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Using Square POS system and Chat GPT to analyse business trends

Square is a popular Point of Sale system which provides businesses with valuable real time sales data, and easy to understand overviews of sales trends, including year on year comparisons. Understanding this data can help businesses understand the impact of external factors as well as any internal interventions made by the business. The example below shows how data helped a business understand the unexpected outcome of raising prices.

The challenge

This business is a busy café, famous for ‘cheap and cheerful’ breakfasts and snacks. The business had been struggling with staff shortages and were unable to cope with the increasing volume of customers, as despite being busy, the profit margin remained low. The business owner decided to raise prices in line with inflation in July with the hope that this would lead to fewer transactions of higher value, which would take pressure off staff.

Unexpected outcome

Before closely examining the data, the business owner was content that sales appeared to be growing despite the increase in prices. On consulting the data however, they found that the number of transactions had also increased compared to the previous year.  When looking at the average total sale compared to the previous year, this had increased by only 0.57%, despite prices going up by on average 10%. This means that in real terms, the average total sale has in fact gone down.

Graph comparing year gross sales and order count 2023 and 2024
Purple graph comparing gross sales 2022-2023

Analysis

After consulting Square POS data and drawing these conclusions, we asked ChatGPT to clarify our theory and provide an explanation. Here is the result:

“If your average sales are lower despite increasing prices, several factors could explain this trend. Here's a breakdown of potential reasons:

1. Reduced Demand Due to Price Sensitivity

  • Customer Resistance: Some customers may have reduced their purchases or switched to alternatives if they perceive your product as too expensive.
  • Elasticity of Demand: If your product is price-sensitive, even a small price increase could significantly impact sales volumes.

2. Increased Competition

  • Competitors might have maintained or lowered their prices, attracting customers who prioritize cost savings.
  • New competitors entering the market could also divert your customer base.

3. Economic Factors

  • Broader economic pressures, such as inflation or reduced disposable income, might discourage consumers from buying your product, even if price increases are justified.

4. Perceived Value Misalignment

  • Customers might feel the price increase isn’t matched by an improvement in quality, service, or perceived value, leading to reduced loyalty.

5. Changes in Customer Behaviour

  • Shifts in consumer priorities or preferences could affect demand, particularly if alternatives offer better convenience, sustainability, or features.

6. Seasonal or Cyclical Variations

  • Certain industries experience fluctuations in sales based on seasons or economic cycles. Ensure this isn’t part of a regular downturn.

7. Operational Issues

  • Stockouts, supply chain disruptions, or longer delivery times might deter customers, especially if competitors are more reliable.

8. Marketing Gaps

  • Less effective marketing or advertising during the price change could result in fewer new customers or diminished brand visibility.

Solutions

  • Analyse Price Elasticity: Use historical data to understand how price changes affect demand.
  • Review Market Position: Evaluate your prices and value proposition compared to competitors.
  • Customer Feedback: Gather insights on why customers may be buying less and adjust accordingly.
  • Promotional Strategies: Offer discounts or loyalty programs to retain price-sensitive customers.
  • Operational Excellence: Ensure supply chain and customer service remain strong to avoid losing customers for non-price-related reasons.

Would you like assistance analysing your specific situation or creating a tailored strategy?

You said:

But the gross sales are still up

ChatGPT said:

ChatGPT

If your gross sales are up but average sales are lower, this suggests an interesting dynamic. Here’s what might be happening:


1. Increased Volume of Low-Value Sales

  • Shift in Customer Behaviour:   More customers may be making smaller purchases, reducing the average transaction size even though the total revenue is increasing.
  • Promotions or Discounts: Are you running deals that encourage smaller, frequent purchases rather than fewer, higher-value ones?

2. Different Product Mix

  • Shift to Lower-Priced Items: Customers may be gravitating toward your cheaper offerings if higher-priced items seem less affordable after the price increase.
  • Bundling or Package Sales: If you're selling more bundles or discounted items, gross sales might rise, but the average sale could drop.

3. New Customers vs. Returning Customers

  • New Customer Acquisition: An influx of new customers might be purchasing smaller amounts to "test" your products.
  • Lost High-Spenders: If loyal, high-spending customers are buying less or leaving, this could lower the average sales while overall numbers rise.

4. Price Increase Offsetting Lower Volumes

  • Higher Price, Lower Units: If fewer units are being sold but at a higher price, gross sales may rise while the average number of items sold per transaction drops.

5. Expanded Sales Channels

  • Different Channel Dynamics: If new sales channels or regions have been added, they might bring in more but smaller transactions.
  • E-commerce vs. In-Store: Online shopping often results in smaller purchases compared to in-store purchases.

What to Do:

  • Analyse Metrics in Detail:
    • Average Order Value (AOV): Track if AOV is declining and why.
    • Sales by Product: See which products are driving sales and which are lagging.
    • Customer Segments: Analyse if high-spending customers are purchasing less or new customers are driving sales.
  • Optimize Product Mix: If smaller sales are driving growth, consider upselling or bundling to increase average transaction size.
  • Adjust Marketing: Focus campaigns on higher-margin or higher-value products to balance the shift.”

Conclusion

This case study highlights the power of data in helping businesses make informed decisions and uncover hidden trends. With tools like Square POS, businesses gain access to real-time sales data and clear overviews of trends, such as year-on-year comparisons. When paired with ChatGPT, this data can be analysed further to reveal insights that might otherwise go unnoticed, enabling business owners to understand the impact of both external factors and internal changes.

In this example, a price increase brought unexpected results. While gross sales grew, the real value of average sales declined. By examining Square POS data and analysing the findings with ChatGPT, the business gained clarity on how customer behaviour and purchasing trends shifted following the price adjustment.

If you’re looking to better understand your business data, identify trends, and make smarter decisions, we’re here to help. Whether it’s using your own data or high street data we can support you in making the most of your data to drive growth and efficiency.

Get in touch today to unlock the full potential of your business data!