Pete talks to Dom about the 7 Levers of Business — 7 areas of any business that can be improved to provide growth, and how a systematic approach to making small increases in each one could almost double your profits in less than a year
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The 7 Levers of Business
Pete Williams: Hey, mate. How’s things?
Dom Goucher: Good, good, good.
Pete: Back for another jam-packed episode of PreneurCast?
Pete: Sounds like a good plan.
Dom: What have you got for me this week?
Pete: Many a tale, many a bad joke, probably some really terrible puns. Same as usual.
Dom: Same as usual, really.
Pete: Hopefully some killer content that people will enjoy.
Dom: Cool. How is the insanity that is your Ironman training going?
Pete: How shall I put this? I have just spent an hour being physically abused by a woman I just paid… I had a massage.
Dom: I was going to say, “Does your future wife know about this?”
Pete: I just had a massage and I reckon I walked out sorer than I did when I walked in. So I’m not quite sure if that’s a good thing or not. She found my sore points and really focused in on those. A little uncomfortable. But besides that, the training is going well. It’s been a tough week this week. It’s been mentally tough too. Had a couple of days that I mentally struggled, but that’s alright. You’ve got to push through.
Pain is inevitable, suffering is optional. That’s the saying at the moment. All is going well. Next week’s an easy week, apparently. I’ve got two less sessions than I normally have. It’s not really a huge easy week, but I guess that’s what the coach wants to call as easy. I’ll suck it up and do it. All going well.
Pete: How’s your sunshine and tequila going?
Dom: Trying to suck me into a weather discussion, aren’t you?
Pete: Touché. Well, last time you were by the beach, so…
Dom: Yeah, the beach part, that was awesome. It was a bit noisy outside, so it took quite a bit of work to edit out the background noise for that one. So I decided to come back home for this one.
Pete: Fair enough. So what are we going to talk about today? What shall we talk about? What shall we discuss? What wisdom can we impart?
Dom: I always like your take on the kind of received wisdom. The stuff that’s obvious but people don’t really pay attention to it. One of the things that struck me before was when we did the Numbers. You’re a big numbers guy. A lot of people say when they talk about management of business, they talk about if you don’t measure it, you can’t manage it.
I know that you are somebody that measures, manages, tracks everything to the nth degree. Is there some wisdom you’ve got, something more about the numbers? We drilled quite down into tracking stuff before, but at a higher level.
Pete: Yeah, we can definitely have a chat about the whole seven levers stuff that you and I have spoken.
Dom: Oh, yeah.
Pete: Definitely worth delving into and talking about. I do like numbers. My mom’s a math teacher, so that has always been ingrained to me a little bit. I guess if we talk high-level numbers, there’s fundamentally, for want of a better term, seven levers that you can pull to increase the profits of your business. I’ve spoken about this a couple of times, and you and I have discussed it. It’s definitely something that I want to go into a lot more depth at some other point; it’s a great podcast episode.
We can talk about, from a high level perspective, what those seven levers are and how they can really dramatically affect the bottom-line of your business and the profits that you can take home and put in your wallet. To give a really quick overview of the seven levers and how the math actually works, we can walk through it. If people got a pen handy, if they’re not driving, they can play along at home and do the numbers themselves and things.
They’re basically independent metrics that you need to work on as an entrepreneur or a business owner to really grow the profits of your business. Like we said, a few different things in various episodes of the PreneurCast, it’s not about the product. The stuff that we’re going to talk about is not about making a better product or anything like that. It’s important this day and age to have an awesome product. But it has nothing to do with the product itself, it’s not about making the product better or anything like that; it’s just the marketing metrics almost, if you will.
These are things you can control. First thing is the traffic. This is the traffic your business gets. So whether that’s web traffic that we spoke about, foot traffic into a retail store, or people responding to direct mail piece you sent out over the phone; to me, that’s all about traffic. It’s first-level inquiry. It’s the first time someone actually touches your business, so to speak, by walking into a store or jumping on you website. That’s the first thing you can affect, by driving more first-time traffic.
There are plenty of ways to do that: with AdWords and SEO, magazine advertising or radio advertising. There’s all those sorts of methods to drive that initial traffic. Then what you’ve got is the opt-in rate. This is very much internet terms these days, your traffic and opt-in rate and things like that. But they’ve come from the real world, the offline world. This is the stuff that has always been the driver of business. Because an opt-in rate online is someone who signs up for your newsletter or free report. It could be someone who actually requests a quote.
If you’re dealing with the real world, selling real stuff to real people, someone comes into your website and requests quote is the first step of opting in. They’ve opted into your sales funnel now. They’re actually wanting some information, and you can then go and sell to them based on that. On a retail aspect, it’s the people who have actually come in, sat down and tried on a pair of shoes. Back in The Athlete’s Foot days when I used to work with Athlete’s Foot, it was all about getting them to sit down and try on a pair of shoes.
