Want less revenue? No. I thought not!
Every year, in pretty much every company, the clarion call goes out to “increase revenue”. Clearly, this is an absolute business imperative.
But just how do you grow your revenue?
Surprisingly, there are just 4 ways:
- Increase the number of customers you serve
- Increase your average transaction size
- Increase the frequency of transactions per customer
- Increase your prices
The best companies build winning sales strategies around one or more of these principles.
So how do they do it and what can we learn?
1. Increase the number of customers you serve
The 3 most popular ways of growing your customer base are:
Market share expansion, product range development and customer retention.
If you have competitive advantage through scale or a disruptive business model like Amazon, you’ll want to drive market share expansion hard, forcing your less efficient rivals out of business.
Just 10 years ago every high street in Britain boasted a book shop. Now Amazon dominates book retailing and has fundamentally changed the way that written content is bought and sold.
If you have a strong and stable customer base and are capable of product and/or service innovation, then product range development could be just right for you.
Again, using Amazon as the example, the business took its online model from books into audio and then all manner of FMCG markets, innovating its operating model as it up scaled.
If you have a product or service susceptible to churn, it also pays to work harder to keep the customers you already have.
Take Sky. If you have ever tried to leave at the end of your contract, they will do everything possible to retain your business. Or Netflix. If you cancel your subscription you can be sure to get a reactivation offer.
2. Increase your average transaction size
It is no secret that the smartest way to do this is by upselling and cross selling.
Perhaps like O2 you have premium offerings that you can persuade customers to upgrade to, either at point of sale or even later in the usage cycle? After all, who really wants an I-Phone 5 when your friends are all getting the latest generation I-Phone 6?
Or maybe you have similar products in your range that your customers could also buy from you?
Then be sure to offen them alongside your “hero product”.
If you have less frequently sold items, encourage sales through bundling. HP does this well by promoting matching accessory packages with their laptops.
3. Increase the frequency of transactions per customer
Many companies find it easier to increase order frequency rather than order value.
If you have a product with a high volume or value of repeat sales in a very competitive market place, it may pay you to introduce a loyalty programme to encourage future purchases.
BA Airmiles (now the somewhat maligned Avios) is perhaps the most famous UK example of this.
Or perhaps you have infrequent purchases with potential future upgrades, then you might consider changing your business model from one off purchase to subscription.
Microsoft has successfully one this in an attempt to lock users into its operating systems at a time of increasing competition.
Where you have variable demand and high fixed costs for a series of events, it may be a sensible strategy to offer “multi buys” or season tickets.
This has the added benefit of improving cash flow for marginal businesses such as professional football clubs and theatres.
4. Increase your prices
If all else fails, raise your prices.
Where you have a product or service with inelastic demand, inertia or high switching costs it might be easier than you think to simply raise your prices to increase revenue. BT are masters at this strategy.
For many businesses increasing prices won’t be viable without enhancing the underlying value proposition. Perhaps you can emulate internet service providers such as Virgin Media by discontinuing certain cheaper services and replacing them with more highly featured versions which cost little more to provide, but for which your existing customers will happily pay a lot more to receive.
Boosting revenue is not easy, but as top companies from Amazon to Virgin show, where there’s a will there’s a way.