Dollars and Sense: Focus on Existing Customers to Increase Your Sales per Customer and Sales per Item
Senior Manager of Product Management
In the first part of this two-part series, we defined sales per item and sales per customer and discussed the importance of these metrics. In this second part, we discuss key actions that retailers can take to positively impact sales per customer and sales per item.
Retailers spend much of their time looking for new customers to grow sales; but to increase sales, they should first focus on their existing customers.
Amazon and McDonald’s are experts at getting customers to buy one more item. Amazon offers items that complement what you are purchasing. If you are buying a camera, they will suggest batteries, a tripod and a camera bag. McDonald’s is famous for “Do you want fries with that?” and “Would you like to super-size your order?”
You have employees in every department who can use these same compelling selling techniques. Well-trained store employees are key to enticing customers to buy just one more item and to upselling customers. If they are not trained on suggestive selling or upselling methods, that is the best place to start. Merchandising improvements, of course, can also help to increase the sales per customer with effective displays, cross-merchandising and especially ensuring out-of-stocks are at a minimum.
Employees should look in customers’ carts.
Just like Amazon looks in your cart, your employees can look at your customers’ cart contents. When employees are greeting a customer, they can observe what the customer has in their cart and suggest additional items that may complement what they are purchasing. For instance, if an employee notices a customer has ingredients for a dinner in the cart but no bread item, they can suggest fresh dinner rolls, French bread or breadsticks from the bakery to go with the meal; and don’t forget the wonderful garlic butter tub sold in the deli. Or if they notice the customer has chicken in their cart, it’s a great opportunity for the employee to make them aware of the sale on steaks this week.
Employees should not only be looking to increase sales in their own departments but also to grow sales in all departments. Good merchandising techniques will help your employees do this. For example, put a shipper of corn skewers next to the fresh corn display in produce. This makes it easier for employees to entice the customer to buy that additional item that is a natural fit to what they are already purchasing. However, employees still must be observant and look in the cart.
Contests can promote excitement in the store.
Run a contest and have fun with this. Have the goal be an increase in the sales per customer or the sales per item metric. The largest increase of these metrics wins first place, with additional prizes for second and third place as well. Determine an agreed upon baseline for each store. That may be the average sales per customer or sales per item against the same period last year, or maybe against the previous 12 weeks, but remember that seasonality will have an impact on this method. Either way, ensure all stores are on an even playing field. Determine the length of time for the contest, considering a suggested duration of at least 8 weeks.
Stores generally like competition. Who doesn’t like to be number one? Determine some prizes that will be awarded to the highest percent increase on either metric. Prizes can also be awarded to the most creative approach, and awards should include store managers, assistants, department managers and all employees. Get everyone involved and raise some excitement. Let your employees offer ideas and suggestions. After all, they are on the front lines and are key players in driving this metric upwards.
How much can this really add to sales?
So maybe you’re wondering what impact this can have on your business. What is the value of just one more item in every customer’s basket? Let’s put some math to it. Let’s assume we have a company that has 40 stores. Let’s further assume that each has average sales of $450,000 per week, an average item price of $2.85 and each customer buys 12 items. If customers buy one more item at the average item price of $2.85, the company will generate an additional $78 million over the course of one year. In this scenario, this company goes from doing millions in sales per year to now doing over a billion in sales per year.
Let’s summarize key components that will increase your sales per customer and increase store sales.
- Focus on your current customers to maximize sales before venturing out to find new customers.
- Make sure all your employees, associates and department managers, are well-trained in various selling techniques and practice suggestive selling and upselling your customers. Conduct small group workshops and role playing. These can help your employees get comfortable with these selling styles.
- Merchandising practices must make sense. Displaying taco shells next to spaghetti sauce makes no sense. Don’t laugh, you’ve probably seen worse. Cross-merchandising is easy to do but takes preplanning, so plan it. Impulse items strategically placed around the store, and certainly at front end registers, can not only add sales but are typically higher gross margin items for even more profitable sales. This also makes it easier for your employees engage the customer and upsell.
- Brainstorm for new ideas on how to increase sales through employee and customer interaction. Remember, just one more item added to each customer’s cart should always be a core goal shared by all employees.
- Keep the spirit of selling more items or upselling by having contests that can periodically raise excitement within the stores.
- Set baselines and the method of measuring results that everyone agrees upon and is fair to all stores, large or small volume alike.
- Report on results and celebrate the stories and successes to all employees.
So, remember to review your sales per customer and sales per item metrics weekly on your KPI dashboard and reporting. Engage with your vendor partner so they can support your efforts to maximize these metrics. Involve your employees. They can be a great source of ideas on how to increase the sales per customer metric. Communicate the goals and focus on your current customer base to maximize those additional sales that are available to you and within your grasp. Once you’ve maximized this metric, then venture out to find new customers, while continuing to maximize your current customer buying potential.