How to increase profits on low-margin products and servicesOct 05, 2022
Feat. Alvin Narsey
If you’ve got a product or service with a low-profit margin and high demand, you might be tempted to stop selling that product or service altogether. Retail business coach and cash flow expert Alvin Narsey shared a simple strategy to help you increase your profit margins without cutting out high-demand products or services.
In retail, Alvin says that the standard practice for low-margin products is to find ways to make your profit using upsells. A great example is when you go to the electronics store to buy a tv, there's not much margin for the retailer on the TV but where they do make money is on the warranty.
You can increase your overall profits by offering additional products or services with higher profit margins that provide immense value for your clients. You can charge a fantastic premium with the other products and services you offer.
Customer Lifetime Value
Alvin also recommended looking at the lifetime journey of your customer through your business. It's about understanding the next steps your customer will likely take and other outcomes that will be beneficial to your client. You will be more successful if your customers come back frequently.
Alvin recommends understanding how the customer will buy from you and the services and products you can offer to continue providing value along the way, continuing to reinvent yourself and your products and services for your clients.
Hopefully, you are curating an email list, and you're regularly keeping in contact with them.
“What happens in our retail world is, loyalty programs are really, really big. And that's why retailers have these loyalty programs because once you've understood what your customers are buying, you can market to them a lot better. We know that you've already bought from us, it's a high chance that you like us, and you will buy from us again, so let's spend more of our time focusing on how to try and get you back rather than finding a new customer.” - Alvin Narsey.
To keep profit margins high with loyalty programs, you need to understand what your customer is buying from you. That's what Alvin says is the real power of a loyalty program because it is easier to identify other things they would like to purchase and just offer them to them.
In service-based businesses, we can do the same thing. If a customer bought a service from you, you can then identify another service that they would use, which would provide immense value that we could then remarket to them.
Alvin says that a lot of the time, it's just about taking a step back and looking at our business from a 35,000-foot view to see where wheels could turn. If you have a product or service with a low-profit margin, instead of immediately cutting that offer, look for ways to build higher profits with upsells, increasing customer lifetime, and loyalty programs.
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