That’s the opt-in. That’s the first response they want to have from that foot traffic that came into the shoe store. There is my bad pun. I knew it was going to come. That’s the first two metrics. The first two levers you have are affecting the traffic by marketing and affecting the opt-in rate by your sales conversions or your first-level conversions. Having a spiel for your retail staff when somebody actually walks into the store – how do you go about getting them on a seat to try on a pair of shoes?
In the cosmetic world where my fiancée Fleur comes from, they had a very, very set plan about getting someone to actually sit down and do a free make-up trial. It was very planned-out and things like that. They’re your first two levers. That number that generates for you is how many prospects your business has, so how many prospects you’ve actually got. To me, a prospect is not someone who actually comes into your funnel and say, “Yes, I want to be sold to.” People coming in, to marketing, that’s just traffic. Then you want to turn that traffic into prospects by increasing the opt-in rates. Those are your first two levers. Does that make sense?
Dom: Yeah. As you say, it’s the basics of the basics. I do like the fact that you’re mapping it back to real-world stuff as well. Internet marketing is everywhere and a lot of people who listen to this podcast will be in the internet marketing space. But hopefully, there are people from the real world as well. A lot of the information out there is focused on internet. It’s all traffic to your website, opt-ins in your email opt-in form and all this stuff. It’s easy to forget that the majority of business is in the real world.
Pete: Absolutely. It’s accounting firms or retail stores or anyone like that. So they’re your first two levers. Once you’ve got your prospects, the next thing you want to work on is the conversions. You can increase your conversion rate from your prospects to customers. That’s things like we spoke about in the other episode, having a better proposal that helps you convert, having standard sales processes that you go through once you get a prospect.
Maybe it’s an autoresponder series if you go to the digital side of things that will take people to a buying or a sales process so they end up purchasing something from you. It should be your sales script. You should be able to leverage and scale your sales team by actually having scripts that everyone follows. That’s the next thing, really working on your conversions, your sales-side of stuff. That gives you how many customers your business has.
Traffic, times opt-in, times conversion rate is your customer base. It’s how many customers you actually have. From there, once you’ve got your customers, the next lever that you can pull in your business to increase your profits is the average sale value. This is how much on average the customers spend when they purchase from you for the very first time or any transaction. What is your average sale value?
This is where it starts getting a little interesting because this is the stuff a lot of people don’t think about. They only think about getting a customer for the very first time. They don’t really care how much they spend necessarily, they just want to sell as much as they can. But you really want to work out what is your average sale value. Is it $104 in the retail shoes game?
Is it $97 if you’re selling electronic goods? What is your average sale value? You can increase that by increasing your rates. Just jacking your prices up is one way of increasing the average sale value. Obviously, being better at sales and having additional add-ons, more items per sale can make a difference there as well. That’s the next part. That’s almost the other lever. The hidden lever is that the average item per sale can help.
Rather than just selling one pair of shoes, can you work out a way to sell a pair of shoes and some socks, and some shoe cleaner, and an insert for arch support? In the makeup game, can you sell a bronzer as well as some mascara and some FiXit Foundation? I live with two women in the make-up game. I know these terms, unfortunately. They talk Benefit Cosmetics all the time.
Dom: I was really getting quite worried about that, mate. Really worried there.
Pete: So that’s the sort of stuff in that space. As an accountant, can you sell tax returns and also look at helping them set up a self-managed superfund? Or can you help do their BAS every month? Or can you do something else? What else can you actually sell to them in an upsell process? And then the next step in terms of increasing your profits from your customer base beyond every sale value and average items per sale is the average transaction value per customer.
Now, average transaction per customer means by how many times they buy from you in a certain period. That’s the BAS statement when you’re in Australia. We have to lodge a tax return of your business every four months. Maybe you can get someone to come back every few months. In the shoe game, can you tell people, educate them that your shoes, if you’re running it regularly, it should wear out every three or four months and get them to come back and buy them more regularly?
In the makeup game, obviously, by getting people to come and buy more regularly. In the infomercial game, Proactive, the acne cream does this really, really well. Not only do they get you to buy the very first time, they try to increase your every sale value by packing on a whole lot of stuff in the package and then get you on recurring revenue on continuity. They force you to have a high average transaction per annum because they get you to buy regularly.
So the other thing you can affect is every transaction per customer per period. Those three things combined, multiplied by the customer number you have, gives you your revenues. Pretty obvious. If you’ve got X-amount of customers and they’re spending this and buying this many items this regularly, this is your revenue. That’s the revenue for your business. And then the final thing to generate your profits, the seventh lever is your margins.
