a 4-minute read
As a business owner, you know that you need to be focused on future growth for your company to be successful. But you also know that this only applies to healthy and sustainable business growth.
Growing your business will essentially come down to making more profit and more sales, but there are actually only three ways to properly grow your business, each with their own unique angle. We’ll cover these three key paths to business growth in this article, so you know where to put your best efforts:
Here are the three potential growth avenues you could make use of:
- Increasing average order value (AOV) of your customers
- Increasing the lifetime value (LTV) of your customers
- Increasing the conversion rate (CR) of website visitors
Business growth can be hard, but it’s made much easier when you think carefully and strategically about where to put your resources. Depending on your business style, you might want to pick just one aspect of business growth or split your resources across all three.
Increasing the average order value
The AOV refers to the average amount that each of your customers will spend per transaction. You can calculate your average order value using this simple formula:
Total revenue / number of orders = average order value
Naturally then, increasing the amount each customer spends will lead to more profit for your company, without needing to bring in more customers or leads. The most common way of doing this is through upselling and cross-selling.
Upselling is when you promote an upgrade to a more expensive version of a product the customer is already planning to buy. For example, if you were running a window-washing company and a customer was planning to purchase your services for a full house window cleaning, then encouraging them to buy a bigger package that includes window sills and frames would be a prime example of an upsell.
Cross-selling is when you suggest complementary purchases that might also be of interest to the customer. Continuing with our window-washing example, suggesting a DIY product that helps prevent the glass from staining in the first place would be a great additional purchase that is relevant to that customer.
Some other ways to increase the AOV are by setting a minimum order value or packaging your services up into bundles. Whichever method you choose, try to find a way that feels as decisive and active for the customer as possible, rather than something they are being manipulated into. It should also always be relevant to the original purchase they were going to make.
Increasing the lifetime value of customers
The lifetime value refers to the total revenue you can expect from a single customer throughout their time with your business. It does so by comparing the customer’s revenue to the company’s predicted customer lifespan.
To calculate customer lifetime value you need to calculate the average purchase value, and then multiply that by the average number of purchases made during the average customer lifespan.
Increasing the lifetime value of a customer is another way to boost growth without needing to continually find new leads and customers. You can increase the lifetime value of your customers through repeat purchases and referrals.
Repeat purchases, as well as regular subscriptions, are great for any products or services that have a finite lifespan. For example, if they will be used up after a certain amount of time or the customer will need to repurchase to gain access. It’s not the best strategy to focus on if you are selling one-off software licensing, for example.
Referrals are another great way of spreading your brand amongst relevant leads, often with little input from your own marketing team. Relying on social proof and word of mouth to spread the good word about your business is low effort for you, but often high reward. Consumers are much more inclined to listen to and trust their peers than businesses.
Increasing the conversion rate of website visitors
The conversion rate refers to the number of people that make a purchase after visiting your website, landing page, or other contact points of your business. Increasing these percentages involves having a strong conversion optimization process. The best processes will help with all three paths to business growth that we’ve mentioned here.
Boosting conversions might encourage customers to buy more products, increasing the AOV, or set up a strong referral process to increase a customer’s lifetime value. But in order to achieve any of these goals, you need to be clear about what you’re doing.
Make sure your end goal is clearly defined before taking action. Is your aim to produce higher conversion rates? You might think so, but once you take a closer look, the answer might well change.
Think of it like this: if you reduce your prices to $0.99 cents for every product, your conversion rates will go up immediately. Unfortunately, you’ll probably also go out of business.
Conversion optimization itself is a misnomer; we should not be optimizing for conversions alone. Instead, our focus should be on growth.
The next question to ask is this: How do we optimize our website so that our business will grow?
As SEO is increasingly difficult and pay-per-click costs getting ever more expensive (AdWords, Facebook, you name it), it’s getting harder and harder to grow your presence online and boost your sales. That’s why it’s more cost-effective to optimize your website and sales funnel to boost more sales from existing visitors.
Some Final Thoughts
It’s hard to make paid customer acquisition profitable since it just costs too much. The answer is to focus on conversion optimization, or its more accurate name, growth optimization. It’s fundamentally essential for growth.
If you can acquire more customers at a lower cost from any channel, you’re in a prime position to grow in all three of the areas we looked at above. Instead of sinking resources into paid acquisition, streamline and optimize what you’re already working with. From there, you are building excellent foundations for a healthily growing business.
If you need any help putting these steps into action or aren’t sure where to start when it comes to your business, we are always ready to assist. Get in touch today.
