Increasing your revenue as a retailer – one more item in the basket

There are at least five basic ways for retailers to drive up their revenues…
There are at least five basic ways for retailers to drive up their revenues...

1.    Increase footfall – by getting more customers into the store

2.    Increase conversion – by getting more customers to make a purchase once they are in the store

3.    Increase basket size – by encouraging customers to add one more item to their basket while they are shopping 

4.    Increase repeat visits – by encouraging customers to return more often so that they make one extra visit across the year

5.    Upsell – by encouraging customers to trade up to a more expensive item

Today I’m going to look at how to increase basket size but will be back to look at the others in further posts.

Be Relevant

Encouraging your customers to add an extra item to their basket can be looked at in two ways – a clear and considered value add (usually delivered by well-trained staff) or as an annoying hard sell. One is a clear example of good retailing, the other, a way to ensure people don’t rush back to your stores any time soon.

In grocery, the placement of sugary snacks and energy drinks at the counter is a golden example of the latter approach. Placing unhealthy items, often at child height, at the counter may be a good way to drive a few extra purchases through pester-power, but it’s hardly an example of enlightened or caring retailing. In the UK at least, ‘point-of-purchase placement of this variety went out of style in around 2015, however, it’s still widely used in convenience retail to this day.

The key factor to getting customers to buy more in a manner that actually hits on the ‘value add’ side of the equation, usually is about the relevancy of any suggested additional items. In areas of retail that involve a high-service element, this should be a relatively straightforward affair. While training, as ever, plays an important role, we have seen that it’s less about helping staff to focus on relevant offers, so much as it is encouraging them to have the confidence to make those recommendations on a consistent basis. 

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For one of our high-end sports retailers, we identified that customers who had been offered additional items increased their transaction amount by an average of almost 23% but that the degree to which staff were making such recommendations varied widely between stores – from two in five transactions all the way up to four in five transactions for the best store. 

Having a simple way to monitor staff consistency against your core service KPIs is increasingly an important way to ensure your cashing in on a simple sales tactic.  

Product Placement (in a smart way) 

It is obviously much more difficult to deliver such relevancy when it comes to a self-serve environment. Here it makes sense for retailers to focus on product placement within the store. A common tactic is to place complementary products close to one another, although in real terms, this tends to be applicable only to the most obviously compatible products. At least if you want your store layout to make sense to the majority of customers.

Online retailers have fewer constraints in this area and can personalise offers to each customer based on the items already in their basket and comparisons to purchases made by similar customers. 

While this data-driven approach can work well it still depends on the retailers having a large enough sample size to deliver relevant offers rather than just ‘best guess’ offers. Unfortunately, most online retailers choose to simply focus on the up-sell opportunity whether relevant or not, without always thinking through the long-term impact on customer perception.

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One potentially surprising aspect we have noticed from our work – is that customer service does not have a straight linear impact on basket size. While offering poor service can definitely limit the size of the basket – once service meets a basic level of expectation – the size of the basket plateaus and does not increase significantly, even at very high levels of customer service.

This is not to say that offering great customer service doesn’t deliver increased revenue – but that the investment can take longer to pay off across multiple visits but that is a subject for a later post.

You can read part two – on how to encourage repeat visits – here.

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