“How do I make more sales?”
This is a question that is often asked in eCommerce forums. Sometimes it is formulated differently, for example
- “How do I get more orders?”
- “How do I generate more traffic for my shop?” or
- “How do I do successful Facebook/Content/Online Marketing for my online store?”
But even these questions ultimately come down to revenue; the other factors merely influence and increase revenue.
More revenue every shop operator’s goal. Either you want to earn more money and earn a living as a one-man-show with your own shop. Thinking further, this leads to the desire to have to work less sooner rather than later by changing from self-employed to entrepreneur, hiring people for packaging and shipping, customer support or help with other operational tasks. Or the shop operator sees growth for the eCommerce shop as the main goal and wants to make his products accessible to more people.
Very few people are aware that there are actually only three ways to make more sales with an online shop. In this article, we discuss these three levers and show how you as a shop operator identify the lever (or levers) with the greatest potential for more sales and how you can make use of this knowledge.
The Three Levers for Increasing Revenue
In order to increase revenue in your online shop, you can influence the following three factors:
- Number of customers
- Average shopping cart size, how much revenue an order generates on average, also known as Average Order Value (AOV)
- Frequency with which a customer orders in your shop
That’s it. And maybe this leaves you thinking “but what about the traffic? That can increase my sales, can’t it?” Indirectly yes, but if you increase the traffic to your shop, this will primarily affect the number of your customers – the first lever. Possibly also on the third, the frequency with which your customers order from you.
Traffic can therefore be a tactic to turn the levers; but it’s “only” a means to an end to increase the number of customers. We’ll go into the different tactics in more detail later. First, let’s take a closer look at the three levers for increasing sales with WooCommerce and go through several scenarios.
Imagine, for example, you improve all three values by 30%. Then your revenue will grow to 219%, 119% more – that’s 25,000 € to 54,925 € monthly revenue. If you concentrate on campaigns to implement a lever for 4 months at a time, achieving this is quite possible in one year.
But of course it makes sense to first find out which lever can provide the most absolute change in margin before overheads and profit, and to work on it first. At Schwungvoll, we’ve created a spreadsheet that wonderfully shows which changes have what impact.
Use the calculator in the spreadsheet and read on for a written explanation.
First things first: the calcualation and evaluation are individual for each shop. This is exactly why it’s so important to understand which of the three levers you need to pull in order to get the biggest increase in revenue for your shop.
In our example, we assume that the shop
- currently has 1,000 customers, with an
- average order value (AOV) of 50 €/order.
- From these 1,000 customers, zero are regular customers of the shop, meaning all customers order only once.
That amounts to a total revenue of 50,000 €.
- Marketing costs are 7,143 € (customer acquisition costs over complete customer running time presumed at 1:7).
- In addition there are product/handling/shipping costs of 21,500 € (empirical values).
- These assumptions run on a margin before overheads (30%) of 21,357 €, as well as
- a profit of about 6,357 €.
Assumption 1: 30% more customers
If we now pull the first lever “Number of customers” and increase it by 30% to 1,300, the following changes result in:
- Revenue increases by 15,000 € to 65,000 €.
- Marketing costs increase by 2,143 €.
- Margin before overheads rises by 6,407 €.
- Profit rises by 1,907 €.
Almost 2,000 € additionally, for 30% more customers – not so bad at all, is it? But what does it look like if you pull the other levers? Maybe even more will happen.
Assumption 2: Average order value (AOV) raised by € 15
If we now pull the second lever instead of the number of customers, i.e. set the AOV to 65 €/order (instead of 50 €), the following changes will occur:
- Revenue increase by 15,000 € to 65,000 €.
- The marketing costs remain the same because we have put nothing into it to attract more customers or regular customers.
- The product/handling/shipping costs increase by 4,500 €.
- The margin before overheads increases by 10,500 €.
- The profit increases by 6,000 €.
Amazing! 6,000 € more profit for only 15 € higher AOV – that sounds feasible, doesn’t it? But maybe the third lever can tickle even more out of this shop…
Assumption 3: More regular customers – out of 10 first-time customers, 3 place another order
If you manage to convert 0.3 customers into regular customers, this will have the following effect on the shop:
- The turnover rises to 65,000 € here as well
- The marketing costs sink around 1,648 €, since it is more favorable regular customers to reactivate than new customers to activate.
- The margin increases by 12,148 €.
- The profit rises around 7,648 €.
With the third lever, we increase the margin and profit most for this shop scenario. But as I said, depending on
- how your own shop is set up,
- how many customers you have,
- the AOV, and
- how many regular customers you have,
another scenario might be the better one for another shop. Use the calculator in the spreadsheet and calculate where you can realize the largest additional margins and profits for your shop. Afterward, we’ll be happy to discuss with you what measures and what effort is involved.
But what happens if we pull all levers at the same time?
Assumption 4: 30% increase with all levers
If we pull all three levers at the same time by 30%, thus increasing the number of customers to 1,300, the AOV to 65€, and the number of regular customers to 3 out of 10 first customers, the following changes result for the shop:
- The turnover increases from 50,000 € to 109,850 €, more than doubling.
- The marketing costs remain the same.
- The product/handling/shipping costs rise by 19,905 €, since more orders are received and must be completed.
- The margin almost triples, from 21,357 € to just over 61,302 €.
- The profit more than triples, from 6.357 € to 28.347 €.
And now it’s your turn. The easiest way to figure this out for your own shop is with our calculator spreadsheet, which you can copy here for free.
Expert tip for all those who prefer to calculate everything themselves: If you know your revenue, AOV, and the number of your customers, you can calculate the repurchase rate if you don’t have it at hand. The formula for this is: turnover / customers / AOV = repurchase rate.
Pull on the Three Levers with the Following Tactics
Now you can calculate which lever has the greatest potential for your shop. But how do you actually pull the three levers? There are different tactics for each lever.
In order to not completely go beyond the scope of this article, we link to further excellent articles for the different tactics of each lever.
Tactics for more customers (lever 1)
To get more customers, you have to do one thing above all else: increase traffic to your shop. The higher the number of visitors to your shop, the more people you can convert into buyers.
But more traffic is not the only tactic for more customers. Learn all about the different ways you can pull lever 1:
- How To Drive Traffic To Your Online Store (7 Proven Methods)
- How to start generating traffic for your store (and how to switch to building a brand later)
- 10 Cheap and Interesting Ways to Attract More Customers to Your Small Business
Tactics for higher average basket value (lever 2)
There are a number of strategies and procedures that can be used to increase the average shopping basket value (AOV). In principle, the aim is to convince customers to buy more when they place an order. This can be either additional products or more of the same product.
Find out how to do this here:
- How To Increase Average Order Value With Smart Upsell Campaigns
- How to increase average order value
- 8 Easy Ways to Increase Average Order Value (AOV) Of Your Online Store
- How to Increase the Average Order Value for Your Ecommerce Store
- 5 Highly-Effective Ways to Increase the Average Order Value of Your Online Store
Tactics for higher frequency of orders of a customer (lever 3)
For this leverage, you have to convert one-time customers into multiple customers, i.e. regular customers. Here, too, there are several different approaches, which you will learn more about in the following articles:
- Retain Your Customers With Win-Back Emails
- Customer Retention 101: Grow Your Business by Selling More to Current Customers
More sales for your WooCommerce shop with the right levers
Now you know the three levers (number of customers, average shopping basket value, and number of regular customers) and their tactics, with which you can get more sales out of your online shop. And you can easily make sure you’re pulling the right lever for your own WooCommerce store with our handy Opportunity Calculator.
Click here, copy the Google Sheet, and get to know your shop better in 3 minutes.