Small margins ≠ small profits
6 ways to optimise for low margins
Hi there,
I work with many low-margin products, which are unfortunately common in Food & beverage and Nutrition brands. The raw costs of goods are high, and in some cases (such as beverages), shipping is no walk in the park either.
While there are definitely things you can do from an operations perspective to drive these costs down, I rarely have an impact on that side of the business.
So what do I do instead? I don’t just twiddle my thumbs; I get creative. I work with what I have to get the most out of what we have. Basically, I try to improve average order value and profitability in other ways.
Here are some practical tips for dealing with a smaller margin (for all six tips, check out the full article on Convert.com). They won’t all apply to your brand, but I have no doubt you’ll get some inspiration along the way.
1. Offer cashback on subsequent orders rather than discounts
Discounts eat into margins but can feel like a necessary evil at times to drive urgency to buy.
A good alternative can be offering a cashback or discount for their next order. This doesn’t cost you much; in fact, most people won’t redeem it, meaning the discount is far smaller than a straight-off discount.
On That Ass does a variation of this; every month, you buy a pair of their boxers or underwear, and you get €10 credit that can be used for your next order.
On That Ass Loyalty Programme
2. Offer quantity bundles to drive up AOV
Making it clear that you get a discount when you buy more works great for driving up AOV; we see this with Vive, natural protein bars:
What I like about them is that they clearly show the discount per bar and how much you can save by ordering more. Don’t make your customer do the maths.
Learn about the other four ways in the full article.
Recommendation
This newsletter is sponsored by Convert, they’re an incredible platform for testing on Shopify. One of my favourite resources by them is their Shopify Conversion Optimisation Checklist.
It really is the ultimate checklist, I can guarantee you you’ll walk away with ideas for improvement from how to optimise your product page to your store speed to optimising for SEO.
It’s not easy to work with lower margins, but it doesn’t have to be a barrier, it just requires a bit of extra creativity.
Until next week,
Daphne