One of the really complex things about growing your profits from your existing customer base is the math gets a bit screwy.
For the math geeks out there (Zac included), the growth isn’t linear it’s geometric – your gains don’t add they multiply.
So here is what happens when Zac eats Thai food:
So say you run a restaurant and your ‘average’ customer comes in once a month spends $70 with you each time they come in. That’s what happens when I order Thai food here and usually it’s for 3-4 people. Maybe that says more about me than it should.
So we know that I would spend $840 ($70 X 12) in Thai food a year. I do eat out more than once a month so they do have a chance for me buy to more Thai food than I do. Every time I eat out I could choose Thai food but I don’t – the fact that I don’t means there is an opportunity for them for extra purchases.
Let’s be conservative and say that they find a way to get me to purchase an additional 4 times a year. Which is surprisingly easy – I probably eat out once a week. I’ll admit I do respond to advertising – so whoever has something I want to try means I eat there.
One thing McDonalds does very well is get people to order a little bit extra – that is what their Value menu /Loose change menu or whatever they decide to call it next is all about. You order the meal and they get you to buy an apple pie or another burger with your meal. Bonus profits – just by increasing the transaction size.
So back to my Thai food. Let’s say they figure out how to get me to order either an extra entree or desert with my meal. There’s an extra $7-10 no sweat for them.
So now we are at $77 a meal 16 times a year. $1232 per year rather than $740. A 66% increase in revenue all from a 10% increase in transaction size and a 33% increase in purchasing frequency. Then we multiply that by your customers and low and behold we get a ludicrous increase in your turnover.
As an interesting aside in the lecture ‘Arithmetic Population and Energy’ (It’s on Youtube here http://www.youtube.com/watch?v=umFnrvcS6AQ )– Dr Albert A. Bartlett’s opening sentence is
“The Greatest Shortcoming Of The Human Race Is Our Inability To Grasp The Exponential Function.”
Exponential and Geometric are the same thing.
For the sake of our little chat here, what that means is that many people will look at the 66% increase in customer purchasing and say something like “Bullshit.”
However if we all get out our calculators and do the math for own business we will see that a 10% increase and a 25% increase will actually increase our turnover by 66%… You can’t fault the math.
Then if our restaurant achieves this with 1000 patrons like me then $740,000 to $1,232,000.
Our challenge to you is are you asking yourself the questions necessary to get your customers in more often and to get them to spend more when you do?
What are those profits worth to you?
That is only the beginning of what your existing customers can do for your business when you have a ironclad relationship with them.
For the first time ever, we are revealing our step by step blue print to building an ironclad bond with your customers, so that they keep purchasing from you for longer, they buy more of your services from you, they buy in larger quantities and take your other products and services that you might offer (if you don’t have any there is nothing stopping you from finding some.
And finally, getting them to refer without you being seen as pushy!