To Increase Sales and Profits, Understand How Your Customer Uses Your Product

To increase sales and profits, understand how your customer uses your product

Consider the unremarkable, off-the-shelf loaf of bread. The baker sells it by the loaf but we consume it by the slice. Let's examine how a no-cost change could increase the baker's sales and profits.

For simplicity sake assume the baker is fully automated so that he consistently produces the same exact size loaves of bread. Each loaf has the same exterior dimensions, same weight, same nutritional components, and he sells all his loaves at the same wholesale price.

To help illustrate my claim of more revenue and more profits with no increase in cost lets use some hypothetical numbers. The loaves sell for $2.00 each and all costs add up to $1.50; profit per loaf is therefore $ .50 (25%.) Next let's include the number of units sold; say 10,000 loaves per month. In this example the baker generates $20,000 in sales revenue and $5,000 in profits per month.

One more piece of information, the baker presents his loaves with lets say twenty slices.

After spending much time trying to figure out how to improve his business he decides to find out more about how consumers use bread.

Again for simplicity sake, his statistically valid survey reveals that all of his bread buyers use bread for sandwiches; two slices per serving, one per day. So each bread consumer eats a loaf in ten days and therefore buys three loaves per month. Simple arithmetic would indicate that he has 3333 buyers (10,000 loaves divided by 3 loaves per month equals 10,000 customers.)

With this information he decides to provide the loaves with fifteen slices. He reasons that with no change in the consumers' buying and consumption habits, each of his 3,333 buyers will now eat a loaf of bread in seven days (one slice will fall on the floor) and buy four loaves per month.

He makes the change; he is correct!

The baker now sells 3300 more loaves per month! His monthly revenue goes up to $26,600 and his profits increase to $6650 per month; $19,800 more profit per year with no increase in cost!

Once again, success comes to those who know which questions to ask. Study your customers, they will provide the answers to all your questions.

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To Increase Sales and Profits, Understand How Your Customer Uses Your Product