And obviously, another way to increase margins is by jacking up your price or lowering your costs. And that’s the final way that you can actually affect your profits. These seven things, as a business owner, you should be focusing on because all of these things can do a huge, huge change to your bottom line. And I’ve got some numbers that I’ve actually written on the back of an envelope here.
We can definitely talk through this, just to give you an example of how much a small change in each one of these levers can drastically improve the bottom line of your business. Before I go into that, thoughts, Dom? Have I kind of gone off on random tangents again as I usually do? Is it making sense, these seven levers?
Dom: To me who’s not really the kind of businessperson that you are, it’s clear. It’s clear to me that there’s a stack here. And when you go through this with the numbers, that’s when it becomes really interesting. Some of these are obvious things and some are not so obvious. But the power of what you’re talking about is going to come out of the examples when people see just what, as you say, a small change, it’s cumulative.
Pete: Yeah, absolutely. But I think the funny thing is, you mentioned ‘obvious’ a couple of times. And it’s always interesting because even for myself quite regularly, because it’s so obvious, people think it’s not relevant. Everyone is looking for the secret, that secret juicy thing that no one else knows about that will skyrocket; they kind of just forget the obvious stuff rather than consolidating and taking the time to sit down and go, “Look, let me just not buy this next product. Let me just go back to basics and look at these seven levers, and try and implement one thing to affect each of these levers.”
Because that, as you’ll see in a second, will probably give you a much better return for your business than trying to do the latest gadget. And almost from a triage aspect, if you’re going to look at investing in a new product, before you buy it, just think, “How is this going to affect one of the seven levers?” If the last five things you bought were all about affecting one lever, start looking at other ways, other tools and other programs that you can invest in to help increase the other levers.
Let’s walk through these numbers to give it some more context, if you will. We can talk all day, but the context of numbers as we spoke about last episode, context helps. So if someone’s got a pen handy, write down any of this stuff and go through them. But I’ll try and verbalize this as best I can. Let’s think of this as an average business, just an average business that has 5,000 visitors, whether that’s web visitors or foot visitors to your business.
You’ve got 5,000 people in traffic coming to your business with an opt-in rate of 30%. So remember, the opt-in rate is simply people who want to: get a free report or a newsletter, request a quote, or sit down and try on a pair of shoes. Thirty percent may be high, maybe low; let’s just use that number for example’s sake. So 5,000 visitors with a 30% opt-in rate is 1,500 prospects. So 5,000 people who walk into your store, 30% of those people sit down and try on a pair of shoes.
That gives you 1,500 prospects that you can now sell to. Now, if you have a 25% conversion rate; so let’s say of those 1,500 people who sit down and try on a pair of shoes or call up wanting to find more information about your accounting service or are wanting to come out and talk to you about your roofing needs or whatever that might be, and 25% of those people purchase, that gives you 375 customers. So you now have 375 new customers who have spent some form of money with you.
Now, if we have an average sale value of $100; let’s say on average they spend $100 with us. And they transact with us twice a year. They come back and buy a pair of shoes twice a year. They buy an eBook and they buy another training course from us six months later. They get their roofing done but they also need their gardens cleaned and you do both, whatever it might be. So 375 customers at $100 every sale value, twice a year or twice a period, that gives you $75,000 in revenues off those new clients.
Let’s say in a month. Let’s say in one month, you’ve generated 375 brand new customers at $100 average sale. And over the next 12 months, they’re going to spend twice with you. You’ve generated $75,000 in new revenues for your business over the next 12 months. Is that making sense so far?
Pete: Cool. All right. Let’s say for ease of numbers, we’ve got 50% margins. We’ve got 50% gross profit. So $75,000 dollars in revenues with 50% margin generates $37,500 in profit to your business. So obviously, you’ve got rent and stuff like that, but let’s keep it easy. So $37,500 in profit. Now, if that was a monthly figure, you generate that every month, that’s just under half a million dollars, $450,000 dollars per annum profit. Nice little business.
And just as a side note, looking at those numbers, it doesn’t get that scary. You can go, “I can make a half million-dollar profit here very, very easy.” If you can generate 500 visitors to your business, get a 30% opt-in rate; so 30% of people who walk into your store sit down and try on a pair of shoes, and you can give that 25% of those people who have obviously shown an interest in buying a pair of shoes, and an average $100 pair of shoes, that’s the average value.
You can sell them two pairs of shoes a year if you still have some good back-end marketing in place. If you’ve got some systems in place to get the backend to the store, at 50% margin, you’re making some good money there. So that’s just a starting point to talk through. Is that pretty self-explanatory or have I explained that well enough for people who are driving in their car, listening at two-speed?
Dom: Yeah. Nice, nice. Well, listening at two-speed. Nice solid example. But I think what’s really going to do this is when we move forward and as you say, pull some of those levers and see what happens.
