Niche – All About Marketing & Sales – 5 Ways
BY AMIT MITTAL, Business Coach, Consulting & Advisory
As discussed in our previous blog, niche stands on six pillars one of which was Acquisition cost, and now we are going to discuss another pillar- Five ways – The ActionCOACH way.
It may sound like a tricky question but can a business increase sales by 46%, keep marketing expenses almost constant, and still see a 61% increase in profits?
It can if it looks at increasing the bottom-line the ActionCOACH way.
Conventional business looks at sales from the standpoint of three variables, namely sales, expenses, and profits defined by the formula: Sales – Expenses = Profits.
In this approach, each variable depends on the other, forcing businesses to look at either increasing sales or decreasing expenses in order to influence profitability.
ActionCOACH moves away from this narrow view and breaks the sales variable into five separate components. These variables can be worked individually and across the board to leverage profits on the bottom line.
In the ActionCOACH business coaching model, this is termed “The Five Ways.”
According to the “Five Ways,” all business is driven by five key profit-generating areas:
- Lead Generation or people who are interested in your product or services
- Conversion Rate, or how many inquiries were converted into sales
- Average Rupees Sale, or Average invoice value
- Average Number of Transactions, or How many times on an average customer buy from you in a year
- Profit Margins.
In today’s highly competitive business world, it is not possible for business owners to sit back and see the profits roll in. It becomes vital for businesses to test and measure everything. Let us understand these key profit-generating areas more –
Lead Generation, Conversion Rates, and Average Rupees Amounts
A good place to start is lead generation. This is defined as the total number of potential buyers that a particular business contacted or that contacted the business last year. Leads are also known as “potentials” or “prospects.”
Most people confuse responses, or the number of potential buyers, with results. The sound of ringing phones does not mean that the cash registers are ringing as well. This is highlighted by conversion rate or the percentage of people that did buy versus those who could have bought. An example of this is 10 people walking through a store with three people buying something. For the day, the store had a conversion rate of 3 out of 10 or 30%.
Number of transactions and profit margins
The next part of the “Five Ways” is the number of customers. This is the number of different customers a business deals with, and it can be determined by multiplying the total number of leads by its conversion rate.
The average number of transactions is the number of purchases the average customer will make over the course of a year. It helps to keep a database of past customers, and many business owners make the mistake of subscribing to the myth of “once a customer, always a customer.” The average number of transactions is closely related to the average sale of each purchase, which is also forecast over the course of a year.
If we increase just a small percentage of the five key profit-generating areas in the business, the impact on the end result is way more. For example, as we said earlier, if you increase each of the key areas by 10% you can increase your profits by a whopping 61%.To know more see this Five Ways Video: https://youtu.be/aon2zU_PQPk
This simple but effective system of evaluating your business in terms of marketing and sales efficiency allows us to benchmark where we are right now, and where we want to go.
Example of how we implemented Niche with one of our client in the manufacturing sector –
Not long ago we handled a client who shall remain nameless but for ease, let’s call him Mr. Sharma. My client, Mr. Sharma before joining us was struggling with his marketing strategies and was facing huge losses in his business. His friend who is also our client suggested that he talk with us and share a little bit about his business with us. He was hesitant and thought there was no way to revive the business now but one last chance could not hurt the business anymore. He was in the garment industry manufacturing his own designer wear, his designs were great but his reach was low and his knowledge on sales and pricing was limited, so when his friend suggested he should hire a business coach to guide him, seeing that his friend’s business was booming and growing more every quarter he decided to at least attend a webinar with us. He was determined to save his business and after a session, he was persuaded to hire a business coach for his business.
Mr. Sharma sat with us and told us about his story, how he started his business, what strategies he used his strengths and weaknesses. He had a great product but was not able to market it well. All he needed was an effective business strategy to establish and take a good look at the important decisions he should be taking to improve his business.
There are a lot of designers in the market so to distinguish he should first find his niche.
Niche is what makes you stand out in the business, which makes people choose you so we made him question “why will the customers choose your product” what can we do to stand out. We helped him in devising optimal branding strategies and designed a strong marketing front.
We used one of the pillars of niche – the five ways as our key strategy and targeted the profit-generating areas of the business.
These areas are highlighted in the following equation:
First, we brought Mr. Sharma more into the popular social platform to increase reach in the community and thereby increasing his leads. Now the next challenge was to increase the conversion rate of these leads.
Lead Generation x Conversion Rate = Number of Customers
With a steady increase in these rates, Mr. Sharma’s number of customers increased steadily. The next area we targeted was increasing the average sales and number of transactions in his business by devoting his brand towards enhancing his customer relationships.
Number of Customers x Average Rupees Sale x Average Number of Transactions = Revenues
Revenues x Profit Margins = ₹ Profits
As his customer base grew, sales and volume of his transactions grew bigger with it. By each quarter his business grew more and its demand. With the rise in demand, Mr. Sharma also increased his profit margins.
A closer look at each of these five variables reveals how an increase in any or all of them can increase sales and profits while keeping marketing expenses constant.
After a few quarters with us, Mr. Sharma started seeing the growth in his business and recovered his losses, and quickly made profits. He saw that he can handle his business and without sacrificing his own social life.
We at MADASKY, business coaching believe the problems and the solutions go hand in hand, while there is a problem, a solution is a hope that is available and accessible in abundance to all who need it. Once you have selected the strategies for your business, we will work on implementing them together and Testing and Measuring the results. Our objective will be to reduce acquisition costs and increase the lifetime values of your “A” grade clients to your business.
Reach out to us and we will help you to overcome your business challenges and grow.
MADASKY Consulting, Business Coaching, Consulting & Advising.
Visit us: www.madasky.com
To register for the upcoming events kindly visit on https://madasky.com/events/
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