Given the fierce competition the traditional high street is facing, its wonder many still survive. With increasing threats from big-box retailers, internet sales, and interest rate changes, many have turned to the ever promising CRM (customer relationship management). “Know your customer better than you know yourself, one package proclaimed.”
All is well and good collecting this information, as long as you do something with it, and with the ever-increasing reams of paper these systems produce, it getting harder to make informed decisions, not easier!!
What do we know about our customers, what can CRM deliver?
- We know basket analysis:- what product was purchased with what.
- We know when:- when do we make most sales when do make the least sales
- We know individuals:- they have store cards and are not afraid to use them
We know a lot!!
Most CRM systems are not designed with the customer’s interests at heart, and with that, it’s hardly surprising that there is little to no evidence on them impacting on customer loyalty.
Example: - In a recent exit survey carried out, one customer of a well-known fashion retailer was asked, did she have a store or loyalty card, she replied, “No!! I would never have one, all that information about me floating around, I would feel violated”. A little reactionary maybe, but pause for thought.
It may seem that I’m trying to give CRM the kiss of death; on the contrary, I’m a firm believer in it.
What I am most passionate about, however, is customer service, the one to one retail experience.
Having spent some twenty years plus in retail as an industry consultant and much longer as a customer, I can be confident in saying that the experience is king; after all, shopping is the developed world’s favorite pastime.
What don’t we know?
Having briefly looked at what we do know, let’s have a closer look at what we don’t!!
- When is our store most busy, or most empty? Don’t rely on sales for this
- How long do our customers spend in our stores, how long is our opportunity?
- Have we got the staffing to customer ratio at optimum?
- What marketing brings in the most customers?
- What is our conversion rate, what percentage of our visitors made a purchase, and when?
How do we deliver these answers?
Customer counting has been around for many years in one form or another. From simplistic beginnings of the owner behind the counter looking up and calling out back for some help, right up to the sophisticated technologies we use today, and many in between.
Whichever method you decide upon, you must believe in it fully, because once implemented, it will change your understanding of your business forever.
The more accurate the system implemented, the better the decision-making process is.
Counting the number of visitors to your stores will reveal some startling information; after all, you can’t measure your sales by volume alone
(a) The following table demonstrates that turnover is no indication of best practice:
Store (A) made sales to 1 in 4 of its visitors, while store (B)’s sales where 1 in 5
When store (B)’s performance matched (A)’s there was an increase in the conversion rate of 20% and an increase in sales annually of £68,250
The table above indicates clearly one area customer counting can help determine results, however, there are many other areas this piece of information impacts.
Staff scheduling is often set hours based:
Example: Store A is open for 63 hours a week and is allocated 220 hours payroll. In this case, this equates to 5 full-time members of staff and 1 part-timer. When analyzed and hours laid over the footfall, it was possible to reduce the number of full-time members of staff by 1 and increase the part-time members by 1, resulting in a 9% decrease in wage and an increase in working hours flexibility. This had no adverse effects on turnover.
Marketing: this is a very emotive subject and also subjective, but it needn’t be
Example: Chain B has a “spend per year” on direct marketing of £1.1M, most of which is spent on radio, TV, and sponsorships. After spending £40,000 on a month-long local radio campaign the stores in the catchment had seen an increase in people visiting the store by 78,000 compared to those outside of the catchment area. This equated to a cost of £0.51 per visitor. A similar ad campaign was carried out in another catchment area, only this time through the media of newspaper, both paid-for and freely delivered: this time the spend was £20,000, this increase had a slower take up but in conclusion had seen an increase in visitor traffic of 101,000, equating to a cost of £0.19. This return on investment has changed the way this retailer advertises (incidentally the spend per head, also increased by 3% when compared to the radio driven customers)
Dwell Time: Can we change how long the customer browses?
Making customers wait to be served is a sure-fire way of losing them, not always immediately with abandoned baskets, but it’s almost a certainty they won't return willingly. However, increase the dwell time of a customer within the body of the store by just 5% will result in an increase in basket size by up to 7% (observed results). This has proved time and time again, whether you are a high fashion boutique or a local grocery store.
Conversion rates: as an incentive to staff, this is by far the most rewarding for all concerned.
Many retailers offer a bonus structure to staff based on increased turnover or performance against target. Recently a client of mine ran a three-month trial where 50% of there managers continued on the bonus structure already in place, and the other 50% had there bonus based on conversion rate.
The results have been closely monitored with both an internal audit and external survey of customers. The results, while these did not surprise those of us involved, caused quite a stir at the client's head office.
With the new bonus structure in place, 94% of those involved achieved there target by the end of month three, while those on the traditional bonus structure only 78% achieved bonus.
Those stores on the new bonus structure also realized an increase in sales and profitability over and above. The same group of stores also observed a 6 point increase in customer satisfaction (where surveyed).
Best Practise: putting it in place
It is not possible to understand all of the metrics behind a successful store, as there are so many variables. What customer counting allows you to do; is understand what works for you and enables it to be replicated across the portfolio.
It allows for the monitoring of incremental change as it happens before it impacts on the business, and enables you to make adjustments where necessary. It negates the need for radical changes that can have adverse effects on staff and the business as a whole.
Using raw data: Peaks and Valleys
Raw data analyses can often be daunting to look at, and in some cases, a client may never want to see it. There are companies out there that will take your data off-site clean it up and deliver back trend analyses of the footfall within your portfolio, avoid this at all cost. Trend data has little worth in the real world; it’s the peaks and valleys which tell us everything. If we have a peak, you want to know what’s working and replicate it. If there is a valley, you want to know what’s not working and halt immediately. Remember What I said about incremental change.