Staying Alive During Tough Times - Part 3
Furniture World Magazine
By Joe Capillo
Part 3: Our most effective and productive salesperson, returns 30% or more of his monthly Ups as be-backs. These customers are 40% more likely to buy.
In the May/June issue of FURNITURE WORLD, we looked at some fabulous consumer research concerning customer motivations and decision-making processes. I mentioned some other research that shows as many as 4 out of 10 furniture shoppers report not making a purchase as the result of shopping. That’s 40%! And, this study was conducted for at least 4 consecutive years. Because this study focused on determining which categories people were shopping for, the reasons for their not buying were not discovered. However, because I am the self-proclaimed director of opinions on these things, I believe I know why at least some of them didn’t make a purchase. They needed more help than they found in furniture stores.
Furniture retailers are fairly good at showing customers how to buy the things they sell. They’re likewise very poor at showing them how to use the things they buy to enhance the beauty and comfort of their homes, and their quality of life. I say we’re only fairly good at showing consumers how to buy because we typically make two sales for every ten customer visits to our stores – 20% of customer visits in typical full-line furniture stores result in a sale. The problem (and the opportunity) for retailers is that this overall average close number includes a range of performance from the highest individual sales performer to the lowest.
For a sales staff of 20, I have found that more than half (11 or 12) will perform below the store average, fewer than half will perform above that level, and the average variance from top to bottom is 40%. The lowest performer shows results 40% lower than the top performer. The retailer’s problem is that all of these salespeople get the same number of shopper opportunities to work with. They get equal opportunities but generate unequal results. This is the number one sales management issue for managers in home furnishings retail stores.
Now let’s follow the logic: If 40% of 1,000 monthly shoppers report not making a purchase as the result of shopping for furniture, how many consumers who shopped in my store over, say, the last three months still haven’t satisfied their need, have not become part of another store’s 20% close rate, and are still shopping? My answer is 1,200. That’s 4 of every 10 shoppers... 40 of every 100... 400 of every 1,000, are still out there looking to solve a problem, fill a need, get the room they want.
My store in the Northeast gets 1,000 shoppers a month, so after only 3 months I have 1,200 hot prospects out there that are still not satisfied. Why are they hot? Well, if I’ve already met them... and if I understand their need... and if I know where they are in the decision-making process... and if I’ve captured their contact information when I worked with them to help them solve their room-related problem... and if they were happy to allow me to stay in contact with them… and then, of course, we all still believe in the Tooth Fairy.
Why am I so sure they’re really out there? Because all the research from disconnected sources say they are. People in one of the four pre-purchase stages of decision-making are shopping for furniture all the time. I don’t know how many there are in any one stage or even in all stages, but I do know that 80% of customer visits don’t result in a sale. My experience in working with hundreds of stores has shown that close rates are far lower than many retailers believe them to be, so this data isn’t out of line with my experience. About 20% of the shoppers we’ve seen in our stores over the past three months have bought elsewhere. So, if our average initial close ratio is 20% and our close ratio for be-backs is 60%, and I can bring back only 2 of the 8 of 10 who didn’t buy the first time, my sales will go up by 50%. A $4-million store becomes a $6-million store. A $10-million store becomes a $15-million store. A 30% close ratio is 50% higher than a 20% close ratio, and it’s just that simple.
The top performing salespeople I know have all that contact information, and they know that customer decisions take a lot longer than many think. Most average and below average salespeople don’t have a plan to bring consumers back once they leave the store. These customers are dead to these salespeople. They don’t have a connection to her room project or acknowledgement of where she may be in the 5-stage decision-making process. No contact information is collected because none was earned. Once more I’ll beat this dead horse: It isn’t about your furniture, it’s about the consumer’s home. Your focus has to be there if you want to earn the right to get them back to complete their project with you.
So, we’ve got 1,200 hot prospects (mentioned above) over three months whom we’ve already brought through our doors and should know something about. If all 1,200 returned to our store a second time we’ll make 720 sales because, as I’ve told you in previous articles, our close rate on return customers is 60%. (I challenge you to measure this rate yourself so you can compare it to our experience. Just make sure you measure those consumers who are returning on the same project.)
In order to make 720 sales to first-time shoppers (meaning shopping for the first time on a project) we would need 4,800 new shoppers because of our 15 % close ratio on first-time shoppers. From a strategic management point of view, this means that be-back shoppers, customers returning to our store a second (or more) time on the same project (and remember, everything is a project to the shopper) are 4 times more likely to buy. For this reason, whatever strategies and initiatives we can employ, whatever training is required, whatever changes to our selling systems or operating systems have to be implemented to get them back, are worth looking at.
All that I’ve written about to this point has had to do with improving two of the three elements of the retail furniture sales performance equation, which is:
Consumer Traffic (Ups) X Closing Ratio X Average Sale = Sales
The notion that salespeople can have a huge effect on boosting close ratios by increasing consumer traffic is in direct opposition to most conventional thinking that assumes customer traffic to be the sole responsibility of the retailer. Their premise is that consumers are attracted to stores by the owner’s investment in advertising, location and facilities. This new thinking that salespeople are, in very important ways, deeply involved in creating consumer traffic through the development of be-backs hasn’t yet found its way into main-stream retailing. Once you realize, however, that the only people who can attract return customers and manage that activity are your salespeople, you might want to make it part of your thinking.
Salespeople are, after all, responsible for creating trusting relationships with customers and are involved with them as problem-solvers and consultants.
In our stores, the most effective and productive salesperson, Robert, returns 30% or more of his monthly Ups as be-backs. These are customers who are returning to him to complete their purchase. No other salesperson in our company is even close to that number. The interesting thing about this is that these people return sometimes many months after the initial contact, and do so because of continual contact by Robert. But there’s more to it than just contact. One of his customers told me recently that, “He’s wonderful!” she smiled, “He called me every month that this group went on sale and finally got me to go ahead.” When I asked her if all that contact annoyed her, she replied: “Oh, no, he asked me if it would be OK”. There really isn’t much more to say about how things should be done.
What is it that keeps the vast majority of salespeople from following Robert’s course? It’s frustrating for those of us who are accountable for making it happen, but it’s really simple: Nothing fails like success. The very things that have produced every dollar of sales revenue cannot produce more. It’s like that famous description of insanity – doing the same things over and over and expecting different results. The thinking and methods that have provided this level of success, cannot give us more, because there is a clear difference between the customers for whom these things work, and the roughly 80% for whom they do not. Next time I’ll address those issues.
Joe Capillo is a 41 year career veteran, experienced in managing and consulting with furniture retail operations. He is also a contributing editor for Furniture World Magazine. He is a contributing editor to FURNITURE WORLD and a frequent speaker at industry functions. See all of Joe’s articles on the furninfo.com website.
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