changed because of this additional sale. The cost of the fries, the potatoes and packaging, is a small fraction of the selling price of the fries, so almost the whole price of the fries goes straight to the bottom line, all achieved by asking a simple question at the time they were making a sale.
The fries in this example is a cross-sell. “Would you like to super-size that?”is an up-sell. McDonalds also package their meals, so you could just buy a burger, or a happy meal which includes a drink as well as fries, and a salad.
In each of these examples, McDonalds has increased the Average Value per Sale.
In most businesses there are opportunities to increase the value of your offer. If you don’t own a burger franchise, here are some other ideas. Many stores like to offer extended warranties on their products.
Does the product also require batteries? If someone is buying an mp3 player, would they like to get a set of external speakers to use without the headphones?
A shoe store could also sell laces, polish and socks.
An accountant could also offer quarterly reviews for small businesses in addition to their annual tax return.
A car mechanic could offer a detailing service and a pick-up and delivery service.
The key to making these strategies work is to find the opportunities first, create the packagesand determine the product associations.Clearly identify the benefits of each of your packages so that you can offer the customer choices of value.
The accountant could just offer their tax return service, or their Small Business Financial Success Plan. The mechanic can offer their standard silver service, or their gold service which includes detailing and pick-up.
Once you have created all these value add opportunities, you could also offer your staff incentives to sell these highly profitable add ons. The high margins from these incremental sales allow the business to offer generous commissions.
Create a menu of these offers and packages and train your staff in how to sell them. Monitor the results to see the impact on your Average Value per Sale. It may be necessary to adjust the packages and prices to maximise the increase in your Third Profit Driver.
May Your Business Be – As You Plan It!
1. Identify the cross sell and upsell opportunities for your business.
2. Create packages for different levels of value with pricing that demonstrates this value.
3. Incentivise your staff to increase the value of each sale.
Subscribe to this Blog for more Small Business news and tips.
Share this article: The Third Profit Driver - Increasing Average Value Per Sale
Over to You. What do You Think? Post Your Comments Below. [Note to those seeking a free ride on our google ranking, blog spam will be deleted,but genuine contributions will be happily published.]
Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.
Promote Your Business on our Facebook Fan Page
To send this article to a friend, click on the envelope below.