By: Michael Cooney
Have you heard the saying “Never leave money on the table”? Good advice. After all, when it’s laying right there out in the open, and you walk away from it, you’re only hurting yourself. I know you wouldn’t intentionally do that. But whether you realize it or not, you’re probably leaving money on the table every single day your business operates. To counter that, here are a few things you can do to help maximize the amount you sell to each customer or client.
What we’re talking about is called “the back end,” or “back end sales.” When a new customer buys a product or service from you the first time, that purchase is the “front end” sale. Sometimes it’s a major purchase, such as a new car. Often it’s a small purchase, particularly if you sell through the Internet or by mail order, since new customers will often start out small to determine if you are trustworthy before committing to larger purchases.
Back end sales
Using a new car dealer as an example, what happens after a car is sold? Naturally, the dealer wants to have the buyer continue to return for more purchases—back end sales—such as recommended maintenance, tune-ups, repairs, and disposables such as tires and batteries.
With competition for new car sales so great, most dealers will tell you that they couldn’t even stay in business if they only had the front end profits from new car sales. New car dealers must have a thriving back end just to survive.
While most businesses do have some kind of back end sales, it typically happens by accident. Most business owners don’t cultivate or try to maximize the back end. Instead, they just take whatever comes in the door. If a new customer doesn’t return, no attempts are made to bring him back. As a result, they are leaving money on the table!
Tactics that work
What can you do to maximize back end sales? Here are some tactics that work for both new and regular customers.
Offer your customer a package of goods related to any large purchase at a substantial discount if he buys the package now. If the items offered are related to the first purchase, or enhance the value or function or appearance of what was purchased, your new customer will welcome the offer.
Will everyone take advantage of your offer? No. But if a quarter or a third of them do, you’ve just made a substantial added profit. You can also put together a special package anytime, and mail the offer to your customers.
What about upgrades? After your customer has committed to a major purchase in your product range, offer to upgrade that purchase to a higher level for a lower amount than normally required. For example, if an upgrade to the next level retails for $500 and costs you $200, try offering the upgrade for $300 if he buys it then and there. The customers who agree to it will be pleased to save $200 on a better version, and you’ve made an additional $100 and extra good will.
Think strategically, too
Those tactics have brought substantial added profit to many kinds of businesses. With some thought and creativity, you can apply them to your business as well. But more than just tactically, I also want to help you think strategically.
Look at your business through the eyes of your customers. Since many first time purchasers are “testing the water” to see what it’s like doing business with you, think of what you can do to make sure they’ll want to come back as regular customers. Buying from you should be easy, enjoyable, comfortable, convenient and even fun! To think strategically, calculate what a typical customer’s lifetime value is for your business. If you go all out to do a great job with the first sale, you stand an excellent chance of getting continued business from that person for years to come. Years of additional profits, because you did such a superb job the first time.
Most importantly, consider this: Do you know what the single most important factor is in generating repeat business and good will? It’s not price, or even quality. It’s trust. If your word is your bond, if you keep your word even if it means suffering a temporary loss, if you make honesty a top priority, you will gain trust and loyal relationships. Conducting your business by the Golden Rule, and doing so with a smile, is hard to beat.
Michael Cooney, co-founder, Global Development, a marketing and advertising consulting group