Last Updated Sunday, May 2, 2021
Selling more to customers you’ve already won via add-on sales and repeat business is one of the best ways to boost your business’s revenues and profits.
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Are you selling a single product or service once to each customer? If so, you could be missing out on a substantial source of additional profit in your business. Increasing the number of products any one customer buys and increasing the frequency with which they buy – along with upselling them to more expensive items – are well-established keys to profitability – and if you’re not using them, you should be.
Consider these two scenarios:
You run into the supermarket to pick up a $1.99 loaf of Italian bread. To get it, you have to go through the produce section where you spot some basil plants for sale. You throw one in your basket. You find the Italian bread and remember you are getting low on paper towels. Those are on the other side of the store. On the way, you see your favorite brand of yogurt is on sale, so you put a couple of containers in the cart. You grab the paper towels and head for the front of the store to check out. As you get in line, you spot an end cap with soup on sale and put three cans in the wagon. When you check out, the $1.99 you planned to spend has mushroomed to $28.97.
Next, think about what happens when you go into a store to buy a new smartphone. Once you’ve chosen the phone, the salesperson will ask if you want a screen protector and a case for the phone, insurance against accidental breakage or loss, and perhaps try to get you to add another device and data line to your current plan. Oh, and by the way, the new phone doesn’t come with a charger or earbuds. You’ll need those, too. By the time you’re done, you’ve added anywhere from $50 to several hundred dollars in extra purchase to the already pricey smartphone.
You don’t have to sell groceries or phones to boost your business sales in the same way. In fact, you don’t even have to sell to consumers or sell physical products. The strategy works no matter what you sell.
Why back end and add-on sales are so profitable
New customer acquisition is expensive. Depending on your industry and other factors, marketing costs may be anywhere from 1 to 12% or even more of your budget. Even when there are no out-of-pocket marketing expenses (you acquire new customers through networking, or cold calls, for instance) there’s still a marketing cost involved in acquiring new customers. That cost is the cost of your time, plus any fees for joining networking groups and attending events. If you charge customers $75 an hour for your services and it takes you 5 hours of networking or calling time to land a new customer, you’ve “spent” $375 worth of your time to get that one customer.
That acquisition cost significantly reduces your profit on the first sale to a customer. But, when you get the customer to buy add-on items or remarket to them later via email or some other low-cost method, you reap extra profit at minimal marketing expense.
For instance, say you are selling an item for $70. Your customer acquisition cost is $25, and your cost of providing the product or service is $25 (total cost, $50). You make $20 each time a new customer buys that product or service. Over the course of a month, you have 100 new customers who each buy that one $70 product. Your profit for the month would be $2000.
Now, imagine you offer a second product to those customers at the time of purchase. Say, only 50 of the 100 customers buy. The second product costs you $35 and sells for $80. That adds an extra $45 in profit to those 50 sales, which adds up to an extra $250, more than doubling the profit you would have had if you didn’t offer anything additional to the first-time customer.
Why it’s easy to sell more to the same customer
Any customer who buys a product or service from you is likely to be a qualified prospect for buying related products or services from you. For starters, they need or want what you sell. So, you don’t have to qualify them. Additionally, if they are in the process of making a purchase, they may have researched the purchase and believe they are making the best possible choice. Thus they are inclined to trust your company and feel confident that, if they buy add-on products from you, they will be the same quality as the product they researched.
Once a new customer has received and is satisfied with the purchase, they are even more inclined to trust your company and be more receptive to making repeat purchases of the same item or buying other things your company offers. In fact, as long as you stay in touch with the customer and they continue to be satisfied with your products or services, they may continue to buy from you year after year.
What else can you sell?
Retailers can easily suggest a sports tee to go with leggings and display small add-on items such as headbands or shoelaces near the register. Restaurateurs know to suggest drinks, appetizers, and desserts as add-ons. But what can other businesses add on?
To answer that question for your own business, consider what related products or services customers would want or need. Lawn services, for instance, get customers to spend more by offering spring and fall yard cleanups, trimming shrubbery, putting down mulch, and other services in the summer. In the winter, some get further sales from their customers by offering snow removal services and putting holiday lights on homes.
Teachers and instructors can sell the tools and materials students will need to use. Someone who offers group training sessions could sell advanced training courses or mastermind group participation. A website developer could sell ongoing site maintenance, or if they have the skills, SEO services.
Finally, if there’s nothing else you yourself can offer, you may be able to gain additional income from a customer by referring them to trusted vendors who will pay you a commission for referrals.
The bottom line
Every business has to market continually to bring in new customers. Without new customers, a business withers and dies. But the secret to ongoing profits is to get those new customers to buy additional products and to make repeat purchases.
© 2021 Attard Communications, Inc. All Rights Reserved. May not be reproduced, reprinted or redistributed without written permission from Attard Communications, Inc.
About the author:
Janet Attard is the founder of the award-winning Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets. Follow Janet on Twitter and on LinkedIn
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