Pete: Speaking of driving in a car, what is about all these podcasters who are offended about people listening at two-speed? I don’t get that. There’s a lot of people like Merlin Mann is out there talking about it. I think Danny Batelic tweeted it as well, and I had a bit of a fun joke back at him with an @reply. They think the people who listen to podcasts at two-speed are evil. I find that very strange. I’m not offended. If anyone’s listening at two-speed, go ahead. And if you can understand me at two-speed, I give you big props.
Dom: You know, a while ago you commented on listening at two-speed. And you said listening at one-speed now is really weird. I’ve been listening at two-speed for the last few weeks, just to catch up with the volume of podcasts that I listen to. And I’m the same now, I can’t listen to people at one-speed. They just seem to be really dragging you out and taking… No, no. Hey, if you’ve got so little to do and you can listen to it at one-speed, that’s fine. But we’re busy guys and we want to optimize our time. I’m a two-speed guy. I want to get a t-shirt made.
Pete: I listen to three-speed now. I was listening and watching some videos yesterday. And I was listening and watching them at three-speed, and I find that absolutely fine.
Dom: Yeah, it’s going to take me a while to get to three-speed, I have to say.
Pete: But anyway, let’s move on. Move on. So we’ve got those base numbers. Now, just as an example, let’s say if you can just pull each of those levers just 10% harder. That’s all. I’m not asking you to double anything. I’m not asking to maybe get twice as many visitors or double the conversion rate or anything like that, which is the goal for a lot of people. If you’re talking to other people, they go, “I really want to try and double my traffic. I really want to try and double my conversion rate or my opt-in rate. I want to double my prices.”
And they’re big jumps. To try and double any one of these levers is quite hard. And really, when you think about it, everyone knows it’s really hard but they get sucked into the new shiny object that says, “We’ll double this. You implement this technique and you’ll double it.” So as an example, let’s not double it, let’s just pull the lever 10% harder. Nice and easy, just a little 10% pull. So our 5,000 visitors goes to 5,500 visitors. Not hard to do, 10% increase in traffic.
It shouldn’t be too hard for anyone to really achieve. And then if you can increase your opt-in rates from 30% to 33%, again, if you’re doing some offline marketing like the Going Analogue stuff that we talked about. If you’re increasing your online opt-in pages by putting in logos and testimonials from offline magazines you’ve been featured in. You can just have a little better sales pitch for staff to say to prospects who walk into your makeup store to get them to sit down and try on some makeup.
Only a 10% increase. That’s going to result in 1,815 total prospects, which is 350 more than would’ve been. A quick 10% increase in those first two levers gives you 1,815 prospects. If we can increase that conversion rate from 25% to 27.5%, again, just a slight 10% increase is going to give you, what’s that 400? I think it’s 400. Let me just do some numbers. Times point 27.5…
Pete: Yeah, 400. So that gives you 400 customers. You’ve now gone from 375 customers to 400 customers. Nice little jump. And if we can increase your average sale value from $100 to $110, so maybe you want to jack up your prices, maybe you are able to get people to spend a little bit extra and buy that $10 pair of socks when they buy the $100 pair of shoes. Or on your online website, they decide to buy the extra little item or whatever it might be. You can sell someone some audit insurance when you do their tax return.
You say, “Look, for 10% extra, we’ll cover your audits. If you get audited, we’ll cover your expenses. We won’t charge you for audit.” It’s a great thing an account of mine did a couple of years ago. He did my tax return. He said, ‘Well, look, you shouldn’t get audited. But if you do, it can get expensive. It’s $400 for your tax return. You spend an extra $40 bucks and you’re covered in case you get audited that might cost you five grand. Do you want to invest $40 now?”
I jumped at it and I said, “Yeah, not a problem at all.” So he easily got me to spend an extra 10% on my transaction. If you can actually increase that average transaction per customer from two to 2.2, so they come back and buy from you 2.2 times a year; obviously, this averages out, that’s going to increase your revenues to $121,000. So you’ve had a jump from $75,000 in revenues to $121,000 in revenues.
And then if you can actually increase your margins from 50% to 55% because of some other adjustments in your buying power, you’re doing more transactions, you can crunch a deal as better, you can buy at better price from your suppliers, or you can maybe change your underlying product that you were buying from a different supplier that’s cheaper. Whatever it might be, you can increase your margins by 10%. That’s going to give you a new profit figure of $66,550.
Now that is actually a 77% boost to the bottom line. You’ve gone from $37,500 in profit to $66,550 in profits. It’s a 77% increase to the bottom line of your business. By just pulling those seven levers by 10%, it hasn’t increased your business by 10%; it’s increased by 77%. Huge. Huge, huge difference. So you’ve not quite doubled your business but by pulling each of these small obvious seven levers by just 10%, you’ve almost doubled your business.
