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I’ve received an unusually large number of responses to my “Learning to increase profit by watching Starbucks post.” I wanted to share some of the comments here.

Jim was concerned about getting away from his core business…

[I’m concerned that] if I start offering my customers additional products that I’m being pulled too far off center from my core business. How do you balance the need to increase RPC with the need to focus on a single business?

This is a great question. I think the best response I can give is that if adding a new product or service runs the risk of diverting your focus away from your company’s core competency then you need to look to partnerships. In other words, if you are selling widgets, but you think that your customers would also be interested in whatchamacallits then don’t get into the whatchamacallit business all by yourself. Find yourself a partner that already knows that business, and cross-sell. (i.e. she starts selling your widgets in her whatchamacallit store, and vice versa.) Supporting the business, managing the inventory, etc. would be handled by the partner, and with any luck you’ve found a new distribution channel for your wares as well.

This is even easier to do on-line, thanks to affiliate marketing programs. Your web site can offer just about anything to your customers, with little or no work on your part. This can be a powerful way to increase the revenue potential for each individual customer.

Robert was interested in hearing more about this concept.

…and today’s post about Starbucks really struck a nerve with me. I was wondering if you had any resources you would point me to on how I can increase the amount of money I get from each customer.

Absolutely. Jay Abraham (author of the excellent “Getting Everything you Can out of All You’ve Got: 21 Ways you Can Out-Think, Out-Perform, and Out-Earn the Competition) said that when you boil business down to its bare essentials, you really only need to learn three things:
<ol><li>How to increase the number of customers</li><li>How to persuade the customers you’ve got to spend more on each order</li><li>How to encourage your customers to purchase more frequently</li></ol>
What we’re talking about here is number 2: increasing revenue per customer. There are quite a few ways to do this…
<ul><li>Complementary Products and Services: **This is what we’re talking about with the Starbucks example– adding products and services that are complementary to your core offerings.</li><li>Bundling:This can be a big one if you do it right: by bundling several of your products or services (or multiple instances of them) together into a single offering can have a dramatic increase in revenue per customer. A great example of this is the company that fills my heating oil and maintains my furnace offers a yearly package that bundles a lot of their services into a single bill. Convenient for me, and guaranteed revenue for them. Everybody wins.</li><li>Encouraging Bulk Orders:** This is a really common tactic, and with good reason… if you’re not providing great price breaks for customers to buy larger quantities at a time you should be. Squeezing your margin a little may seem scary, but remember: you’re getting a bunch of sales done in a single transaction. Just make sure that the threshold on the size of the order is high enough to justify the size of the discount.</li><li>Market to your existing customer base effectively. Check out the amazing “Permission Marketing” and “Permission Based Email Marketing” if you haven’t already.</li></ul>
The key here is to keep your customers happy, and gradually increase their perception of what your business can offer them.

This post is licensed under CC BY 4.0 by the author.