Inventory Genius Method: Increasing SalesJul 06, 2023
In this part of the Inventory Genius Method series, I'm walking you through three ways to increase sales. Remember that in these posts, every story you read is real, and every business journey is a lesson for you as you make your way forward on the path to profitability.
Feel free to print these posts and highlight sections you find especially important. Or, you may just decide to take notes. Be sure to write down questions as you have them and reach out to me when you are ready for the next step or to share your realization moments with me. I want to celebrate your wins and applaud your efforts as you work to become an inventory genius!
Now, let's work on how you can increase sales in your inventory based business:
More money on the bottom line. More cash in the bank account. A paycheck for you. All three of these goals can be achieved by increasing the top-line sales.
Let’s be honest. At the end of the day, we all want more money. Whether it is so we can finally pay the bills without stress, or we can replace our past executive income, or we can finally feel we have a legitimate business, we all want to keep more cash. We have seen that a high top-line number doesn’t necessarily mean we have more money to live on. However, once we have fine-tuned our financials and are confident our reports are accurate, it’s time to start back at the top and try to increase our sales in a smart way.
In everything I teach, I like to find the root of the problem and then begin to dissect it, simplifying it down to bite-sized actionable steps.
There are three main ways to increase overall sales:
- Increase conversions
- Increase average ticket (average order value)
- Increase traffic
The first and second are the lowest hanging fruits, so I like to start with those first.
Increase Your Conversions
Selling more product to the customers you have already brought in is far easier and much less expensive than bringing in new customers. Besides, when you take an in-depth look at your current conversion rates or what your current tickets are comprised of, you will likely identify some telling things about your business model. Let’s start with conversions.
Have an e-commerce business? According to Shopify, “your [conversion] rate should be above 3.7%. Anything above 3.7 percent puts you in the top 20% of Shopify stores for conversion rate, and anything above 5.2 percent can put you in the top 10%.”
What about a brick-and-mortar store? You should look to attain a solid 70% conversion rate for in-store sales, which means of every ten qualified shoppers who walk into your store, seven of them should leave with a purchase.
When I first started working with Rebecca, she had a thriving six-figure boutique business with three open locations. We had been working together for about a year, and Rebecca was a star client. She watched the numbers, she organized her finances, she managed her inventory, and she was taking a paycheck.
She had no debt, had cash in the bank account, she was focusing on the right things, and she was ready for more. It was time to tackle her conversion rates.
Sales were good! Product was flowing, and the brand was bringing in growth year after year. After working together for over a year to get her profit flowing, her inventory under control, and her business to a financially healthy place, she was ready for the next project.
She decided she wanted to increase her marketing spend, and in conjunction with that, she felt it was time to truly understand her in-store conversion rate. I had her start counting traffic. By nature, I am a simple person. Technology is great, but so many things can be accomplished just as effectively in a simple way and on a lean budget. So, I literally had her print out a counting sheet, put it on the counters of each of her locations, and told her to make a tally every time a customer walked through the door.
Side note: Often when I bring this idea up to clients, I get some push back. “What if my employees forget to count? What if they count people who don’t even buy?” And the questions go on and on.
Stop right there.
If the first thoughts that came to your mind when I brought up tracking your customers were any of those above, they are excuses for not focusing on the right things, for not doing the right work. Yes, you will have a busy Saturday and forget to count. I did that! Yes, you will have two people on the schedule, and both will think the other is counting, and no one will.
That happened more than once in my stores. Yes, you will have an employee who counts everyone, even the grandpa, the two-year-old, and the nosy neighbor who walks through the store. I even remember the name of my employee who used to do that! But where are you today? What information do you have? “None,” you say? “I have never counted and have no idea who comes in, when they come in, or how many of them come in,” you say? Then start counting those people. Aim for perfection, and you will stay on the hamster wheel. Stop making excuses, start focusing on what matters, and we can pull you up out of that big black hole you are in today.
Rebecca started counting her customers, and she found that reviewing the customer counts along with the total completed transactions gave her a way to measure her return on investment with not only her marketing spend, but also her employee payroll.
Now that you have the information, what do you do with it?
The first step to making any change is looking at the facts.
