Instead, by focusing on the other four levers of revenue generation, you’ll bring in more profit per customer. In turn, this additional revenue will allow you to power up your traffic generation.

This is a true 2+2 = 5 situation.

With this extra revenue, you can spend more to acquire a customer. You can start testing things like: 

• Buying Ads
• Paying for Leads
• Online Marketing
• SEO
• Content Marketing
• Direct Mail Campaigns
• And more

Sounds like a good idea?

Let’s take a look at the other 4 levers. We’ll get back this first lever, increasing customers, later in the article.

Conversion rates for brick and mortar stores range from 20% to 40% while e-commerce stores average anywhere from 1.5% to 5%.

Let’s look at two examples for each of the scenarios above. Let’s also assume an average order value of $100 for easy math.

Brick & Mortar Retail Store:

Assumptions:

• Conversion Rate - 20%
• Average Order Value - $100
• # of Customers / Transactions - 1,000

Taking the assumptions above, your store made $100,000 from 1,000 customers in January:

$100 (AOV) X 1,000 (# of Transactions) = $100,000 Revenue

With a conversion rate of 20%, 1,000 out of 5,000 customers actually bought. This means 4,000 people “just browsed” through your store.

If you could increase your conversion rate by 20%, matching the higher end of the average, your store would have made an additional $100,000 in revenue for a total of $200,000 in the same period.

E-Commerce Retail Store:

Assumptions:

• Conversion Rate - 2.5%
• Taking the assumptions above, your store made $100,000 from 1,000 customers in January:
• $100 (AOV) X 1,000 (# of Transactions) = $100,000 Revenue

With a conversion rate of 2.5%, 1,000 customers purchased out of 40,000 visitors to your website. This means 39,000 people visited your website but did not buy.

If you could increase your conversion rate by 2.5%, matching the higher end of the average, your store would have made an additional $100,000 in revenue for a total of $200,000 in the same period.

Increasing conversion rates can lead to some amazing benefits!

1. Increasing conversion rate means that you will make more sales given the same number of customers. You can double your revenue without bringing in a single “extra” visitor!
2. Increasing conversion rate will also decrease customer acquisition cost. This means it will cost you less to bring in each potential customer, multiplying the effectiveness of your advertising dollars!

How to Increase Conversion Rate

Let's face it. I'm not a conversion rate expert, and I do not play one on TV. Instead of me trying to fake it, see Jabed's excellent tips in the linked article below.

What is Average Order Value?

Average order value is the average of how much revenue you generated per order over a given period of time. 

The formula is simple:

Average Order Value = Total Revenue / Total Number of Orders

Let’s say you average 1,000 transactions a month and each transaction averages $100. 

Your total for the month is $100,000.

Now, if you can increase your AOV by only $20 by adding an additional product to each sale, you magically increased your monthly revenue to $120,000.

That is an additional $20,000 per month!

And here is the thing. Increasing average order value is often more valuable to the customer. 

In fact, you may be providing a disservice to your customer by not providing them with these add-ons.

For example:

I worked at Circuit City, a now-bankrupt electronics store, selling car stereo equipment in college. When someone bought a radio, they also needed a wiring kit, mounting kit, and professional installation (three add-on sales resulting in around an additional $50 per sale). 

Imagine a customer buying a car stereo. They choose to install it themselves. They get home, open the box, and are excited to install it in their car! 

They take their dashboard off. They pull out the old radio and unplug the harnesses. They excitedly grab the new radio they just bought. Oh yeah, they’re going to be jamming out soon! 

But wait, the harnesses don’t match. What are all these freaking colored wires? How does it fit back in the dash? The antennae connection is different. 

Now, the customer must come back to the store to buy the additional items they needed to install the radio. Or worst case, they return it, and we lose the transaction.

This customer needed a few additional items to utilize the main item they purchased to its fullest potential. 

Add-ons are a huge value to your customer. 

A drink and fries were an add-on to hamburger sales. Now I can’t even imagine buying just a burger. I want fries and a drink, too. It provides an immediate revenue increase and just happens to include the highest margin product a restaurant sells - soft drinks.

How to Increase Average Order Value

The benefits of increasing average order value are that you generate more revenue per customer without any increase in marketing spend.

The implementation of this method is also pretty simple with a few tweaks to your sales process.

