Revenue capture strategy: What it is and why you need to define one for your business
Shopify Growth Specialist
What you're going to learn: How you can capture more revenue for your Shopify store
Why this matters: You are probably leaving a lot of money behind, which is something you shouldn't do.
- There are more ways to increase revenue than just driving more traffic to the site
- Traffic is much more valuable when more of it converts to sales
- Repeat customers are extremely valuable, and you should encourage them
The most obvious way for a Shopify store to make money is for someone to come to the site and make a purchase. We usually think of that person as someone new who has never been to our site before, and comes in after seeing an ad or other marketing piece.
That looks something like this:
But if your site is only focused on sales to new traffic, you are leaving a lot of possible income out in the cold, rainy winter. Someone else is going to come along and pick it up.
If you want to be the one to bring that money in and give it a warm and loving home, you need to a plan. You need a revenue capture strategy.
What is a revenue capture strategy?
A revenue capture strategy is a plan to increase:
- Average order value (The amount of money people give you at once)
- Customer Lifetime Value (The length of time that people keep giving you money and the amount of money they give you over that lifetime)
- Capture Points (The number of ways that people can potentially give you money)
- Conversion Rate (The number of site visitors who become customers)
If you want to do move away from one-and-done purchases and into more profitable territory, you need a plan. That plan will guide the actions you take to increase key metrics and bring more cash into your business on a regular basis.
That's what a revenue capture strategy is. It is taking a step back and identifying where you are missing out on opportunities to increase cash flow. Then, you figure out what tactics can strengthen these weaks areas and how you could implement them in your business.
This is less of a single thing you do, and more of a central strategy that informs other things. If you decide that part of your plan is to increase average order values, you can then examine different ways you can do that. If you want to increase conversion rates, there are many tactics that branch out and give you options.
More than anything, your revenue capture strategy highlights all the places you are missing out on money right now, and creates the basis for how you will reclaim that lost money for your business.
What does this look like in practice?
How this works depends on what kind of product you are selling and your target market. A store that is selling a single large product will implement things differently than one that sells dozens or hundreds of smaller products. Marketplace stores will be different than heavily branded, personality-driven stores.
No matter who or what you are, some of the basic ideas are:
- Optimize your website for increased conversions
- Focused on your best customers
- As insanely easy to use and understand as possible
- Give visitors the information they need to make a decision
- Bring more high-quality traffic
- Increase your average order value
- Take advantage of upselling and cross-selling
- Create bundles and packages
- Reward with small discounts or free shipping for larger order sizes
- Adding additional products that fit your business and customer base
- Increase customer lifetime value
- Use email to build and maintain relationships with customers
- Retain more customers
- Encourage sharing and referrals
- Reduce time between orders
- Reactivate lost customers
Here are some questions you need to be able to answer if you want to create a strategy that works for your store:
- How could you convert more traffic to customers?
- Is your site design conversion-focused?
- Does your copy focus on ideal customers?
- Do you convey the value you offer your customers?
- How can you encourage higher dollar values on each sale?
- Can you bring higher-value traffic to the site?
- Can you increase the amount people spend on site?
- What reasons can you give for customers to keep coming back?
- How can you build long-lasting relationships?
- What touchpoints can I create?
- What touchpoints already exist?
- What does an ideal brand-to-customer relationship look like?
When you know the answers to these kinds of questions, you can begin to see where more money might come from for your store. When you see where that money could come from, you can start to plan how you can make it happen.
You need to define your strategy
If you want to want more money coming in than you get from one-off purchases, you need to have a plan to make that happen.
You are looking to increase the number of different ways you can generate sales and revenue from whatever amount of traffic you get right now. You want higher conversion rates, higher average order values, and for more customers to stick around and spend more over time. Once these things are set up, they will act as multipliers as your traffic grows, making everything you do more profitable.
The goal is more sales, more money, and more happy customers
Make it more enticing for people to buy from you. Make it easier to buy more. Build a long-lasting relationship with them.
When you've done all that, you can jump into a swimming pool full of money like Scrooge McDuck. Or invest it in an index fund. I don't care, I'm not your financial advisor. I'm just here to help you make more money, not decide how to spend it.