Welcome to the third episode of the Five Numbers Podcast and today we are going to talk about the 2nd business growth multiplier or the 2nd number which is your conversion rate.
So what is the conversion?
A conversion is simply a sale. We want to keep it simple because we are looking at establishing a benchmark.
So your conversion rate can be simply measured by the number of sales divided by the number of leads. Leads being your measure of the first business growth multiplier.
In the first instance we are keeping the definition of your conversion rate has been fairly simple being the number of leads divide by the number of sales but at a later stage as we start to optimise your business we might look at the conversions by product or service or location or marketing channel.
As we discussed introduction and our previous episodes , we are not looking at a massive increase or one single idea that will increase our conversion rate but a number of small changes to the business that will each result in a 1%or 2% increase in the conversion rate.
We are looking for 10 ideas that we can implement that will each result in a 1% increase in the conversion rate.
To one of the important factors in being able to measure our conversion rate is it needs to be easy to measure.
So a retail business might look at our till tapes on a daily basis to determine how many sales were made during the day or alternatively it could be the number of invoices that you issue in a particular period whether that be daily weekly or monthly.
Xero, the online accounting software provides the number of invoices and average invoice value as part of its standard report.
Most ecommerce shopping carts will provide you with a simple report that tells you the number of sales made in a week, month etc.
Just to repeat, your conversion rate is the number of sales divided by the number of leads.
So how can you improve your conversion rate
The number one way, which is the biggest opportunity missed by many businesses, is getting your existing clients and customers to buy more often. You have already sold to them and they trust you.
The cost of acquisition is nil, you have already acquired them.
So are they prepared by the same product or service again or what do you need to offer them a complimentary product or service that are offering?
Can you convert them from a one-off sale to a recurring basis?
For example, if your business provides a service maintaining equipment can you offer a maintenance plan where businesses pay on a monthly basis where you proactively maintain equipment rather than just been called out when something goes wrong. Proactive versus reactive.
If you are going to get your customers to buy more often you really need a database of all your past and current clients and you need to communicate with them on a regular basis.
I ask every business that I speak to:
- Do you have a list of all your past and current clients or customers?
- If yes, how often do you contact all of them by phone, email or mail?
The answer to the first question is almost always: “Yes, we have a list in our invoicing systems or I know that someone in the office has a list somewhere … maybe …. I think”
The answer to the second question is “No – we don’t contact them”.
They never systematically contact all those customers or clients that they spent so much time and effort and money getting in the first place.
They never contact them to see if they were happy about their purchase or service.
They never advise them of a new product or service that they are offering that would be perfect for them.
They never educate them about different ways that they can get the most benefit from your service or products.
Your past and current clients are a gold mine for any business – they already trust you. You have already overcome their objections, collected their money and provided the product or service.
Let’s say your conversion rate is 10%, if you get 10% of your customers to buy again throughout the year, your conversion rate increases by (100 leads, 10 buy, 1 buys again, 11 sales on 100 leads) 10% increase in conversion rate to 11%.
Here are just some different ways that you can get your current customers and clients to buy more often from you:
- •Develop a continuity service where you charge a monthly amount for a maintenance plan.
- For example, 1,000 leads, 10% conversion, 100 customers, 5% convert to continuity, 20 x 12 invoices, 240 invoices, 34% conversion rate 240% increase in conversion rate. This will reduce your average sale value but it depends on where you price continuity program. It could be at a much higher price.
- Loyalty Scheme or Card – where they get a discount or extra benefits for buying from you again.
- Provide education through webinars, seminars, whitepapers that address their problems and how you have the knowledge, expertise and experience to provide a solution.
- Send them emails detailing your latest products, services and offers so that they know everything that you sell.
Another way that we can improve our conversion rate is to improve our selling.
Is our proposal document sufficient for people to make a decision/
Does it contain enough information, does it highlight the benefits of doing business with you?
Does the sales pages on your website actually convert? Can they be improved? Does it have a call to action.
Can we improve our closing, actually asking for the sale?
Does our sales material and processes focus on the benefits to the customer or rather just the features of the product?
One way of thinking about the benefits of your product or service is to look at the product of the product will stop what is the in benefit that the customer gets – sex money fame pleasure time and ideally, we attach that benefit or product of the product to that emotion.
The book worth reading is the Caldini’s “Influence – the Psychology of Persuasion” . Caldini explains the psychology of why people say yes and distils the psychology down to reciprocity, commitment, consistency, social proof, liking, authority and scarcity.
Are you following up your leads quickly enough or at all?
It is surprising how many businesses lose sales because they just don’t follow up leads.
Create an automated system in Ontraport – leads gets added to Ontraport and added to sequence: task call lead if call not answered, send “sorry we missed you email” if call answered, then send “great to talk – here is info or I will get back shortly to you but just for now here is ebook, report, video etc.” email
Is your product a quick impulse buy or a decision that needs to be considered over time?
Are you nurturing your prospects or leads through the sales process?
Do you need to educate your prospects, providing them with reports, white papers or case studies so that they may make an informed buying decision?
Generally the more expensive and intangible product or service the longer the period that you will need to nurture your prospect through the buying process.
An automated process to nurture your prospects is the e-mail auto responder, where prospects will receive a series of e-mails over time moving them through a sales funnel.
People buy on value not price. So you need to establish what is the value to them of the product or service.
Are you trying to offer everything to everyone and actually providing nothing to no one?
Can you look at a smaller tighter segment within your market and have your offer exactly appealing to their wants, needs and desires?
The needs of people looking for superannuation strategies have massive differences in their risk profile depending on their age. Those close to retirement are looking at preserving their capital, whilst someone in the thirties, will be prepared to take far greater risks like actively trading shares.
The sales strategies employed will be completely different for each demographic.
Becoming The Expert
Would be more compelled to buy something from the expert in their field?
These days being perceived as the expert in your field, is much easier than ever before. In the past, you had to write a book or speak at industry conferences.
Today, you can bypass that by producing videos, writing articles on your blog and having a podcast.
Risk Reversal or Guarantee
Most businesses actually guarantee what they offer but hide or are not explicit about it.
Can you offer a guarantee for your product or service that will remove your customers’ objections and concerns?
Testimonials could be in a number of different forms – reviews, written or video. Testimonial reduce objections and build on social proof.
Ecommerce businesses can measure and track every step of the way. Drop off points in checkout process,reactivate discarded shopping carts through email and remarketing campaigns.
Spilt test – sales pages, headline, copy, images, layouts and calls to action.
The first step to improving your conversion rate is establishing a measure of your conversion rate.
The conversion rate is sales / leads. Sales are easily measured by the number of invoices per day, week or month.
Once you have a measure or control you can focus on improving it.
Don’t worry if it is not the perfect measure yet or too general, you can always drill down to a tighter focus later.
Next Week, we discuss the Third Business Growth Multiplier – Improving the Value of each Sale