The 5-Step Profit Formula Explained with Adrian Ulsh
In several of our previous posts, we’ve been discussing the 5-Step Profit Formula.
There are five critical steps that every small business owner MUST address in order to attract new clients and generate more revenue… leads, conversions, average sale value, number of transactions and profit margins. We want to show you how to increase each of these 5 critical metrics for your coaching practice as well as your client’s business.
In our last post, we discussed lead conversion and how a drip campaign can increase any business’s conversion rate dramatically. A drip campaign describes a campaign that automatically delivers a form of communication to customers or prospects on a predetermined and scheduled basis. In essence, you continuously drip various forms of communication to your prospects. A well-coordinated drip campaign can increase conversions 20% to 50% or more depending on the type of business you’re dealing with. Implement this conversion strategy and watch sales soar.
In today’s post, we’ll discuss various ways you and your clients can generate more transaction; in other words, getting them to buy from you more frequently than they do now. Are you familiar with upselling and cross-selling? When you go to McDonald’s and the kid behind the counter asks if you would like your meal “supersized,” that’s upselling. When that same kid then asks if you would like an apple pie to go with your supersized meal, that’s cross-selling.
Upselling means offering a higher grade or quality or size of the item that the customer may be interested in at the point when the customer is ready to buy. Cross-selling means offering other products or services which complement the item the customer is interested in, at the point when the customer is ready to buy.
Now here’s what most business owners don’t realize. 34% of prospects will buy additional products or services at the time of their original purchase… IF they’re asked to do so. Most businesses NEVER ask them, and they lose out on this lucrative opportunity to dramatically increase their revenue. Let me show you a brilliant example of this.
Up until about 3 years ago, most car owners on average paid around $39 to get their oil changed. Today, you can get your oil changed all day long for around $10. I recently purchased a Groupon that was offered for 3 oil changes plus 3 additional services of your choice per visit. The price for it was $18. That’s $6 per oil change… and then they add on an additional $4.50 for oil disposal, so the total for each oil change is less than $11. That’s obviously a bargain. So why do they offer this when they used to get $39?
Simple… they finally realized the power of upselling and cross-selling, and they can’t get the opportunity to upsell or cross-sell if they don’t get themselves in front of their prospects. This Groupon is designed for one purpose only… to get them in front of as many prospects as possible… and the best way to do that is giving them what are basically free services.
But here’s what most businesses don’t understand about this strategy. This Econo Lube is breaking even by offering this Groupon. That $11 covers their material and labor costs. Then in addition to each oil change, they allow you to select 3 of 8 free services they offer…simply because Econo Lube is going to perform all of those services anyway. They know they make most of their profit through their higher dollar service offerings, like batteries, brakes, transmission services and repairs.
So after the technician changes your oil, they’re going to take all of your tires off so they can inspect your brakes… and cross-sell you a brake job. Since they have to remove all your tires to do that, why not offer you free tire rotation and a free brake inspection. Most of their patrons have no idea they’re going to do this anyway, so the customers have this perception they’re receiving all these services that they normally have to pay to have done… for free!
One such free service involves Econo Lube offering to do a complete vehicle trip check where they do a complete inspection of your car before you take a long trip. A dealership would charge around $100 for that service, but Econo Lube includes 2 of these every 12 months. Well of course… they want to do this. I guarantee you that after checking over your entire vehicle, they WILL find SOMETHING wrong with your car. And since you’re leaving on an extended trip, you will naturally want them to fix everything that’s wrong. Are you starting to see the brilliance of this strategy?
So the key takeaway here for this strategy is to get yourself in front of your prospects as often as you can so you give yourself more opportunities to sell them more. Let me show you how this exact same strategy will work for a dentist. Obviously a dentist is about as far from an Econo Lube as you can get, but the principle is exactly the same… get in front of prospects and upsell / cross-sell them.
A dentist offers basic dental services like exams and teeth cleaning. That is NOT where they make their money. A dentist generates the vast majority of their revenue from cosmetic services, root canals, crowns, fillings and braces. So obviously the more patients they can get in front of, the more of these services they sell. The problem for dentists is that most people already have a dentist, and 90% of them will never change unless their dentist either retires or dies.
So what might convince someone to leave their dentist? Consider these stats… 85% of the population have medical insurance, but only 50% have dental insurance. Among those without dental insurance, 44% said that was the main reason they didn’t visit the dentist. See an opportunity here if you’re a dentist?
What do you think might happen if a dentist specifically targeted families without dental insurance… and offered them virtually the exact same services as those with dental insurance… but without paying the expensive monthly premiums? For the dentist we did this with, it exploded his number of patients. But you might be thinking… how could he afford to offer this type of program? Same way the Econo Lube did!
The dentist basically offered patients routine services at his cost. That $25 covered the labor cost for the dental technician to take x-rays and clean the patient’s teeth. But the dentist now had double the patients to upsell and cross-sell his more expensive and profitable services to. And of course, any business can always resort to the standard way to upsell and cross-sell customers… just make them more offers.
As you can see, there are many ways to compel your current customer base to buy from you more frequently. Think creatively, consider various innovations but the real secret is to simply ASK each customer if they would like to buy more. 34% will say YES!
Until next time,
About Adrian Ulsh
Adrian Ulsh is the CEO for Leader Publishing Worldwide, the largest online provider of coaching services worldwide. Adrian currently works with more than 500 coaches in 24 countries advising them on building 6 and 7 figure coaching practices.
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