Increasing sales margins is always in the back of my mind. And who would blame me?
If you have your own business, then you probably know what I mean! You always want to put more of that hard-earned money in your pockets because that's where it belongs!
How can you do that?
Many business owners find themselves scratching their heads when they have to come up with the answer to that question.
Yes, there are many ways to maximize your profit margins, but how many of them are actually applicable, especially if you're a small business owner?
Today I am going to share with you a strategy that I used for my own business that helped me maximize my margin without spending a ton!
If you're ready to learn what you can do to see an increase in sale margins, tune in now!
The 5 Steps of the Buyer’s Journey
Before sharing my golden formula with you to increase margins, let’s learn a bit more about the buyer’s journey. Understanding this will help you find the perfect time to execute the strategy I will be sharing with you later.
Many say that the customer's journey only has four steps. However, I am here to argue that there are actually five of them, and they go like this:
- The Offer
Let’s say you’re driving alongside the road and you pass by a Chick-fil-. You see on their billboard that they’re running a promotion on their chicken nugget trays. (This is the OFFER.) So, what do you do? Well, if you’re like me, then you promptly turn around, head to the Chick-fil-A, get in line, and pull out your wallet to order, which leads us to step two…
- You Become a Customer
During the offer stage, you see what’s going on, but in the second stage, you become a customer. That’s when you spend money. So, keeping up with our example, you become the customer when you order your chicken nugget trays.
- The AOV – Average Order Value
The third step in the process usually happens this way: While ordering your nuggets, the cashier asks you if you want fries and a drink with your order.
You end up ordering your chicken nuggets, but also add fries and a drink. This is called the AOV, or Average Order Value.
This creates value for you as a customer because you don’t have to go somewhere else to get a drink or a side of fries. This also creates value for the company since now, Chick-fil-A's order value rose because they offered you those additional options.
- The Resell
The resell in this scenario is when you get a notification on your phone the next time those chicken nugget trays are on sale again.
- Nurturing Along the Way
This is the fifth step that I added to the process, and it simply means nurturing your audience before they’re even customers, then nurturing those customers.
You can do this in many ways; you can send emails with coupons and bonus points, use social media to target your customers, or even message them when new products come out, etc. The possibilities are truly endless. In our Chick-fil-A example, they nurture their customers by sending out emails when they have new menu items to try and allow their customers to earn and redeem bonus points when spending a certain amount of money at their restaurant.
The Golden Formula For an Increase in Margins
Now that you know what the customer’s journey looks like, it’s time to share my golden formula with you, and it’s an easy one!
If you remember, last week, I had Dean Graziosi as a guest on the podcast, and the main thing we discussed was how to use digital products to increase your margins.
Well, this is precisely what my formula is:
a physical product + a digital product = higher margins
However, you need to execute this the right way and at the right time, so that you don't confuse your customers.
How can you do that? Keep reading to find out!
How You Can Increase Your Margins
Did you notice at what point of the journey the customer is willing to pay more? Yes, you got it! Customers are always willing to pay more during the third step of the journey, the Average Order Value.
This is because the second product (or digital product, in our case) is presented right after the customer has already shown a willingness to buy something.
However, you have to offer the right product to get customers to spend more. As Dean Graziosi said in last week’s episode, it has to be something that adds value and serves your customers.
How I Increased My Margins
If you’re still unsure of how you can execute this formula, you’re in luck because I did it, and today, I’m sharing my experience with you!
This New Year’s Eve, I launched a new product: a planner. And this is how I planned the customer's journey (and added value through a digital product, which increased my margins a ton).
- The Offer
When I was thinking about putting this together, I started with research. I found that similar planners sold for between $15 and 30$, depending on what came with them.
Next, I made my calculations, and decided that I could probably price my planner between $15 and $20. However, I started thinking that maybe I could increase my margins a bit more.
What if I gave away part of my planner for free?
So, here’s what I did: I took my planner, and instead of it being for an entire year, I decided to give away a 90-day planner for free.
Now, when I say free, I don’t mean all of it. I still charged a handling and shipping fee. People still ordered because hey, they wanted a free planner!
- I Got Customers!
When people decided to get the free planner and pay the handling and shipping fee, they became customers. Why? Simply because they were willing to open their wallets and pay.
This is where my AOV comes in!
- The AOV – Average Order Value
For this step, I came up with two ideas. First, I would offer the whole planner (so the entire year) for an additional $10. That’s the first AOV.
The second one is where the digital product comes into play! For $37, I offered my customers training on how to use both products. This way, they could get the most out of them.
- The Resell
During the resell step, I used email. I have every single one of my customers on an email list. Whenever a new product comes out, I let them know.
- Nurturing Along the Way
Finally, for the nurturing process, I use social media! I post valuable information and make sure that my customers get the maximum value out of this planner.
By the end of it, I was averaging $32.67 per customer for a planner that I was going to sell for $15. That's a pretty awesome increase, and it served and added value to my customers. WIN-WIN!
The Top 10 Takeaways
- A physical product + a digital product = higher margins.
- Remember, it can be a simple dial change.
- The customer journey contains five steps, and knowing the journey will help you understand when to add those digital products.
- The first step in the customer’s journey is the offer, so make sure you have a strong one.
- People only become customers after they hand you their money.
- Your AOV is your average order value.
- You can go back and resell your customers in the future.
- Don’t forget to nurture along the way!
- Don’t feel like this is a new concept.
- Remember, you are and will always be your biggest investment.
