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Perhaps the most fundamental question on every business owner’s mind is, “How do I increase my revenue?” It’s a question that can create anxiety, fuel determination or lead to even more questions.
As plenty of research has shown, the health of your business impacts your personal health, quite literally. It’s no wonder this topic stirs up confusion and creates unneeded stress. The wellbeing of you, your family and your business rests on this one little concept: revenue growth.
Luckily, growing your revenue isn’t as convoluted or treacherously difficult as it sometimes seems. It’s actually very straightforward. If you want to increase profits, there are two basic routes you can take:
- Attract more new customers, or
- Increase the earning potential from your existing customers
New business owners tend to focus most of their efforts on option one, and rightly so. However, once you’ve generated even a small following, you should begin putting effort into option two, as well. Years down the road, you’ll be glad you did the hard work to support the sustainability of your business.
Option two, increasing the earning potential from your existing customers, is only possible if you can retain customers and build loyalty. Once this is achieved, you can work toward boosting revenue.
Most businesses are aware of the importance of customer retention. The real progress comes from continuous effort, taking all of the steps you can to ensure customers are satisfied and returning again and again. You don’t want your customers to have to consider other options or look to other solutions because your offering is not comprehensive. You want to provide a flawless user experience from start to finish so that customers leave not only satisfied, but with their expectations exceeded.
A common misconception is that customer service is of primary importance if you want to build a stable customer base. While that is important, it’s the flawless execution of your business model that makes the most significant difference. For this, you’ll need a deep understanding of your customers’ pain points and desires. Then, you’ll need to provide a seamless solution that gets to the heart of what they want.
A recent study by Forrester confirmed that your customer experience holds the key to revenue growth.
The problem is that few businesses have the information required to create more value over time. Thus, they are leaving many opportunities untapped.
Business owners can break this cycle of ignorance by embracing the learning curve. Ask yourself how you could increase the duration of your relationship with customers. What else could you offer them that wouldn’t be difficult or costly for you? You may not know the answer immediately, but the more you observe, the more you can experience empathy for your customers. Figuring out both the costs and potential profits for new offerings will help you create more value in the long run.
Creating more value
It’s not always easy to recognize how you can earn more without attracting new customers. If you’re already solving your customer’s problem and generating repeat business, what else is there to do? The answer will vary depending on your business model, but there is always something more you can include to boost the overall value.
Increasing the total “lifetime value” of each regular customer is a highly effective strategy for revenue growth when done right. This essentially means that you find additional ways to help your standard customer, whether it’s with another product, a complementary service, or other small add-ons to your main offering.
This translates to more value for your customers and increased profits for your business. It’s a win-win. NatureBox, a snack company, bumped up its sales dramatically in just one year by creating apps that were useful to their customer base. It was simply a matter of determining what additional capabilities customers would love and use regularly. In NatureBox’s case, it was:
- The ability to choose from a large, ever-growing selection of snacks to customize boxes, and
- the ability to track orders
A simple way to remember how creating more value leads to higher revenue is this easy formula:
Customer Acquisition Cost – Lifetime Value = Your Profit
Consider the amount of money it requires to obtain a new customer. That’s your acquisition cost. If you can increase the lifetime value of each customer, the difference between your costs and income shrinks. For most businesses, Customer Acquisition Costs are much higher than Lifetime Value, so you have your work cut out for you. But with steady effort, you can shrink the gap and pave the way for higher revenue over time.
If you’re unsure where to begin, start experimenting. By doing some research and tuning into customer feedback, you can discover small ways to improve upon your product. Develop a continuous feedback loop to assess customer actions (not just stated opinions), and you’ll begin to see where improvements can be made.
With this new information, you can shape your business model to meet the true interests of your customers. Stronger retention rates and a higher lifetime value per customer will mean more revenue for your business — and a healthier, happier life.