How Understanding Your Customers Helps to Increase Profit

If you ask a small business owner to explain the best possible way they can increase profit, they are likely to either stare at you blankly or instantly say 'charge more' or 'cut costs'. For most small business owners, the desire to increase profit is strong, but the ability to implement strategies and systems to make profit increase possible just doesn't seem to exist.

It doesn't have to be hard to increase profit; in fact the smallest changes are often the most effective ones. Here is a simple way any small business owner can work towards increasing their profit immediately.

Understanding Customer Demographics:

Unfortunately for many small businesses, they don't really understand just who their customer base is, and where each customer fits into the overall business. Knowing who customers are, how they buy, what they buy and how often they buy is vital to creating long-term business success.

If a business is able to identify their top 20% of customers, these customers are likely to represent around 80% of total business. Once these customers are known, there are further things to take a look at.

Increase the Average Order Total:

Analyzing the orders of the top 20% of customers is vital. It's time to think creatively about increasing average order spending. Depending on the type of business, thinking outside the square to offer add-on products, or complimentary products or services will often work if the customer is happy with the products or service they already receive.

McDonalds is an extremely important example of this ' with each drive-through order they ask a customer 'Would you like fries with that?' While it may seem strange to do this, for each customer who takes them up on their offer they have increased the value of the sale and also their average order total. This concept is extremely valuable yet often underutilized.