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Episode 7: 3rd Profit Multiplier – Average Sales Value
The 3rd Multiplier of Average Invoice Value is calculated by dividing your total sales by the number of invoices.
The essential principle is once you have spent the money to acquire a customer can you increase the amount that they buy from you.
The 3rd Profit multiplier is about up sells, cross sells and increasing your prices.
The trick with Amazon is that it is difficult to measure what other products your customers buy from you, so instead in Amazon, the focus is on the average selling price.
Transcript:
Welcome to Episode 7 of the Treehouse metrics podcast
My name is Arnie Shields and I am your host, bringing you the skills and knowledge to work ON your Amazon business rather than IN your Amazon business.
In the 3rd episode, i introduced the 5 multipliers of business and how just small increases in each of those multipliers can deliver you exponential growth
In this episode, I am going to discuss the 3rd multiplier – the Average Invoice Value or Average Price
The 3rd Profit Multiplier – Average Invoice Value or Average Price
The 3rd Multiplier of Average Invoice Value is calculated by dividing your total sales by the number of invoices.
The essential principle is once you have spent the money to acquire a customer can you increase the amount that they buy from you.
The 3rd Profit multiplier is about up sells, cross sells and increasing your prices.
The trick with Amazon is that it is difficult to measure what other products your customers buy from you, so instead in Amazon, the focus is on the average selling price.
That is not to say that you cannot do upsells and crosssells in Amazon but it is difficult to measure the effect.
The primary focus of many Amazon sellers is price if I reduce my price then I can sell more but the real focus should be profits and how those profits convert to cashflows.
The biggest obstacle and limiter to the growth and success of your Amazon business is cashflow – without sufficent cashflow you cannot restock your inventory to continue sales.
As we are applying the multiplier to Amazon businesses, the primary focus becomes a pricing discussion. If we are looking at any other business, then the discussion of the average selling price multiple includes upsells, cross sells, maximising the amount that you get from each customer and pricing strategy.
Dropping your price really should be the tactic of last resort once you have exhausted all other methods to increase your conversion rate. Your sales price is a conversion rate issue.
SO first lets look at the ways that you can cross sell and upsell in Amazon within your own products.
Cross Product Bonus Offers
You could set up a bonus offer to buy one and get x% off another of your products.
Complimentary Products – find out what people buy with your product and add that product to your product line.
High and Low Price variations – have two variations of your product where one product has a higher price (better material etc). The lower price product variation will sell more but some people will buy the higher priced variation.
Because price is such a big question with Amazon sellers, I wanted to concentrate on price and pricing rather increasing the average dollar sale.
A common characteristic the Amazon environment is price wars where a number of sellers undercut each other to gain or maintain market share.
You need to have a long term view on whether to match your competitors or just hold the price.
It is unlikely that your competitors will be able to continue selling at the lower price and reduced margins for a sustained period. The cashflow effect of lower margins will make it difficult for them to restock inventory without an additional capital injection into the business.
Most Amazon busines
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By Arnold ShieldsThe 3rd Multiplier of Average Invoice Value is calculated by dividing your total sales by the number of invoices.
The essential principle is once you have spent the money to acquire a customer can you increase the amount that they buy from you.
The 3rd Profit multiplier is about up sells, cross sells and increasing your prices.
The trick with Amazon is that it is difficult to measure what other products your customers buy from you, so instead in Amazon, the focus is on the average selling price.
Transcript:
Welcome to Episode 7 of the Treehouse metrics podcast
My name is Arnie Shields and I am your host, bringing you the skills and knowledge to work ON your Amazon business rather than IN your Amazon business.
In the 3rd episode, i introduced the 5 multipliers of business and how just small increases in each of those multipliers can deliver you exponential growth
In this episode, I am going to discuss the 3rd multiplier – the Average Invoice Value or Average Price
The 3rd Profit Multiplier – Average Invoice Value or Average Price
The 3rd Multiplier of Average Invoice Value is calculated by dividing your total sales by the number of invoices.
The essential principle is once you have spent the money to acquire a customer can you increase the amount that they buy from you.
The 3rd Profit multiplier is about up sells, cross sells and increasing your prices.
The trick with Amazon is that it is difficult to measure what other products your customers buy from you, so instead in Amazon, the focus is on the average selling price.
That is not to say that you cannot do upsells and crosssells in Amazon but it is difficult to measure the effect.
The primary focus of many Amazon sellers is price if I reduce my price then I can sell more but the real focus should be profits and how those profits convert to cashflows.
The biggest obstacle and limiter to the growth and success of your Amazon business is cashflow – without sufficent cashflow you cannot restock your inventory to continue sales.
As we are applying the multiplier to Amazon businesses, the primary focus becomes a pricing discussion. If we are looking at any other business, then the discussion of the average selling price multiple includes upsells, cross sells, maximising the amount that you get from each customer and pricing strategy.
Dropping your price really should be the tactic of last resort once you have exhausted all other methods to increase your conversion rate. Your sales price is a conversion rate issue.
SO first lets look at the ways that you can cross sell and upsell in Amazon within your own products.
Cross Product Bonus Offers
You could set up a bonus offer to buy one and get x% off another of your products.
Complimentary Products – find out what people buy with your product and add that product to your product line.
High and Low Price variations – have two variations of your product where one product has a higher price (better material etc). The lower price product variation will sell more but some people will buy the higher priced variation.
Because price is such a big question with Amazon sellers, I wanted to concentrate on price and pricing rather increasing the average dollar sale.
A common characteristic the Amazon environment is price wars where a number of sellers undercut each other to gain or maintain market share.
You need to have a long term view on whether to match your competitors or just hold the price.
It is unlikely that your competitors will be able to continue selling at the lower price and reduced margins for a sustained period. The cashflow effect of lower margins will make it difficult for them to restock inventory without an additional capital injection into the business.
Most Amazon busines