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I explained how the macro/micro concept can turn your company into a powerhouse. Today, you’ll actually see the concept in action, with numbers revealed. It turned a single $50,000 sale, into a sale worth $80,000 almost overnight (a shocking 60% increase).
‘Nasty Business Shocks’ is my column revealing the hidden truth behind how companies really become successful.
Companies are always trying to make more sales. But there’s one common ‘macro strategy’ error I see over and over, that stops them from doing this easily.
The Water Cooler Question
Imagine it’s a baking hot day. You’re seated at a table with a very small glass and an ice-cold, blue water cooler on it. The blue cooler will only release water once you have pressed its button 100 times.
So, you press the button 100 times and the blue cooler fully unlocks. Now you can freely refill your small glass as many times as you want, at your blue water cooler.
As you finish your first glass of water, you look up and notice there is another table 50 metres away. It has a red water cooler on it. If you want to drink from it you have to unlock it again by pressing it 100 times.
Question: Now, no tricks here – where would you refill your glass, the red cooler or the blue cooler?
It makes sense that you get more water from the blue cooler.
- You’re familiar with the blue cooler (so you know it will give you water)
- The blue cooler is already nearby (so there’s less work to get to it)
- You’ve already put in the work to unlock it (so it will give you water with much less effort)
Why Do Companies Keep Getting This Wrong?
The water cooler question represents companies and their customers. The common ‘macro strategy’ error I see companies making over and over is only selling to their customers one time.
It’s far easier to resell to someone who has already bought your product. Like the list above, they’re already familiar with you. You have their contact details so you can easily communicate with them. And you’ve already done the work to sell them once.
So, selling them a second time will be much easier then selling to a cold stranger (assuming you gave them a good experience the first time).
This sounds simple in theory. But the amount of companies I see, that focus on selling to new customers (when they could be re-selling to their current customers), is staggering. It’s easy money being lost. But for some reason, most companies decide to drink from the red water cooler.
The Common Objection: We Don’t Sell Low Priced, Repeat Items
Now, if a company sells something like soap, it’s easy to see how they can keep selling more product to their current customers.
What if they sell higher priced items, that people don’t re-buy? This is where we look back to the macro/micro concept.
A company should experience sales growth, even if all its sources of new customers were cut off.
Here’s How A Luxury Cabin Company Generated More Sales From Its Current Customers
One company thought that the ‘resell to current customers’ idea wouldn’t work for them.
The reason was that they sold a single big-ticket item – a ‘quick build’ compact luxury cabin/outhouse with a fully working kitchen and bathroom. The average sale price was around $50,000.
They didn’t have any scope for increasing the frequency of re-purchases.
After understanding their business using the macro/micro concept, it was clear that the answer lay within their guarantee.
They initially had a 10-year guarantee period.
However, after running some numbers, it was clear they could profitably offer each customer a 20-year guarantee period.
The company created a new offer for each buyer. Customers would need to ‘weather protect’ their luxury cabin with the company each year (to preserve the outer wood and brickwork). The customer would need to do this in order to keep the extended guarantee valid.
This service costs $750 each time. An outhouse needs to be ‘weather protected’ once before the summer and once before the winter.
The total extra revenue this would bring in would be $1,500 a year. But remember, the guarantee period is over 20 years.
So total new revenue generated worked out at $1,500 * 20 = $30,000 in ‘new found’ revenue per customer, locked in.
Before the company understood the macro/micro concept, this was all potential lost sales. I’m sure you’ll agree that discovering that you’re potentially losing $30,000 per customer came as a very nasty shock indeed.
How are you using the macro/micro concept to protect your business from lost sales?
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February 12, 2019 at 08:35AM
Forbes – Entrepreneurs