How Small Changes Can Mean Big Profits
In the article, 80% of marketing that most businesses overlook, I talked about the "The 5 Steps of the Sales/Marketing Process":
1. External Lead Generation
2. Converting leads to clients
3. Up-selling
4. Re-selling
5. Referrals
Now I'm going to show you how making small improvements in each area will make a huge difference to your profits
I want you to imagine a business that brings in 1,000 leads a year, converts 20% of those leads into paying clients, makes an average of 10 sales per client at an average profit of £50 per sale. That's:
1,000 * 20% * £50 * 10 = £100,000
That's £100,000 in net sales (we'll ignore referrals for the moment). Let's assume fixed costs of £60,000, so that means a £40,000 profit.
Now, imagine the company gets just a little bit more serious about their marketing. And let's say they only manage to improve their processes by a miserly 5%.
That's: 1,050 leads a year, converting at 21%, with an average of 10.5 sales per client at an average profit of £52.50 per sale.
Hardly spectacular increases are they?
But here's what happens to the sales and profits:
Net Sales: 1,050 * 21% * £52.5 * 10.5 = £121,550.62, an increase of 21.5%.
Profits: £121,550.62 - fixed costs (still £60,000) = £61,550.62, an increase of 53.8%!
And these are from just tiny incremental improvements in their marketing.
As you can see, it's so much easier to achieve these jumps in sales by compounding lots of little improvements than trying to do it by getting 21.5% more people in the door.
(it's usually possible to take this a step further and break down some of these processes into sub-processes ... and then make small improvements in each sub-process, which multiplies results even more!)
Now, Let's talk about referrals
Referrals work like compound interest.
Let me explain: if you have a 20% referral rate then, for every 1,000 clients you bring in, you'll get 200 new clients via referral. However, from these 200 referred clients, you'll also get 20%, that's another 40 clients. And, from those 10, you can expect to get another 8 clients ... and so on ...
Adding these 20%s up: 200 + 40 + 8 + 1.6 + 0.32 ... = 250 new clients by referral (25%)
So, with a 20% referral rate, you increase your business by 25%.
Have a look at some other referral rates:
25% referral rate: 333 referrals per 1,000 clients
30% referral rate: 428 referrals per 1,000 clients
40% referral rate: 666 referrals per 1,000 clients
You can see that, just like with compound interest, small increases multiply to produce big results.
By now you've seen how just little changes in your marketing can create huge increases in the profitability of your business.
With my Marketing Manager service, I do all this work for you: I identify the processes you have in place that are already bringing money into your business and then I use my marketing experience to uncover the improvements that you've seen in the numbers I've just shown you.
And these increases can be far greater than the 5% improvements I used in the example above.
If you'd like to see evidence of a real life 28.9% increase in sales conversion, check out this page: 28.9% Growth In 4 Weeks.
That was the result of improvements I made to a couple of key areas of my client's website.
If you'd like know what it means to have me working on your marketing and making similar increases to your sales (or your money back!), check out my Part-Time Marketing Manager service.
Best Wishes
Steve Gibson
Steve Gibson Consulting, Edinburgh 2015 - Privacy Policy