What gets measured gets attention. What gets attention gets done.
There’s potential revenue sitting in your business, and all you need to do is measure it, monitor it and act on it. So what are you waiting for?
I learned a lot over years of working with truly talented business professionals, but one of the points that really stuck with me is this:
When you’re struggling to look for new revenue sources, it’s time to look within your business. With the right data about the business you’re already doing, you’ll often find the path to growing your revenue is right in front of you.
The actual data points you’ll specifically need to monitor to grow your business will be unique to your company. However, compiling this information and knowing what to work for is a universal concept. Typically, the data we’re looking for is described as “attachment rate,” “purchase frequency” or “add-on sales.”
What’s all this jargon and why does it matter? Well, let’s use an example to illustrate the kind of revenue goldmine you could be sitting on. Since I just got done shopping for a new phone and plan, let’s go with that.
Let’s say we run a mobile phone business and make money on the sale of a phone plus a 2-year service contract. We’ll call these “Phone Activations.”
But what else would we make money on? The monthly contract? Sure, but what about accessories? You wouldn’t buy a new iPhone only to leave it naked and vulnerable to scratches, would you? What about charging it while you’re on the road? And don’t forget the laws requiring you to be hands-free if you’re going to talk while you drive.
That’s a wealth of sales opportunities for accessories like car chargers, leather cases, Bluetooth headsets, screen protectors, and more. We’ll call this revenue stream “Accessories.”
The frequency in which the sales of Accessories get “attached” to Phone Activations becomes our attachment rate. In this case, it’s tracked as the number of Accessories sold per Phone Activation. We can easily find our attachment rate for a certain time period by dividing the total number of Accessories our store sold by the number of Phone Activations sold.
Since we’re trying to increase our revenue, we decide that we need to examine our attachment rate. Let’s say we find our attachment rate is 2.5, which means that for every Phone Activation we sell, we’re selling an average of 2.5 accessories.
What does it break down to? Well, 2.5 accessories at $20 of revenue per accessory is an average of $50 in accessories revenue for each phone activation.
And if we sold 300 phone activations last month, that works out to:
300 Phones x $50 = $15,000 of revenue from accessories alone.
To increase this revenue, we’ll need to determine how good this is. We can draw on our business experience, refer to industry standards or use other means. For our hypothetical business, let’s say we determined our attachment rate is a little low, and we know we can do better.
With some focused attention, a training program and various incentives for our sales team, we could shoot for an attachment rate of 3.0 per phone. Why? That seemingly small jump from a rate of 2.5 to 3.0 equals an extra $3,000 in revenue per month, or $36,000 in additional revenue per year, all from products we already carry.
And if we owned 25 wireless stores and implemented this strategy in all of them, well, you get the gist.
Sound simple? Actually, it is. This scenario holds true for any other data point you want to measure, monitor and act on.
What are the equivalents of an “attachment rate,” “purchase frequency” or “add-on sales” for your business? Are you tracking and monitoring them? Are you using them to measure your business performance? Or to reward your business and your team?
The good news is that it doesn’t take a whole lot of time to put the measurement systems into place, and we can help you with that. Depending on your business and what your data points are, focusing on moving their performance forward can increase your current revenue by 10%, 20% or even much, much higher.
Want to get started today? Here’s a guide:
- Identify three important data points and measure them.
- Set some target goals for improving those data points.
- Put some focus and effort into reaching those targets.
- Measure, monitor and broadcast the results regularly.
Then, sit back and enjoy your newfound revenue stream.
Not sure what your attachment rate is? Ready to increase your purchase frequency?
We can help.