Dom: Awesome. I love examples like that. I really do. It goes against what a lot of people are thinking, a lot of people are selling, and it does actually makes these things achievable. As you said right at the beginning of this example, go ahead and said, ‘I want to double my visitors,” or, “I want to double my opt-in,” or, “I want to double my conversion.” If you want to try and double anything, good luck.
Dom: Basically, unless you’re currently at 1.
Dom: Good luck with you. Good luck to you. Off you go. Oh sorry, slight digression by the way: 27.5% conversion on all those numbers is 500, not 400. The rest of the math is solid.
Dom: I think you just slipped and said 4 but you meant 5 because all the numbers add up.
Pete: Okay, cool. I’m glad you’re in the background with a calculator to make me not sound too stupid. You’ve got my back, I love it.
Dom: That’s what I’m here for.
Pete: Maybe I can’t read my own handwriting. I did say it was at the back of the envelope.
Dom: Yup, you did. But to me, there’s something else you said at the beginning of this that’s really, really important. Going out there and picking up the next new shiny thing isn’t necessarily going to help. Before you even start trying to plus this by 10% by the way, if you start by sitting down and having a chat with yourself honestly with the back of the envelope and saying, “Do you know these numbers?” We’re back to Rob Somerville and The Challenge conferences where people stand up and say. “Hey, yeah, I want some help with my sites,” or whatever.
And then Rob always says the same thing, “What are your numbers?” If you are not already measuring these things, then you can’t plus them. You can’t improve them. You can’t do anything with them really, because you don’t know what they are. So the first thing to me is to sit down and make sure you know your current state for each one of these seven levers. And then from your example, it’s very clear. As you say, it’s relatively straightforward to improve any one of those things by 10%. And the effect just knocks on through the whole thing.
Pete: It’s just exponentially. It’s one of those things. You mentioned it, you can’t manage what you don’t measure. That’s what it all comes down to really, because if you’re managing this stuff and measuring it, what you focus on expands. The whole The Secret – what you focus on expands. There’s some validity to that message. The context in which they told the statement on what you focus on expands was not right in that DVD necessarily. But the underlying premise was good. And it’s true.
If you literally focus on these, if you write down and do your numbers and work out what these seven things are, and then track those numbers on a weekly or monthly basis, I guarantee it, they’ll expand because what you focus on expands. And if you’re aware of it, you’ll start to see where you can improve it. If we’ve got some time left in the episode, we can run through those seven levers again and just spitball two or three ways to actually increase each of these by just 10%. Just to give you guys some action points and some mental snowballs so you can go run with it and push down your own mountain.
Dom: Definitely, mate. That is a great, great thing to do. Yeah, because if you’re not focusing on any of them, if you’re just spreading your energy across the whole thing willy-nilly, then it’s time to pick one and focus on it. Get good at it. First of all, get good at tracking and measuring, which is really, really important. And then pick one and focus on it until you’ve got that 10%. And then go down the list, pick the next one, go again. And just keep….
Pete: Like one month. For the next seven months, you make a promise to yourself. Every month, I’m going to pick one of these levers and then spend the entire month focus my Critical Focus Time on working on one of these seven things for the next seven months. Your business could almost double within seven months.
Pete: Great investment of time. If I tell anyone, “Look, give me seven months and I can double your business,” they’ll think I’m stupid and go, “Hell yeah.” But when you look at the numbers like this, it’s not that hard to do.
Dom: Yeah. And it’s amazing as you go down that list what each 10%, as you say, it’s exponential, because it is kind of exponential. If you increase your visitors by 10%, then you’re increasing the people going into the funnel. But if the rest of that funnel stays at the same effectiveness, then your growth is only going to be so much. But if you then improve each stage of the funnel and its effectiveness, then it’s like compound interest. Even if you leave the traffic alone and improve your opt-in, which is something that I know you talked about before.
Improving your opt-in immediately increases the number of people going into the funnel. Increasing the conversion immediately increases the number of actual customers you have, and so on and so on. Just picking any one of these has an effect. But focusing step by step over the next seven months can have an amazing result. Let’s take a little bit of time. Let’s brainstorm some ideas for each of the seven levers, just one or two quick ideas that people can pick up and go with and see if they can get it at 10%.
Pete: Starting at the very first level, let’s go. Traffic, whether it’s web traffic or foot traffic, AdWords, SEO, banner advertising, all the internet stuff. I think most listeners to the podcast are sort of somewhat web-savvy and know a hundred different ways to get more traffic into your business, webinars all that sort of stuff. Advertising still works in the real world. If you’re a real-world business, Yellow Pages can still work in certain niches, in certain clientele. It definitely can still work.