1. Create Product Bundles

Find products that are often bought together and bundle them into a package. Provide a discount to entice customers to buy the bundle and get an instant boost in AOV.

Tula uses the bundling technique to perfection with a whole selection of "discovery kit" bundles like this one:

2. Offer Free Shipping Just Above Your Current AOV

Determine your current AOV and add a free shipping option at a price 10% higher. Definitely play with the exact percentage for your business. Doing this will cause buyers to add an additional product to the cart to take advantage of the free shipping option.

80's Tees offers free shipping on orders $50 and up. As you can see, this shirt costs $36 and the majority of their tees are similar in price. This means to get free shipping, the customer would have to order a second shirt, increasing AOV and profit, even while eating the shipping cost.

3. Add Upsells During Checkout

Upsells during checkout can be used in several ways. You can simply offer to purchase more of the current product, offering a discount for additional quantities. You can add a personalization option for an additional fee. Or you can offer an upgraded product at a higher price.

At my duffel bag company, we offer the option to add your company name and your own name for an additional $10 each, before adding the product to your cart.

More than 50% of our customers choose both customization options, resulting in a $20 uplift on the sale.

4. Add Cross Sells

Like upsells, you can add a recommendation for cross sells for products that are complimentary to the product they are buying. Amazon is the absolute master of this, and their built-in AI driven recommendation engine is the key to their success. Still, you can do something similar.

Brickell does a great job of cross-selling with the Frequently Bought Together section just below the product. 

5. Price Anchoring

Some may say this is a slightly more devious psychological tactic . Offer a low, medium, and high priced tier. The buyer will more often than not buy the middle tier.

Squarespace lays out their pricing in four tiers, with the lowest at only $12 per month. Take a closer look. That is $12 per month if you pay for the year upfront, but if you want a month to month plan, that $12 jumps to $16 per month.

Secondly, they've added the "MOST POPULAR" icon right above the $18 per month plan. I don't know the numbers, but that little blue box certainly has made many Personal Plan buyers opt to go with the Business Plan. And I'm sure Squarespace has tested this!

Many companies lose money on the first transaction and make it up on subsequent purchases.

Some companies give product away for free because they know that a certain percentage of customers will buy and with their LTV, the campaign will be profitable.

You don’t have to get this sophisticated. 

You do need to sell more to existing customers. 

Whether it’s calling, emailing, or traditional mailers, keep in contact with your customers. 

Make them feel special. Delight them. Provide spectacular service. 

Define your best customers. Holy crap, hardly no one does this. Treat them special. Call them. Give them special privileges, special coupons, first looks, something.

Increasing your repeat order volume allows you to make more money per customer. Knowing your customer lifetime value will help you determine how much you want to spend to acquire new customers profitably.

How to Increase Repeat Order Volume

1. Subscriptions

Add a subscription service. Subscriptions add an immediate after sale revenue stream. You'll get reorders until the term runs out or the customer decides the subscription is no longer worth the cost.

It is amazing how many business models can implement this tactic. You just need to be creative.

John Warrilow's, The Automatic Customer, is a great book that details the different subscription types that businesses can implement.

Take BarkBox for example, Dogs have moved from living in the backyard in a dog house to an actual member of the family with a spot in their owner's bed. BarkBox took the love people have for their dogs and made a simple subscription box with goodies for your puppy that come monthly!

2. Win-Back Campaigns

At the point of purchase, you must collect email and physical addresses. With these in hand, you have the ability to contact your customer after the sale.

With a win-back campaign, you can use email or snail mail to send out coupons, related products, or services, or even just a thank you note. I also like the idea of segmenting the biggest spenders (whales) into a separate list. Then, call your whales or send them special promotions and first-looks at new products.

BiteSquad utilized a snail mail postcard offering a free entree, and according to Sumo, they netted an 18% redemption rate.

3. Free Samples / Swag

Add free samples of your other products or swag such as stickers within each shipment.

As an avid workout enthusiast, I've tried plenty of protein powders, creatine, and other supplements. The savviest supplement companies and health stores include product samples when you purchase. This gives the customer a chance to try a new product and gives them reason to come back and buy more.

4. Product Catalogs

Do you have a ton of SKU's? Add a product catalog to each shipment. 

This is such an underrated tactic and should absolutely be used by more companies. ULine adds a catalog for every shipment. I'm not even interested in office supplies, but I have looked through the catalog.

