The 3 Levers of Growth for More Reve­nue in eCom­mer­ce

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:

  1. Number of custo­mers
  2. Average shop­ping cart size, how much reve­nue an order gene­ra­tes on average, also known as Average Order Value (AOV)
  3. 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 Xci­ting Web­de­sign, 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.

Initi­al Situa­ti­on

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:

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:

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:

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.