This is my third post in my Lessons Learned series and my first about sales and marketing. I may come back to management in the coming days or weeks as I continue to work through these in my own head. As previously stated, this exercise is for my benefit as much as yours. I’m putting them in writing to remind myself of what is important.
Those that know me well know that I’m always spouting these same quotes that I’m basing this series on. I believe in fundamentals and that business skills are learned and need to be practiced like an instrument or a sport.
Today’s lesson learned isn’t one I need to remind myself of as often. It’s one I live by more than most others and one that I say often around the office.
No matter what product you are selling, there are only three ways to increase revenue. You can increase your lead count, improve your closing ratio or raise your average ticket price.
All activities should be designed to affect one or all of those three things.
It doesn’t matter if you are selling domains, timeshares, diamonds, watches, televisions, t-shirts, website memberships, software, or anything else. It’s always the same three metrics that determine your revenue.
Sure, there are other variables inside of those metrics. For example, there may be four or five metrics that you look at when determining your lead count. However, the top of the pyramid contains only those three. Always.
Yesterday, we finished our July goals and incentivized our management from top to bottom in our luxury watch division based on these three metrics.
Our marketing team has a specific July target goal for a lead count that we know if we get, we’ll hit our revenue target.
Our sales team which takes the leads and gets the packages to our offices has a specific conversion ratio as a target that we know if they hit, we’ll hit our revenue target.
Our closing team which sells the watches, has a specific average ticket price that we know, if we hit, we’ll hit our revenue target.
Their goals are structured in a way that we only need one of them to win for us to get to the level we want to be at by the end of July. If two or three of them hit their targets, we are off to the races.
© 2010
Excellent point – I agree completely!
I’m still surprised when I ask someone how business is going and they respond by saying, “revenue is dropping but we’re getting by.”When I hear this my usual response is, “so what are you doing to change that?”
People can get so stuck on doing things the same way that sometimes they can lose sight of the three principles you outlined above.
Another great post – I’m really enjoying this series – we’re going up to Part 100 right?
We’ll go until I run out of principals. These aren’t just things I’ve read in books although I did learn a lot from reading. These are principals I personally live by. Honestly I don’t know how many there are. I’m remembering them as I go.
When I had a paving company 20% of the customers brought in 80% of the $$$. As well raising prices 20% got rid of the cheaper accounts and let us focus on the accounts that didn’t mind paying a bit extra for better service/work. I was worried about the increase in $$ but in the end we had more time and it worked out great. Thanks for the tips.
Best.
I’m in the business of measuring and optimizing marketing (http://www.razordriven.com/site/page/pg3188-as904.html). Your focus on core principles is right on.
I prefer my principles in threes as well; however, I feel you may have left out a fourth principle here (although I reckon it may just be semantics):
- Increase units sold per transaction
“Raise your average ticket price” sounds to me like you are only talking about raising prices per unit sold, not increasing the value of each transaction by selling more units per transaction. Upselling or cross-selling product and services to customers in the middle of a transaction is a fundamental way to increase average transaction value. Raising prices alone can be a deterrent to a sales transaction so I’m just wanting to point out the difference (again, probably just semantics).
Great article! this is the kind of lessons that bydomainers’S members need to learn.
Thanks!
@Logan,
Actually, they are one and the same. Ticket price is referring to the total amount on the invoice. It implies that you could sell one customer more units or less units for more. It’s about how much money you get on each order.
As I said, each of those three metrics are made up of other metrics. Meaning, if you are focused on any given day on the ticket price, you will find yourself looking at both units sold and average price per unit as well as add-ons.
@Rick
Perfect then — you can keep it to three principles!
Logan.
Great article – getting back to the fundamentals of business success.
Have tweeted it to my followers at http://twitter.com/mikeseaton