Price Increase
Increasing the cost of products or services, on the one hand, may seem inefficient. Which client wants to pay more?
The proposed method is used quite often and works well. The research results by the consulting company McKinsey suggest that even if the price tag is raised by 1%, operating profit increases by 8-11%. There is no doubt that with considerable increases in price, orders decrease. However the profit will increase due to the rise in the average check, provided that the cost of production remains at the same level.
How to Set the Ideal Price for Your Product?
- Step #1. Measure the current number of leads, average checks, and customers.
- Step #2. Use the resulting values to calculate profit and conversion.
- Step #3. Increase the cost of goods and perform a new calculation of marketing indicators.
- Step #4. Estimate the final profit and see the conversion, leads, and profit dynamics.
Establishing the optimal balance between the number of customers and the price at this stage is essential. It is better to gradually increase the cost of goods, starting from the minimum values of 1% -10%. Be sure to test pricing innovations and never use multiple price increases.
Increasing Conversion
Conversion growth should be present at every stage of interaction with customers. The ideal one should look like this. The company has a digitized CMJ that you use to digitize the parameters at each customer touchpoint.
Your goal is to work on increasing conversions at each stage of the customer journey. Try to increase it by at least 10%. Then, the effect will increase several times compared to that achieved by increasing the conversion only at one of the stages of interaction with customers.
Example
You place your ads in the Yandex contextual network. Its reach is 10,000 users, and 1,000 customers click on the ad. Out of these thousand visitors, you get 100 leads; out of this hundred, ten people become your company’s customers with an average check of $5,000. The cost of the advertising budget amounted to $5,000.
So, we fixed the amount of profit. Now let’s formulate a task for the marketing department and contractors – “We need to increase the conversion by 2% at each stage.” The final conversion will be 12% in each stage. Our budget will be the same as in the previous example. The new marketing metrics look like this:
So, we fixed the amount of profit. Now let’s formulate a task for the marketing department and contractors – “We need to increase the conversion by 2% at each stage.” The final conversion will be 12% in each stage. Our budget will be the same as in the previous example. The new marketing metrics look like this:
Increase in the Average Check
The average check consists of the average number of product units (units) in the check and the average price of one unit. For example, a customer of our company made a conditional purchase. His check includes pants worth $3,000 and a T-shirt worth $2,000. The size of the average check, in this case, will be $5,000, the average price of one check unit is $2,500, and the average number of sold units of goods is 2.
In this regard, a completely logical question arises – why is separation necessary if it is possible to increase the average bill without such difficulties? Splitting a check expands the helpful information for obtaining a set of tools.
For example, we discovered that increasing the number of units sold by one check significantly affects making a profit. Therefore, the company expands the assortment matrix and uses cross-selling in sales. If it becomes more efficient for the business to increase the average cost of a unit sold per check, then the company uses up-sell in its work and investments in the brand to achieve more expensive sales.
The Attraction of New Clients
The most popular way among entrepreneurs is to increase company profits, but not consistently the most effective.
Do not limit your customer acquisition channels; test other tools as well. Remember that social media targeting and standard search engines are not the only tools for expanding your company’s customer base.
Other methods are possibly not used by competing organizations in the market. Incorporate them into your company to improve the efficiency of your customer acquisition channels. Test channels, analyze metrics, and enhance the effectiveness of your advertising communications.