Monday, March 17, 2008

Retailers Counting On Conversion Analysis To Drive Store Metrics

By Amanda Ferrante, Assistant Editor

With physical expansion slowing, many leading retailers are taking a harder look at the performance metrics of their existing locations. Given the more intense focus on metrics, forward-thinking retailers are adopting sophisticated traffic counting systems and developing conversion rate analytics to precisely track how many shoppers are actually making purchases.

“Knowing your conversion rate lets retailers see how well they are doing, how much the shopper felt the promise of your brand at the door, delivered on the rack, and how much money you might be leaving on the table,” says Bob Phibbs of The Retail Doctor, a sales training consultancy specializing in the retail sector, who has worked with organizations such as True Value Hardware.

Given the economic slowdown and increased pressures to show top and bottom line growth, missing out on capturing customers while they are in a store is becoming an opportunity retailers can no longer afford to miss. Major retailers such as Virgin Megastores, Marks & Spencer, and Crabtree & Evelyn have served as a few of the early case studies for the benefits of measuring and improving conversion rates.

Virgin has credited the analysis with uncovering variations of up to 20% in average transaction values between stores, as well as a 15 point difference in conversion rates between its highest and lowest performing stores. Jason Toy, a division manager for Virgin Retail, said the analysis has been beneficial in highlighting store level performance, as well as regional customer profiles. “From the outset we linked the FootFall information to our store customer service program which has been extremely effective in creating a clear understanding of how service drives conversion,” he said.

Once retailers start collecting the performance analysis from individual stores, they are often surprised by the results. “If you were to ask a retailer how many shoppers they convert, the assumption is typically north of 50%,” said David Smyth, Vice President of sales operations for Experian FootFall. “In reality, the average conversion rate ranges between 20% and 40% for most retailers. Using that average, that means about 70% of shoppers are leaving the store without buying anything. That means retailers are leaving an awful lot of money on the table.”

With major retailers realizing that even a 1% improvement in conversion rates can equate to millions of dollars dropping to the bottom line, more and more are utilizing traffic counting analysis-- not only at the headquarters level, but also providing the analysis directly to store managers and other personnel. For example, Marks & Spencer has used its visitor count system to build staffing plans that better match the customer to each department within a store. “By making small, simple, sustainable changes in staffing, product availability and service based on our findings, Marks & Spencer has been able to drive measurable improvements in conversion, units per transaction and basket size,” said Bill Donald, a manager with Marks & Spencer.


In addition to highlighting operational opportunities for staffing and merchandise adjustments, industry analysts point out that traffic counting and conversion rates also help to measure the effectiveness of a retailer’s marketing efforts. “You can see if your advertising creates more traffic or more sales from the existing traffic,” says Mark Lilien, Consultant with Retail Technology Group, which has worked on strategic initiatives with clients including Circuit City, KB Toys, and Coach.

Laura Davis-Taylor, Founder and Principal with Retail Media Consulting, suggests that the bigger opportunity for retailers is learning more about the in-store behavior of shoppers. “Frankly, any retailer that is interested in shopper insights that unveil the desires and causal triggers for the human behaviors of the people in their aisles benefit from conversion rates,” Davis-Taylor says. “What we are doing is finally bringing the best practices of marketing into the store environment. It's interesting that it's taken so long, as those insights lead to the knowledge on what works and does not work to positively affect these valued people.”

She adds that in order to gain better insights into moving a shopper from an exposure to a purchase, retailers need to move from a “Find Me/Sell Me” approach to a “Know Me/Help Me” strategy that applies to “every touch” to customers. “We can't know and help people if we don't know what they want to make their shopping experience
better and deliver on this with relevant, welcomed communications. It's just that simple: give people what they want and we are much more likely to turn them into purchasers.”

Monday, March 3, 2008

New Study Reveals Sales Staff Driving Shopper Defections

By Amanda Ferrante, Assistant Editor

The phrase “sales help” may prove to be an oxymoron in many corners of retail. A recent study found that front-line sales staff are actually winding up to be more of a hindrance than a help for many consumers.

The Retail Customer Dissatisfaction Study, conducted by The Verde Group and the Baker Retail Initiative at the University of Pennsylvania’s Wharton School, show that sales staff are the single biggest detriment to the shopping experience, resulting in more lost business and negative word of mouth than any other shopping problem. The study also estimated that the defections caused by a lack of sales help or a poor associate experience ultimately results in a 6% loss of business for retailers.

Compiled from 1,000 American consumers surveyed by phone in March 2007, the research found that one in four Americans who experience problems when they shop are ignored by sales staff, receiving not so much as a smile, greeting, or even eye contact. This turns 3% of consumers away from the retailer permanently and is the number one problem customers are likely to share with others—increasing detrimental viral impact.

“It’s odd that retailers are hiring associates who avoid customer contact,” says Paula Courtney, President of the Verde Group. She suggests that part of the problem could be that associates are charged with too many distracting tasks, such as restocking shelves. “Are you asking too many tasks of them? Where’s the priority? Are you rewarding for A but hoping for B?”

The most critical retail shopping issue of all, not being able to find a salesperson for assistance, is experienced by 33% of all consumers who reported a problem. Many shoppers are so annoyed by the lack of assistance that they won’t go back to the store at all. This, in turn, results in negative word-of-mouth, and a whopping 50% of shoppers said they have chosen not to visit a particular business because of someone else’s poor experience- this is not counting their own.

Courtney suggests retailers look to other industries for examples on strategies for dealing with dissatisfied customers. For example, she pointed to the telecommunications industry, where customers who call into a call center for service are often routed to a "save desk" if they are threatening to leave due to a problem or are reporting a problem that puts them at risk for defection. For retailers, the comparable strategy might be for in-store reps to ask customers "did you experience any difficulty or, “What could we have done differently to improve your experience today?" at the end of the purchase transaction.

Other key findings of the study:

· 25% of those surveyed said they found sales people, but it made little difference since the store employee ignored them;

· Long checkout lines, over-solicitous and insincere sales people, and being ignored by sales staff alienate the shopper and make retailers lose big bucks;

· 22% reported aggravation with product stock-outs;

· The average number of problems experienced per consumer were highest among those 18 to 29 years old;

· Stores specializing in a particular type of merchandise (category killers), such as electronics, home improvement or office supplies, account for the largest proportion of shopping trips and drew the most complaints and lowest shopper loyalty.

Based on the findings, the team at Verde Group and the Baker Retail Initiative at Wharton has identified the four core competencies salespeople must have in order to drive loyalty and keep customers coming back for more:

· Educator- explains product, makes recommendations, and tells the customer where items can be found.

· Engager- approaches the customer, smiles, makes eye contact, and helps the customer no matter what else they are busy doing.

· Expeditor- sensitive to the customer’s time constraints and helps them speed through long checkout lines.

· Authentic- lets customers browse on their own if they want and is genuinely interested in helping, regardless of whether a sale is made or not.

The Verde Group and the Baker Retail Initiative at Wharton are also developing a customer experience measurement systems, which is expected to be introduced later this year