There are many ways to increase the average revenue per customer per year including selling more often to the same customer, selling higher value items or services each time, offering a broader line, targeting better customers and finally, increasing your price. In my experience, the number one person resisting a price increase is the business owner because the owner knows the cost. As long as you are not losing money, the cost of the product is not relevant. The only thing that matters is what your product or service is worth in the mind of the customer. If you clearly articulate your USP (Unique Selling Proposition) and target your customers properly, you can significantly increase the value of your offering in the minds of your prospects. Depending on your gross margin, a price increase can have a dramatic effect on your profits.

The Table below shows the effect of a 10% price increase on a business with different gross profits.

Gross Margin 25% 40% 60% 75%
  Current 10% Current 10% Current 10% Current 10%
Revenue $100 $110 $100 $110 $100 $110 $100 $110
Gross Profit $25 $35 $40 $50 $60 $70 $75 $85
Gross Margin 25% 32% 40% 45% 60% 64% 75% 77%
Gross Profit % Increase   40%   20%   17%   13%

If you have not taken a price increase in the past two years, take a hard look at the opportunity.

The following are my top five ways to increase your average revenue per customer.

  1. Increase Your Price– Chances are that you are undervaluing your product or service. You can actually lose a few customers and still be ahead from a profit stand point. What’s more, the customers you may lose are most likely the 20% of customers that create 80% of your complaints.
  2. Target Higher-Value Customers– Do an analysis of your top 20% of customers. I will guarantee you that they will generate between 70% and 90% of your business. Determine the characteristics of these customers including what they are buying, how you found them in the first place, the size of business or annual income if they are consumers, and where they get their information. Then target customers like these with your marketing.
  3. Expand Your Offering – Determine the goods and services that your customers are currently buying and look for items that fit with your capabilities. Introduce these lines to your existing customers.
  4. Market to Your Existing Customers – It is six times less expensive to gain additional business from your existing customers than it is to find new ones.
  5. Use Check Lists – If you have a retail business, develop customer check lists and train your team to constantly use them. As a consumer, how often have you gone into a hardware store for paint and forgot the brushes, drop cloths and tape? Help your customers and make more money!

One of fastest ways I help business owners gain immediate profits is helping them find ways to increase theri average dollar revenue. If you would like to explore how you can drop more to the bottom line, give me a call @ 585-781-0384 or follow the steps below.

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