The magic in product catalogs is when your customers are passionate about your niche.

Two catalogs that stand out to me are Crutchfield and American Muscle. I devoured both and even circled product I planned on buying in the future. This time however, I didn't search, I bought from them because I had the catalog and knew exactly what I wanted.

Let's be completely transparent. Orders did drop by 14.68% and my conversion rate dropped 11.67%. 

But. And a big BUT... 

My revenue and AOV increased. Although we did see those # of transaction and conversion rate decreases, we were more profitable,

Obviously, you can’t go crazy with price increases, but if you do it smartly, it is a simple way to make more money or keep your margins in line as costs rise.

The big thing with raising prices is to test. If you see a huge drop in sales, you’ll know you need to adjust your pricing. Just know that it isn’t as scary as it sounds.

How to Increase Prices

1. Immediate Prince Increase vs. Gradual Price Increase

One way to increase prices is to just increase prices. This could be a percentage increase across the board, or you can strategically increase prices on a per product basis.

Alternatively, you can opt for a gradual increase in prices. Raise prices one product at a time, initiate a yearly increase, or utilize price increases only when your manufacturing or supplier cost increases.

2. Sneaky Surprise vs Notifying Your Customers

When I increased my prices on my website, I simply increased the prices. I did not notify anyone. I did not post it on social media. This worked for us.

In fact, we only had one complaint because the customer was looking at our products the day before. We gave him the old price, and everyone was happy.

Other businesses will want to notify customers of a pending increase. This can also work in your favor if you know you have people sitting on the fence because you could force an "urgency event" where customers want to purchase before the prices increase! You can notify them by email and posting on social media.

3. Test, Test, Test!

Don't just change prices without having a way to test how it impacts your business.

Ensure you have a system in place to measure your Total Revenue, Number of Transactions, Conversion Rate, AOV, & profitability. 

E-commerce stores can easily utilize their Google Analytics set up with e-commerce tracking or their analytics dashboard on their shopping cart platform. Brick and mortar stores can use their POS system. Others may have to develop their own system.

Don't skip this step. You might be surprised what you find when lowering or raising prices!

Increasing traffic comes top of mind for any business owner. It's all about loading the funnel, right?

Optimizing the entire customer journey through the other four growth levers will boost your profits and allow you to spend more to acquire customers than your competitors. 

Let's take a quick look at the impact of increasing each lever individually. Here's our table of assumptions we'll be working with:

We'll use this data to apply the increases to each of the five levers.

Lever 1 - More Traffic

If you were able to increase your traffic by 10%, you would increase revenue by $10,000 per month. 

Lever 2 - Increase Conversion Rate

If you were able to increase your Conversion Rate by .5%, you would increase revenue by $20,000 per month.

Lever 3 - Increase AOV

If you were able to increase AOV by 20%, you would increase revenue by $20,000 per month.

Lever 4 - Increase Repeat Order Volume

If you were able to increase Repeat Order Volume by 10%, you would increase revenue by $15,000 per month. 

*Note that this is assuming your AOV stays the same. You're reorder AOV will largely depend on the type of product you sell.

Lever 5 - Increase Prices

If you were able to increase Prices by 10%, you would increase revenue by $10,000 per month.

Your Cash Machine | The Cumulative Increase

The most interesting thing about the 5 Growth Levers is that they do not happen in a vacuum.

Sure, you will see an increase on each lever individually, Yet, the magic is when you start to see how they affect each other.

When you add additional traffic to the system, the increased conversion rate means a greater percentage of those visitors are turning into customers. More conversions will lead to more repeat customers.

Similarly, when you increase prices, your AOV will go up even higher.

In fact, if you applied the cumulative effect to the exact same level of traffic (40,000 visitors), you would see an additional $7,160 per month.

So, let's add 10,000 more visitors to the store and see what the cumulative increase in revenue will be: 

Now, I understand that adding 10,000 more visitors isn't exactly easy to do organically. If you haven't been able to run profitable ads, this may even seem impossible.

But once you have these optimizations in place, your Customer Lifetime Value will increase allowing you to run profitable ads. If you really hit it out of the park, you'll even be able to outspend your competitors at a profit!

As you can see, focusing on the 5 levers of growth can bring outsized returns.

Is there anything I missed? Let me know in the comments!