Emily, from Curly Girl Boutique, loves data. Spreadsheets and information collecting are her friends, so watching her traffic was never a problem. She knew her conversation rates like the back of her hand. Fast forward to baby number two, a maternity leave, and a drop in sales.
Where did all the people go? Was it really a lack in traffic? Since Emily had been tracking her data, she could easily find the answer, and she quickly found that the drop in sales was directly related to her conversion rate.
Since she stepped down as primary sales associate, her team had been dropping the ball, and she could see it in the numbers because she had the numbers! Her conversion rates were 25% when some team members were behind the counter and 60% when others were. She knew she needed to make a change, and she needed to do it fast if she wanted those top-line sales to climb back up. So, she changed the schedule, went back into the store when she was able, and improved her overall conversion rate to be steadily at or above 55%, all in a few short weeks.
If Emily hadn’t been tracking her traffic and completed sales, she wouldn’t have been able to find a solution as quickly as she did.
The first step to making any change is looking at the facts.
If you want to increase your conversation rate and improve your sales, you need to know where you stand today, so you can create a bridge to where you want to be in the future. Let’s look at an example:
You should always keep drilling down for more solutions. There are multiple ways you can increase your current conversion rate:
- Educate the customer about the product.
- Schedule your best salespeople on your busiest days. (Hint: that might be YOU!)
- Remerchandise the store or clean up the flow of your website.
Increase Your Average Ticket
Another way to work on growing your overall sales is to increase your average ticket. Every transaction has a value, and after identifying the average of this value, you can use that data to increase each purchase value, thus increasing your top-line revenue over time.
The transaction value is what the average customer pays when walking into your store or check out in your Etsy shop. If you have never looked at this number, you can find it on the dashboard of most point-of-sale systems. You can also calculate it yourself by taking your overall sales for any given period of time and dividing by how many transactions you had. $35,000 / 120 transactions = $291.67 average ticket
Just like your conversion rate, the magic of increasing your average ticket is that you don’t need to spend one penny of advertising money to do it.
You simply start selling more to the customers you already have.
According to a Forbes online article from June 2021, “focusing on improving your AOV is an efficient use of business resources. By targeting existing customers that you know are already interested in at least one of your products, you get a head start on winning their additional business.”
An article titled “Why Your Existing Customers Are Your Best Customers” by James Spillane states that “sometimes, it’s so easy to get caught up in the process of converting new customers that you forget that your best customers are sitting right in front of you. They are your existing customers. You’ve already won them over with your products. It’s easier to convince them to buy products from you again, and the longer they stay with you, the greater their lifetime value becomes”.
As with any project, there are multiple ways to slice it and dice it. There are several options for increasing your average ticket value, including:
- Upselling and cross-selling
- Creating thresholds
Upselling and cross-selling are the easiest ways to increase your average ticket without decreasing margin.
Upselling is defined as selling a customer a better product or a larger quantity of products. Instead of one shirt, they buy the entire outfit. Instead of the sixteen-ounce bottle of shampoo, they purchase the thirty-two-ounce bottle. They get the entire home refurbished with new furniture instead of only the living room and bedroom. You get the point.
Cross-selling is adding a related item on to the purchase. Instead of only shampoo, sell them the shampoo and conditioner pack. Sell socks to go with those shoes or a case to go with the sunglasses.
You know those nifty little endcaps on the grocery store aisles, the place where every child kicks and screams, begging their mother for a pack of gum or some silly little toy? This is where our mind goes when we think of upselling—putting baskets of little items on the counter or teaching an employee to sell one more item to customers as they check out. However, there are other ways of upselling and cross-selling.
If you own a brick-and-mortar store, using the fitting room to upsell can work magic with increasing the average ticket. Teach your staff to pull additional similar items every time they take a customer to the fitting room. Taking the items into the fitting room along with the items the customer chooses is a great way to entice them to add more to their order.
Have an e-commerce store? Try using an app such as Spently or Order Bump to increase order value. As a customer checks out on your website, the app will provide add-on opportunities and put similar items in front of your customers to entice them.
You can also increase your order values with the bundling and threshold techniques.