Radio advertising, TV advertising, putting an A-frame at the front of your store in the sidewalk, doing some big bold fluorescent signage in your store window can help increase foot traffic. The bike shop across the road that I helped out and worked with a little bit. I’ve yelled at them for months. They’ve got this huge window space on a huge major road here in Melbourne and I said, “The glass window seems to be doing nothing.” Get some big ugly signage out there. Bike store, family bikes, discount, whatever it might be, that sort of stuff is going to increase the foot traffic.
In the Benefit Cosmetics world which is the world that Fleur and Sarah who live with me do, they do what they call traffic stopping. So in the store, they’ll get the staff to stand out there and traffic stop, stop people, stop the foot traffic walking past and getting them to sit down. There’s plenty of ways to increase traffic and that’s an obvious one, really, to a certain extent. Opt-in rates. Let’s talk opt-in rates. Split-testing your opt-in page of a website. Making sure you have a Request a Quote button on your website if you require someone to request a quote like we do in the telco space.
Big, bold red, dog-ugly Request a Quote button stands out and gets the attention. Having a script. I know one of the scripts that sound so basic that I know a lot of people have implanted and tested is, in the retail aspect: “Have you been here before?” Rather than saying, “How are you doing?” getting the typical, “Just looking” response, break out a little bit. “Have you been here before?” It’s a big one for Athlete’s Foot. We used to use it a lot. People would say, “No I haven’t.” Athlete’s Foot here in Australia is completely different to Athlete’s Foot in the US. It’s very much more scientific in the way you buy shoes.
It’s like, “Oh great, you haven’t been here before. Let me tell you about our Fit Print System.” We actually have this computer analysis of your foot to work out things like whether you’re pronating or supernating so we can get the right shoes, have the right medial support,” blah, blah, blah. It was just a way to engage the person and actually get them to try a pair of shoes on. Having that sales pitch down pat, having the right testing on your website, plenty of way to increase your opt-in rates, that’s going to increase your prospects.
Dom: One thing that you did point out there that is probably the most basic thing that you can do is ask for it.
Dom: Ask for people to sign up to your newsletter. Make it easy for them to sign up to your newsletter. Give them a big button to get a quote. If it’s a website, don’t have some miniscule menu option at the top of the screen that says almost apologetically, “quote”.
Dom: Really ask for it. Start that conversation. Make it easy for them to ask you for what they want. Suggest things that they can have or start that conversation. As you say, ask them if they’ve been there before. Just get some dialog going with them if it’s a retail store.
Pete: Yeah. Absolutely, couldn’t agree with you more. This comes down to conversions too. Ask for the damn sale.
Pete: Ask for the sale. As long as you ask, the more chances someone will say yes. It’s very rare in business someone just walks in with their wallet open throwing money at your feet. You’ve got to actually somewhat pry it out of their wallet sometimes. So things like long-form sale letters and testing long-form sales letters, using autoresponder sequences in your online world to automatically have those sale working without you being there. In the real world of business, working out how you can actually have a repeatable sales system, which I spoke about before, train sales staff.
Maybe have a six-part checklist when someone comes in to buy a bike. So it’s like, “Oh great, you’re looking for a bike. Not a problem at all. Are you looking at road riding, is it for a triathlon or are you looking just for a family bike? Oh, it’s for a triathlon. “Oh ok, great. But what sort of distance are you riding?” Have a checklist of questions that actually helps you discover the client’s needs that helps you then ask the right questions and point them in the right direction and also makes you look like an expert and your staff like an expert.
Because it makes you really care about the outcome of the actual person and fitting the right product to them. Even have a sheet there like, “Julie, great. You want to do the triathlon, ok. What sort of stuff do you have? Do you have a bike right now? Ok, great. Do you need these sorts of things?” It helps in that sales process so it’s repeatable, and anyone can come in and learn it and have the same sales conversion rights. The worst thing you see in retail is, unlike web businesses… This is one of things why web is so good to a certain extent, it’s the same system.
It’s the same sales letter, it’s the same sales page, and it’s the same opt-in page that people see every single time. You know what you get should be consistent. There’s no variable for staff having a bad day, or having one great sales staff and having one shitty sales staff. You want to try and systemize it and robotize it as much as you can in the real world too. That’s the sort of stuff in the conversion perspective that you can actually do.
Dom: Again though, with conversion is, as you say, don’t be afraid to ask for the sale. But the other thing, and this is the subject of a fantastic book called Why We Buy by Paco Underhill, is don’t get in the way of the sale. Make it easy for people. If somebody walks into your store or comes to your website or whatever it is because they know what they want and they want to buy that thing and they have their wallet out, the worst thing you can do is get in the way. Take the money, take the money. Why do you think shops have big signs hanging from the ceiling that say, ‘Pay Here’?
Dom: Really? Honestly?
