3 Steps To Increase Your Average Revenue Per Customer

Business.com / Sales / Last Modified: February 22, 2017

Techniques to help increase both your number of customers and the amount per transaction customers spend in your business.

Do you know the two things McDonald's and GoDaddy have in common?

By the time you checkout; your bill or payment is tripled due to the extras added.

In business, it is much more profitable to have fewer customers or clients who pay a premium than to have a large base of customers or clients who pay peanuts; that way you earn more but work is reduced.

Three steps to increasing your average revenue per customer.

Using the techniques listed below, you will increase both your number of customers and the amount per transaction your customers spend in your business enabling you to reach your business goals.

Related Article:Tips From Closers: 8 Pro Techniques Top Sales Professionals Use When Selling

1. Charge More

Increasing the price of your business or service should be your first step. Most SaaS are underpriced, in the words of SaaS guru Patrick Mckenzie, "Take a moment, to look at your yearly or five-year financial business goals, can the current price of your product or service beat that benchmark? I guess not, crunch those numbers up. Most businesses between 65 percent to 75 percent miss their revenue or profit goals" - Harvard Business Review

The big question is “are you charging enough”? There are several signs to show a business is not pricing itself aggressively. One is the sales team meeting target easily, figuring out how to price your business can be tricky and complicated but the downstream is to achieve business goals, you need to raise your price to meet your long-term business goals.

“The amount you charge captures everything a particular offer represents, including your product’s impact on revenue, associated risks, and costs.” A creative way to charge more is to add new features to existing products or services. Offer new products or services when increasing your pricing and make it known in your newsletter for a week. Alternatively, you could offer new plans or tiers which reflect your new pricing and a slight increment in the old pricing.

2. Increase Average Transaction Size

A second way of increasing your average revenue per customer would be increasing the average transaction size through:

  • Cross selling
  • Up-selling
  • Minimum purchase size
  • Offering combos or multiple packages

Cross-Selling:

This means you attach other services and features of your business to the checkout page of each customer so they don’t leave with one product or purchase rather they purchase other products and services to complement their main purchase.

For example, if you are in domain registering business, while a customer is checking out, simply offer/add a hosting plan for the new domain to the purchase, since that would work obviously, you can offer personalized email service or SSL certificate that way instead of earning $10 per customer, you are getting $35 to $45 due to the extra toppings.

Amazon results page for Pebble Time Steel watch and frequently bought together items.

Do you get the picture?

Key Takeaway:

Go back to the drawing table with your team, brainstorm and develop other features, services your customer or target audience would need on their journey to a purchase or while doing business with you. Bundle it up at the checkout page.

Up-Selling:

Another technique of increasing the average transaction size is up-selling at the point of sale. Up-Selling involves offering a better value to customers compared to their present choice; this means you offer a more expensive and sophisticated version of your service that adds value to their transaction.

Example of upselling tiers on business site

Minimum Purchase Size:

Simply, increasing the number of purchase unit per customer would increase your revenue, remember this technique works for certain industries only. Making customers buy more than one product per transaction in exchange for free shipping or a gift card would increase customer spending.

Related Article: Game of Probability: The Critical Difference Between Marketing and Sales

A perfect example can be found below:

minimum purchase example on business site 

Simply changing your product or service mix could result in an increase in customer purchase per transaction, this technique requires  creativity and split-testing to determine what works for your business. Subtracting or adding to your present business offering can help grow your business size.

Offering Combo or multiple packages:

This would encourage customers to buy more by offering valuable deals and packages on products. A restaurant  chain could offer a small dish and  appetizers together for a little less than the combined price of both options. Apply this technique to your business with creativity.

Most buyers would definitely pick the combo option, leading us to another point.

 Amazon example of how to show frequency of items purchased together

 

3. Increase the Frequency That They Buy

Increasing the frequency that customers buy your products can also increase the average revenue per customers. Techniques for implementing this step include:

Create a periodic sales challenges or giveaways:

The sales and communication team should give priority to running periodic sales challenges and giveaways with huge discounts. This would amount to a recurring revenue for your business on a large scale. Businesses in the E-commerce niche could run weekly or monthly discounts sales to increase revenue and discard old stock.

Ask yourself the following questions; how many times do your current customers make a purchase? Once a year? what could you add? what would you offer?

  • Bonus 1: use psychological pricing strategies such as charm pricing (adding 99 cents), use prices with fewer syllables.
  • Bonus 2: Train the sales team to sell the most expensive packages or plan first.

Related Article: Tapping the Right Brain: 5 Steps to Improving Creativity in Sales

Conclusion

Increasing your Average Revenue Per Customer (ARPC) requires patience, creativity, and strategy. Fully utilizing one or more of the steps above would aggressively generate more revenue to meet business goals.

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