Two easy ways to increase sales and improve your overall profit
Incremental sales provides more profit for your business than regular sales.
Convenience stores do it. Mass merchants do it. Grocery stores do it. Fast food outlets do it. And, if you are in business, you should do it too. You should create incremental sales to improve your bottom line. Here are two easy things you can do to create incremental sales.
First, create the opportunity for incremental sales by placing point of purchase displays in customer dwell areas. These are areas where your customers queue for service or linger in your store. You see these every time you enter the checkout lane at your favorite mass merchant, drug store, grocery store, home improvement store, etc. These items, which are relatively low-priced consumer products, create large incremental profits for the store. Here is how it works.
Say for example your customer has a shopping cart full of items they want. The total of that cart is $100. If your gross profit on that shopping cart is 40 percent, you have a gross profit of $40. Then, you have to take off your overhead expenses that are assigned to each transaction, say 20 percent. This leaves you with a net profit of $20 for that shopping cart. Now, if you add an incremental, or impulse, sale of a package of batteries (or a cookie, a lighter or a package of gum) that rings in at $4 , and you make 50 percent ($2.00), you just increased your profit by 10 percent from that single customer and a single incremental sale. You see, you would have made $20 from that customer, but with the incremental sale, you make $22.00, which is a 10 percent increase in overall profit from each customer where you create an incremental sale. At the end of the year, that is huge profit!
Second, implement a suggestive selling program. We’ve all hear “Would you like fries with that?” There is a reason for this, and it is called suggestive selling. For example, if you run an auto parts store, each and every customer that comes into your store will need penetrating oil at some point in time. Penetrating oil is used to loosen rusted-on bolts and other fasteners. So, when your customer has what they came in for, simply ask them “Do you need penetrating oil?” If the customer says “Yes,” you just made an incremental sale by using suggestive selling. If they do not need penetrating oil, they certainly will need an air filter, oil filter, motor oil, windshield washing fluid, polishing wax, fuzzy dice, windshield wipers, light bulbs or anything else that you have in your store.
If you run a greenhouse, you can ask your customers at the check out counter if they need fertilizer, which is conveniently located right next to the register. If you run a hair salon, you can ask your customer if they need shampoo or conditioner. If you run a convenience store, you can ask you customers if they forgot the milk, butter, coffee, bananas or anything else that you sell.
Incremental sales, more commonly understood as impulse purchases, have the potential to create huge profits for your business. Give it a try for a month and see if your profits have improved. If implemented correctly, without being pushy, you should see huge profits for your business.
Paul J. Werner is an Michigan State University Extension educator from L’Anse, Michigan. You can obtain free business counseling by registering with the MSU Product Center. Werner has many years experience in small business ownership and entrepreneurship. He and his wife currently own two small businesses in the Upper Peninsula of Michigan.