Pete: Why We Buy, it’s a great book. If you’re in that retail space or in any real selling space to be honest, it’s worth a read. It’s the psychology of the consumer. It’s really important. We spoke about this in the previous episode. Make your brochures and you quotes stand out. Make them little sales people. Once you leave a quote with someone and they walk away, that’s all they’ve got. That’s your sales person in print. That’s the next one.
Once you’ve got your conversion rate and you’ve got customers, how can you increase the average sale value? Well, obviously you can jack up your price. That’s the easy way to do it. And for most people, if you jack up your price 5% to10%, you probably won’t see a huge drop in sales. It’s kind of surprising and scary but realistically, if you’re in the retail space and the face-to-face selling space, that shouldn’t make too much of a difference.
Having things like contests, if you can work out your average sale value. Right now it’s $135, let’s say hypothetically. And you then run a contest saying everyone who buys something to the value of $150 goes in the draw to win X, Y and Z. Let’s keep going with this bike store example because it’s applicable for retail. If your average sale is $135 in tires and jerseys and pumps and stuff like that, say you go into the draw if you spend $150 to win a set of race wheels or to get a new jersey valued at $300. You’ll be amazed at how many people will start looking around the store of where they can spend extra $15.
How can they spend that extra 10%? They’ll start buying some gels or buying a spare tube or buying a new set of gloves or something like that just to get over that hump to potentially win something of value. Maybe in the cycling space, you go and invest $500 and get Cadel Evans, the cyclist, the Australian phenomenon right now, probably the best athlete we’ve ever had who just won the Tour de France. Get him to sign a few jerseys and give one away every two months to people, and they get an entry when they spend 10% more than the average sale value.
Dom: The one interesting one that takes a little bit more thinking about is one that places like GoDaddy do, which is if you spend a certain amount of money or you register a certain number of domains, they give you a discount.
Dom: Because theirs is a continuity service where you have to renew the domains. That’s very clever because they’ve got you to buy more items that need renewing year on year.
Pete: And then renew at full price.
Dom: They actually will give you a discount on the renewals as well.
Pete: Ah, that’s cool.
Dom: It is quite a complex system but I’m sure for them, the maths work out. But even simpler than saying ‘spend a little bit more money with us and get this,’ we talked about this earlier, which is cross-selling and upselling. If somebody’s buying a bike and if it’s their first bike, it’s highly likely that they don’t have the other elements that go with the item.
Pete: Yep. And have that checklist. Have the first-time bike-buyer’s checklist that you can give people.
Pete: Have the triathlete’s bike buyers’ guide, the road cyclist’s, the weekend warrior’s bike-buying guide. Because obviously, what a triathlete needs is different to what a road warrior needs in the weekend, which is different to what a family biker who wants to ride around the house and the backyard in the weekend-type of thing. Have those checklists because people might not think about, “I need an actual water bottle holder, I should get a pump,” or whatever it might be.
Just educating your clients about making their experience better will help them buy more. Have bundles, create a bundle. Create the first-time or create the triathlete’s pack that in that you get some protein gels, you get a spare inner tube, you get a pair of sunglasses and some vouchers to an indoor spin class or something like that. If you’re an accountant, it’s a bundle of, you get your tax done but you also get the insurance for an extra 10%.
So those sorts of the example as well to help increase that. Obviously online, it’s the upsell process through the check-out process to get the upsell. “Hey, think about buying this as well?” Very, very simple to do. And then the next one is the average transaction per customer per period. How can you increase that? Well, create and build a database. The easiest people to sell to are the people who have bought to you before.
Pete: Every time someone buys from you, grab their details and put them in a autoresponder sequence. Whether you’re an online marketer or in the real-world who runs a shoe store or an accountant, have a monthly newsletter that has offers in it. And have an automated series to send out three emails to the person after they bought. In a footwear store example, if they are buying shoes to be a runner, then you have a four-part running tip newsletter that goes out as soon as they buy from you.
They get six emails, five emails, or four emails automatically saying, “Hey, here is some tips to make you run better.” And then in the third installment, it might be talking about inner soles and how they can make you run better. And then you have automatically at the 90-day period, “Hey, your shoes may be getting ruined. Don’t forget to come and buy a new pair.” Just make it part of the automated sales process.
An accountant, you schedule in follow-up visits or tax planning visits. If you’re a roofer, you’re try and work out a way that you can only paint half their roof and do the other half 12 months later. Whatever that might be, work out a way you can get additional transactions out of that person. It’s all about database marketing. Build the database of clients and sell them other stuff.
Dom: This gets a little bit more advanced. But if you are at this level, segmenting the list, being aware of who has bought things and who hasn’t is a big deal?
