5 Drivers of Business – Part 4: Average Dollar Sale
15 Tried-And-True Ideas for Increasing Your ADS
I don’t know a lot about math, but I do know this: just 10% growth in one of five areas of your business can create a multiplicative effect when it comes to your profit.
I’ve been covering this in a series on those areas, which are known as the 5 drivers, as well as sharing some ideas for how you can hit that 10% mark in each driver. Today, we’re going to look at a bunch of proven ways to increase your average dollar sale.
1. Raise Your Prices
The most obvious way to make more money in each transaction is to charge more. You might be afraid you’re going to lose customers. Ok, that’s valid. But here’s the thing: you should always expect about 10% resistances to your prices, because someone will always think you’re too expensive.
My advice is to try pushing your prices until you’re near a 25% resistance mark. 10-15% of customers will complain about price no matter what you charge, so 25% is usually a good indicator that you’re charging as much as the market will bear. And if you’re afraid of losing existing customers, apply the higher rate only to new customers.
2. Brand Story & Positioning
The way you talk about and position your brand can make or break your average dollar sale. Creating a stronger brand position can help you break customers of a commoditization mindset and justify the rates you set. There are a few different ways you can go about this:
- Premium specialization – Brands perceived as “premium” or specialists in a particular service or industry can charge more. For instance, an accountant might specialize in small businesses.
- Unique approach – There’s an injury lawyer near me who’s a big guy, very imposing. So he capitalizes on his look by positioning himself as the one lawyer who will “get tough” with the law on your behalf.
- Compelling brand story – Do you have an interesting origin story? Some brands thrive on telling a rich narrative about themselves and their history. Think Burt’s Bees, REI and Coors
- Sell solutions, not components – I don’t sell websites. I don’t sell code and copy and content management systems. I sell digital salespeople who work tirelessly to generate new business.
3. Upselling, Cross-selling & Bundling
I’ve been doing a lot of skiing this winter, and you better believe that ski shops take every opportunity to upsell, cross-sell or bundle gear, guides and lift tickets. And you know what? I buy them. Make sure you give your customers the same opportunity to purchase related products or services from you.
4. Know (And Sell) Your Value
Cost versus value pricing is a big consideration, especially in services industries. Many companies get locked into a price based on what they need their margin to be. But you should always be aware of – and sell based on – the real value you’re providing to a customer. For example, a lawyer could say, “This is my fee based on my time,” or she could say, “This is the value of me keeping you out of jail.”
5. Offer a Guarantee
On the topic of value, think about offering a guarantee related to what you’re selling. For example, when Hyundai was trying to establish a foothold in the US, they offered an industry-leading 10-year/100,000-mile warranty. Guarantee your products or services and clients will be more likely to buy, even if you’re charging a higher price than the other guy.
6. Provide 3 Options
You see this a lot with software, but it works in a variety of industries. Provide a low/medium/high as a way to nudge up a sale into a higher price point. The middle one nearly always wins.
7. Provide Flexible Payment Options (with Fees)
If your products or services have a higher price tag, consider offering an option to make payments over time at a higher final price point. This is another one you see often in software–pay $X all at once or $Y split into payments (which actually totals more than $X).
8. Create FOMO Through Scarcity
For a lot of people, there’s nothing worse than the fear of missing out (FOMO) on a great product or service. Consider offering limited-time upgrades, packages, enhancements or other desirable elements to create a purchasing frenzy.
9. NEVER Discount
One way you don’t want to create FOMO—discounts. While discounts might drive up short-term sales, all you’re doing is training people to wait for the next sale rather than buy now. Think about it. The best products like Apple are the same price pretty much anywhere you shop. If you’re good at what you do, people will pay for it. Because once you go down discount road, there’s no coming back.
10. Actively Recruit Reviews & Referrals
A quote from a happy client builds trust like no marketing or advertising can. Encourage your customers to review you on review sites or refer you directly. You could also ask your best customers to write a “dear colleague” letter that you can share with prospects who are on the fence.
11. Make It Impossible to Compare
I can’t think of a better example of this than mattress shopping. Walk into a Mattress Firm or Ashley Furniture and you’ll see the same brands and very similar products, but each store changes just enough to make it impossible to compare apples to apples. Or, put together a unique bundle of products and services that no one else can offer.
12. Own a Monopoly
Look for opportunities to own a particular market, client group or industry. Think concessions at sporting events. Buy up or limit the competition or create exclusive partnerships where you can charge a little more. As Peter Thiel puts it, the government’s job is to break up monopolies; Your job is to own one
13. Learn to Negotiate
I highly recommend you read the book Never Split the Difference. Learn to work with emotion, look for hidden information, and find the right mix of logic and emotion. As a seller, you can capture a little more value from your customers by negotiating well.
14. Improve Your Experience
Put a white-glove spin on your services in a way that no one else offers. Maybe your AC repair team is always clean, in matching uniforms and driving well-maintained branded trucks. Maybe your customer service always goes just *that* much extra.
15. Show the Math
If you find customers hesitate at paying your prices, show them the costly effects of NOT buying. For example, a mechanic may offer a yearly tuneup package for $70, but shows how skipping out on regular maintenance could cost thousands in a couple of years. Suddenly, that $70 looks pretty cheap.
There you have it—15 solid ideas you can cherry-pick and implement to increase your average dollar spend. Spend a little time brainstorming on your own, and I’ll bet you can add more to the list.
Like this? Check out the rest of the 5 Drivers Series:
Part 1 – 5 Drivers: The Simple Math at the Core of Your Business
Part 3 – 5 Drivers: Conversion Rate
Part 4 – 5 Drivers: Average Dollar Sale