How to double online store's profits
A common mistake made by beginning dropshippers and entrepreneurs is to think only about how to increase the number of orders. Rising advertising costs eat up most of the profits. In fact, to increase profits, it is enough to revise the structure of advertising creatives, adapt the site and change or rather reduce the response time to the application (ideally bring it to 60 seconds).
What's preventing your online business from growing? Betonlogos Marketing conducted a survey among its clients and partners. And although they all work in different sectors, have different sizes and turnovers, the problems turned out to be the same for all of them! Low margins, lack of solvent customers, incompetent staff, logistical problems, working 'blind'.
2xProfit =2xQLeads +1.5xAvPrice +1.5xRetention +0.75xCOGS, where
QLeads (Quality Leads) - the number of qualified leads, these are the most promising customers who know what they need, have an urgent need to solve their problem and are willing to pay.
AvPrice (Average Price) - the average receipt per purchase (sales/orders), revenue divided by all purchases.
Retention - the number of repeat purchases per user.
COGS (Cost of Goods Sold) - Cost of goods sold per product.
- By doubling the number of quality leads (real leads), you expand your base of potential customers.
- By increasing the average price, you increase your revenue per sale.
- By improving customer retention, you increase the lifetime value of your customers by motivating them to return to your store. LTV (Lifetime Value) is the lifetime value of a customer, which is the total revenue a customer brings in over the entire time they interact with your business.
- By reducing the cost of goods, you improve your profit margins.
Formula for doubling your profit
In this article the marketing experts of Betonlogos s.r.o. will tell you how to double the profit of your online shop without huge investments and expensive advertising. It is enough to analyse business efficiency at the level of individual product units or a single customer.
Let's start with the formula. How can you double your company's profit with just a few key factors? It is not only necessary to attract new customers and retain existing ones, but also to adjust the selling price by reducing production costs, thus increasing the value of the product for the customer.
How do you double the number of potential customers and orders? In theory, it's not difficult: you need to motivate those who have already bought from your shop and attract new customers who are likely to become real customers.
Without increasing QLeads, you can't raise prices or increase the average cheque size, as this will reduce the conversion rate.
- Targeted advertising. Run advertising campaigns on social media and Google Ads to attract more quality leads.
- SEO optimisation. Improve your website's SEO to attract organic traffic. Use the right keywords, create quality content and ensure your site is easy to navigate.
- Affiliate programmes. Develop partnerships with bloggers, influencers and other sites to extend your reach to your target audience. Offer affiliates referral commissions to incentivise their engagement.
We have already written about how to retain customers, influence their loyalty and encourage repeat purchases. For product projects and B2C services, the number of repeat purchases is the responsibility of competent automatic funnels set up for customer return.
- Loyalty programmes. Implement loyalty programmes by offering discounts, bonuses or exclusive offers to regular customers. For example, offer a discount on their next purchase or reward points for each purchase that can be redeemed for discounts.
- Quality service. Provide a high level of customer service by responding quickly to customer questions and complaints. Establish a customer service team to help customers solve their problems and answer their questions.
- Regular promotions and discounts. Run regular promotions and advertise discounts for loyal customers to encourage repeat purchases.
2xQL Leads. Quality leads growth
When calculating the cost of goods, include hidden costs: commissions and taxes, delivery and order processing fees. Do not forget overheads for: website maintenance, advertising, promotion, staff salaries (if any), product certification (if required).
You can increase the cost of goods by adding value or changing the positioning of the brand. It is not necessary to raise the price unreasonably without good reason and prior market research of competitors.
- Expand the range. Add newer products to the range to complement the core products.
- Packaging and premium products. Include premium versions of your products in your range, or create packages that include several products at an attractive price.
- Value enhancement. Highlight the unique benefits and quality of your products so that customers are willing to pay more.
- Betonlogos Czech Republic's specialists will help you calculate the break-even point for drop-shipping partners and customers, and create sales forecasts based on delivery logistics.
1.5xAvPrice. Increase the cost of goods
1.5x customer retention. Customer engagement
Reducing your COGS to 75% of current levels means reducing costs through more efficient production processes, bulk purchasing or other cost saving measures. By reducing costs, you can increase your profit margin without increasing prices to your customers. Here are some ideas on how you can reduce your cost of goods:
- Optimise supply. Look for new suppliers to get the best terms. Negotiate all possible discounts for bulk purchases.
- Effective stock management. Optimise your inventory management to avoid overstocking and understocking. Use automated systems to track stock and forecast demand. Optimise logistics to reduce transportation costs.
Reduce Cost of Goods Sold (COGS)
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