Increasing Customer Purchase Volume to Boost Profitability

We’re always looking for ways to drive profitability. Experienced profit leaders in distribution know that this doesn’t always mean looking for ways to raise prices. Price level and sales engagement an affect volume in ways that drive higher profits as well. Increasing the volume of purchasing for individual customers is a great strategy for boosting frequency, profitability and adding to your bottom line.

Adding More Lines to an Order

Adding more lines to an order is a powerful way to increase the overall purchase volume. It maximizes the value derived from each transaction, thus boosting profitability. This can be achieved simply by exposing your customers to more of your product range through targeted sales and marketing efforts. By providing customers with a wider variety of options, you also encourage more frequent buying overall as most customers would prefer to consolidate their vendors for efficiency.

At SMP, our distribution sales analysis has shown that if you can add just one extra line per order on every fifth order placed, you can increase your profits by 40%. This is because adding an extra line to each order increases revenue without significantly increasing the costs associated with that same order. In other words, a lot of your sales costs, operational overheads and pick-pack-ship costs are already built into the order, so each additional line you can add to an order increases overall profitability.

Data and analytics are important in helping you make the right decisions about pricing as well as the right targeted offers aimed at increasing order size. Just as you can leverage price optimization solutions to find the right price for maximum profitability and distribution CRM solutions to analyze purchasing trends, customer interactions and buying behaviors to target the right sales offers.

Other Benefits of Higher Volume Sales

Of course, distributors can benefit from higher sales volumes in many ways. Even if you lower your pricing to generate higher volume, you can drive overall profitability with a higher turnover rate, better performance on rebate goals and lower costs of service. Rapid turnover rates allow you to boost your cash flow and reduce storage costs. Selling more of products represented in supplier rebate programs can drive you to a higher rebate level.

Don’t Cut Pricing for Volume – Make Highly Targeted Offers

You don’t have to cut pricing to drive volume. One of the most effective ways to add more lines per order and increase profitability is through customer segmentation and targeted offers. You’ll want to use your data to divide your customer base into specific groups based on various criteria. You’ve probably already done this to adjust your pricing matrices based on purchasing behavior. You can take it a step further with other criteria inside you CRM system based on location, demographics, product purchasing history and more.

This gives you the ability to meet the needs of unique customer groups with targeted marketing offers. The goal of this kind of marketing is to increase volume and more importantly, increase profitability. In fact, our recent survey about trends in targeted marketing in the distribution industry showed that distributors were 4.5 times more likely to see increased order profitability and 2.5 times more likely to experience higher order sizes when segmenting based on buying behavior^.

Encouraging More Purchasing Frequency

Any sales and marketing programs aimed at increasing purchasing volume can help with profitability, but one of the most successful tactics is targeting already profitable customers to increase their purchasing frequency. In SMP, this is as easy as running one of our profitability dashboards and drawing a circle around the results to create a new marketing list. You can create a new campaign in minutes.

Successful campaigns might include the following.

1. Loyalty Programs: Create programs that reward you most profitable customers for frequent purchases. For example, you could offer points that could be redeemed for training, shipping, discounts, special merchandise or other perks.
2. Volume Discounts: Offer tiered pricing or bulk discounts to encourage larger, more frequent orders. The more they buy, the more they save, which can incentivize customers to consolidate their purchasing with you.
3. Product Bundling: Bundle related products together to encourage more frequent sales. Your customers will be encouraged to buy more items at once and will be exposed to more of your product lines.
4. Regular Communication: Using tools like SMP for regular communication through email and sales calls helps your customers understand more about new products and industry news that can help you stay top of mind.
5. Specialized Training and Education: Offer training sessions or educational seminars on new products or industry trends. This not only provides value to your customers but also positions you as an expert in your field, which can increase trust and encourage more frequent purchases.