Is Conversion King of the KPI’s?
Sometimes the easiest way to solve a problem is not the most obvious.
When sales are down from a previous comparable period, or under target, when people are not performing as well as they need to and when all you hear are excuses day in and day out – you can sometimes become a bit jaded yourself and start to think there is a bigger issue…an uncontrollable issue that is causing your troubles.
But, there really is no evidence for that, most of the time.
Results speak for themselves. Poor results mean something or someone is not up to par.
Monitoring the numbers and interpreting them in a positive way allows the analyst…or retail manager…to take action.
One by one, every single result will tell its unique part of the overall story.
While no one number can be relied upon without taking other numbers into account, every retail manager must know what to do with every single number…the expression of a result…in order to improve it.
Let’s look at Conversion, for example.
Conversion tells you so much about the number of people buying your goods or services compared to the opportunity that was available.
High volume stores often have lower conversion rates than lower volume stores. This comes as a surprise to many because the high-volume store is often seen as this very special animal…a flagship that delivers so much top line and profit…the store that beats records and is the standard bearer for the company; revered by many throughout the organisation.
When confronted with this reality – that their conversion is not usually the highest in the company – it is often met with understanding.
Some individuals in the management of the country, region, district, etc. may believe that there is no way the high-volume store could staff their sales floor to the level of being able to attend to every customer and still maintain a reasonable wage cost percentage so, to them, it is reasonable and acceptable.
However, viewing things through the lens of ‘high volume’ perfection can distort things…like conversion.
The high-volume store has so much traffic that many of the customers leave without being spoken to or sold to.
Is that really acceptable?
Well, that depends on who you ask.
Does the high volume store operate with a different service model? Do they have different expectations of their sales associates? If so, then maybe it is.
There are arguments on both sides of this question.
Certainly, we are not suggesting that just increasing the number of staff is the answer. It definitely is not.
There would be very little point to adding associates who cannot contribute and take advantage of the additional opportunity available in high-volume stores. The staff in those stores need to be more numerous and the most talented; the best of the best your company has.
Another issue that can influence conversion is partial payments and deposits.
Long story short…that is when the customer comes into a store and has a conversation with an associate who gets to “yes” and the customer leaves a deposit on the item.
At some point in the future the customer comes in to make the final payment, concluding the transaction.
The question here is when is that transaction included in the conversion calculation?
Is it on the day the customer said “yes” or the day the customer came in to make the final payment.
You can make the decision on which day it would be but you must ensure that all monitoring and reporting go hand in hand. No apples to oranges, for example.
And, all company personnel must have the same understanding.
The point is you must know what the conversion rate is and understand the reason for the result.
Good or bad, if the reason is understandable and/or acceptable, you need look no further and take no further action.
If the result is not acceptable, whether understandable or not, then you need to engage in conversation with concerned parties and come up with a solution.
Conversion is just one of many Key Performance Indicators that can be investigated to see what your retail organisation can do so much better.
Key Performance Indicators are just one of the topics covered at the Retail Math & Analytics Workshop in Coral Gables.