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How Suggestive Selling Can Increase Sales
In the hard goods industry, purchases are need based. Customers buy items for their job and projects.
When a customer comes to the checkout counter, the counter man can look at what is being purchased and recommend other items that the customer might want to purchase. Not all of these recommendations will be accepted, but those that are represent additional revenue. The recommendations that are made depend on the sales person’s knowledge of the products and experience on how they are used. The profit margin on suggested items, when they are bought is very high, because you are leveraging a customer who is already in your store!
Suggestive Selling is a Recession Buster!!
In a virtual environment such as a web-store, there is software that monitors what is being placed in the “shopping cart” and make recommendations based on the individual items or on collections of items. As in the real store, a few of these recommendations will be accepted. But the net effect will be to increase the average number of items in a shopping cart, and therefore revenue.
You might be wondering how software can make these recommendations. It is accomplished by analyzing earlier sales and discovering what items are typically bought together. Emcien’s analytics on the sales data will reveal items that are bought together for the job. For example – 90% of the times item A is bought with item B and C. If you know the items that go together (for a job), why not make suggestions to the customer? This shows that you know how customers use your products; it improves customer service and increases sales. A win-win all the way through!
Distributors typically sell tens of thousands of unique items across hundreds of thousands of transactions. Emcien’s analytics quickly reveals customer buying behavior and trends that every distributor can utilize to increase sales. When suggestive selling is based on actual buying patterns, the suggestions are more plausible, and customers trust them. It is very believable when you can say “ 90% of the times this ballast is bought with this lamp and mounting.” These recommendations are sensible, simply because they are based on the actual buying behavior of your customers. Emcien’s analytics can simulate the years of experience that’s normally accumulated by working in a store for years. I need to point out that sensible recommendations are critical because irrelevant recommendations annoy customers and may reduce sales.
To illustrate the potential of suggestive selling, here are some actual numbers. ACME hardware store carries 41,155 unique items. An analysis of 232,500 orders showed that 61% of these orders would result in at least one additional recommendation. When the store implemented the suggestive selling, sales increased by 3% in the first 4 months.
Product recommendations have been used very effectively by Amazon and reported to increase sales by up to 30%. Surprised? Here is the impact to your business – Adding one more item to 10% of the orders can increase sales by 5%!
How much money are you leaving on the table because you are not leveraging suggestive selling for your products? Would you like to know?
Variation is valuable
Advances in interconnection technologies are driving an increasingly demand-driven market. Customers are learning to expect to get what they want, when they want it, how they want it. And they tell you in each and every interaction they have with your company, or not. In a demand-driven world, increasing product variation and complexity in your business model is inevitable. Left untended, your business can become a tangled web of counterproductive business strategies with a dense portfolio of product families comprising thousands, even millions, of variants.
However, make no mistake, variation is valuable. To deny complexity or view the long tail of product variation as a management failure is to deny diversity of the world in which we make our living. Eliminate complexity in your product offer and you will find yourself competing with boatloads of product from China, India or any of a number of low-wage production markets.
The “keep it simple” principle is the root of good management. However, as Oliver Wendell Holmes, Jr. has observed, “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity,” it matters which form of simplicity you choose. The wrong simple answer is to try to focus on the 20% of product variants that make up 80% of your revenue, the head of the ubiquitous Pareto distribution, and find ways to minimize or eliminate the so-called unprofitable remaining 80% of product variants that lurk in the tail. Hello commodity, goodbye margins. The right simple answer is to deliver Intelligent Variation based on the voice of the customer shouting through the many interactions they have with you each and every day.
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8 more definitions you need to know for product complexity analysis
1. Kit
A kit is a collection of parts that are used together for some purpose — for example, all the parts needed to implement air conditioning on a particular model of a car. A kit is assigned its own part number.
2. BOM
BOM stands for bill of materials. When a customer makes a selection of choices chooses a configuration (i.e., makes a complete set of option choices), the manufacturer translates the order into a collection of parts that are needed to assemble it. The BOM is expressed in terms of part numbers. These part numbers may refer to whole kits, composite parts or specific atomic parts. A complete vehicle, or washing machine, will contain many parts that the customer has not chosen. But these parts appear in every instance, or else they are implied by the combination of choices that the customer made.
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