Bundling is the practice of adding multiple items together with a package discount in order to entice your customers to spend more right then and there.
“Get two for the price of one!”
“Buy more, save more!”
“Bundling home and car insurance!” We have all heard the slogans!
Enticing customers to bundle and save will increase your order value and leave them clamoring for more. Who doesn’t love a discount? And while you increase your average ticket, your customer will be telling their friends about their amazing savings. Win-win, as they say.
Threshold selling is another technique, most commonly seen in the form of a shipping discount when a customer spends a certain amount. If your current average ticket is running around $65, you might set your free shipping offer to, “Spend $75 to receive free shipping,” in order to entice your customers to add one more thing to that e-commerce cart. While this might not reflect a lower margin when looking exclusively at your sales—not your COGS—you will see the net profit shrink when you review the entire picture, since you are eating that outbound shipping cost. The difference in your top-line revenue compared to your overall net profit may be significant enough that this cost is worth it, but it could also be offset by slightly raising your overall prices.
These examples can be great ways to sell more to the same customer, but they often come with a decrease in margin. This is not necessarily a bad thing, but as with everything, understanding possible ramifications is important when deciding where your main focus will be. That’s why understanding the numbers matters. You can do the work, but you want to be doing the right work.
We have talked about your lowest hanging fruit when it comes to increasing your overall sales—increasing your conversion rates and increasing your average ticket. It is time to focus on the action that is most difficult: increasing traffic.
Increase Your Traffic
Even with this technique, there are ways to break it down and simplify.
We can increase traffic one of two ways. We can go out and find new people to buy our amazing inventory, or we can focus on the customers we already have, enticing them to buy with us more frequently.
Here are some interesting stats on the latter option:
- Repeat customer statistics reveal that returning loyal customers spend an average of 33% more per order as compared to others. (Source: My Customer)
- 91% of customers are more likely to purchase from brands that provide them with meaningful and relevant offers. (Source: Forbes)
While these stats prove that focusing first on current customers is much more lucrative, it appears that most businesses focus on getting new business. According to semrush.com, “44% of business focus on new customer acquisition while only 18% focus on customer retention.”
Why is that? We want to grow. We need to pay off debt. We want the cash rolling in, yet we focus on the hardest way to get from point A to point B. Not only do most of us focus on increasing traffic before we look at our current average ticket or conversion rate (in other words selling more to the people we already have), we also quickly run after new customers instead of working aggressively to sell more often to a person who has already bought into our brand.
We love all shiny things, don’t we?
“If only I could get more people to watch the videos I post on social media” (completely forgetting we already have 1,526 followers who would love for us to speak directly to them about the products we have).
“If only I could get more people to book a design consult with me” (while having a portfolio of hundreds of homes we have decorated over the years who would love for us to give them a call and let them know about the new trending colors of interior design and how they could quickly redecorate on a budget in a thirty-minute consult).
“If only I could get ten more people a day to walk into my boutique and buy something” (never thinking about creating a customer loyalty program for the thousands already on our email list that would entice them to come in and shop once a month).
There is absolutely a need to keep filling our funnel with new customers, but focusing first on the customers we have already is the lowest hanging fruit of the tree.
Some simple ways to increase customer retention:
- Loyalty programs
- Good old-fashioned calling (Yes! Pick up the phone and call, text, or even email your customers, and let them know what just arrived or invite them to a VIP night.)
After you feel you have established a consistent and effective strategy to retain the customers you already have, then, and only then, should you look at ways to bring new people into your marketing funnel. So, what is the best way to put together a plan to go out and get new people? Take a deep dive into who is shopping with you now. Who are they? How did they find you? What do they buy? Creating a strong avatar and using that to create a marketing plan will be key to implementing your plan with success.
If you're looking for next steps beyond these blog posts, I invite you to get started with the Quickstart to Inventory Genius.
The Quickstart is my keystone coaching roadmap. Three modules will quickly layout five things to focus on in your inventory based business. You can implement these five strategies right away in order to drive immediate profit. And with the Quickstart, I GUARANTEE that you'll double your investment through either making, saving, or finding that amount in PROFIT. The Quickstart really is the perfect way to get your inventory based business on the right track.
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