Pete: Oh, yeah. And particularly, if you’re using something like AWeber, whether you’re on online space or in the retail space, and you create four or five different segments of your market. First time triathletes, road warriors in the weekend, family cyclists. Maybe you’ve got employee tax returns, personal tax returns which have a self-managed superannuation or 401K, business owners, corporations.
Every time you actually sell to someone, you figure out which ones of these four buckets they fit in and put their email address in there. If they’ve already bought from you historically, the system will say this client already exists, and they won’t be sending emails again. So that’s easily achieved to make sure you’re not going to repeat the same marketing to people.
Because if you have the system in place, you throw people into that bucket and if they’re already in there, you’re going to get warnings. If you have that bucket set up, that happens automatically every time. “Join our VIP club and get 10% percent discount.” It’s an easy sell to get people’s email addresses these days. “Let me email a couple of the invoice to you. What’s your email address?” That’s not that hard to do that stuff.
Dom: Good one, good one.
Pete: And finally, it’s margins. There’s plenty of ways to increase your margins whether it might be doing stuff like increasing your prices or crunching your supplier. “It’s tough out there.” Say, “Look, I’ll take my business elsewhere unless you can drop your prices a little bit.” Find a different supplier and potentially change the underlying product you use. Not to reduce the quality of product you offer, but maybe just change suppliers. Maybe use different printer paper, if you’re an accountant. Maybe use different Scotchgard, if you’re a carpet cleaner, I don’t know. How else can you improve your margin? I’ve had a lot of fun, I’ve lost it.
Dom: The one I was going to say, I’ve actually been going through Book Yourself Solid by Michael Port.
Pete: Ah, Michael Port.
Dom: One of the things he talks about, John Warrillow also talks about this one…
Pete: Built to Sell.
Dom: Built to Sell. Basically, look at the products you currently sell and potentially look for a higher-margin product that you can sell. And one of the highest margin products there is, is information. John Warrillow talks about it from a point of view of, and also to a point, Michael Port as well, let’s say you’re an accountant and a lot of your time is being taken up with doing things. You’re maybe maxed out with your time, so you have to be more efficient of your time. Maybe you could produce a cheap booklet of advice of regular things that people can do that you can sell to your clients cheaply.
Pete: 37 Tips to Reduce Your Tax.
Dom: There you go, and publish that. Don’t just publish it to your clients, but also publish it out to the wider world, Kindle Publishing or whatever.
Pete: Very easy thing to do.
Dom: Very, very easy to do.
Pete: And then also, you’re published author that helps you justify your increased pricing.
Pete: And you put that on your opt-in page to increase your opt-ins. There’s so many ways that one little thing can drastically affect all these seven levers.
Pete: The other thing I was going to think of was trade exchanges. Looking at something like Bartercard or a trade exchange to help increase your margins. Now, for those of you who aren’t aware of what trade exchanges are and Bartercard is and all that sort of stuff, I covered it as a chapter in my first book, which is now also freely available as its standalone podcast in iTunes.
So, a slight plug for that. But we’ll do an episode if people want, around trade exchanges and what they are and how they can actually work in a lot of businesses very, very well to increase your margins and increase your traffic. The future episode will do.
Dom: Cool, definitely. Well, we’re overtime as usual.
Pete: You know what we should do? We should change our time to an hour and then we’re always going to be under time.
Dom: I prefer to try it in for half an hour, and then we are always over-delivering.
Pete: Okay, fair enough. You’ve changed the context. You’ve changed the frame.
Dom: Framing that one for you there.
Pete: You actually listen to the podcast. Awesome.
Dom: Amazing, isn’t it? That was… Go on.
Pete: Okay, let’s wrap this up.
Dom: Yeah, let’s wrap this up. That was fantastic. That was really, really good stuff in there. Hopefully, everybody found it useful. Again as we ask always, if you do find this stuff useful give us a bit feedback on the iTunes Store. We still have to beat Ed Dale and Danny Batelic.
Pete: In Twitter, I had some awesome response in Twitter this week from a few people who sent me some tweets. So @preneur, P-R-E-N-E-U-R. @preneur is my Twitter handle. Or you can shoot us an email, firstname.lastname@example.org is probably a good email address to reach us on. So thoughts, feedback, show suggestions. I’d love to hear how people are actually consuming this stuff too.
I like to consume a lot of podcast while I’m riding my bike and running and stuff. I know a lot of people listen to it on the train to work or in the car. But maybe you’re pigeon racer and you’re listening to it while you let your pigeons go. I’d love to hear how people are consuming this and applying it.
Dom: Maybe we should switch to other Twitter hashtag. Maybe we should have like a #2speed.
Pete: Yes. That could be very cool. Say if you’re listening to us at two-speed or because I speak so fast, you have to listen to it half speed. I don’t know, I’m keen to know.
Dom: Cool. Okay, we’re going to wrap this one up and I will see you next week.