Customer Conversion: How Many Sales Did You Lose Today?
Even in good times, consumer electronics retailers live on the edge - razor-thin margins, unrelenting competitors, fickle consumers. When times are as difficult as they have been in 2009, weak retailers simply close their doors, and the good ones cut expenses and hold their breath waiting for the storm to pass.
As difficult as times are, you would assume that retailers would do everything they could to sell to the prospects who do visit their stores, but the majority of retailers don’t. They can’t because they don’t measure traffic and customer conversion - and they’re making these tough times even tougher on themselves.
Every day prospects visit your stores looking to buy. While some number of these folks will buy and be successfully “converted” into actual customers, others will leave without buying. How many sales did you lose? When did you lose them? What can you do to lose fewer of them?
You won’t find the answers to these questions in your till or in the mountains of POS data you collect. As much as they try, retailers who say that sales transactions provide a good proxy for store traffic are simply wrong. Transactions are a measure of the buyers only - it tells us nothing of the people who came and left without making a purchase, the “unconverted.” Aren’t you even a little curious about these folks? You should be. Every retailer loses sales every day, and so do you, but you will never know it or be able to do anything about it unless you measure traffic and customer conversion.
Customer conversion - calculated by dividing sales transactions by walk-in traffic counts - clearly shows where the sales opportunities were, what you got and what you missed. It’s almost too simple. Then why do so many retailers either not measure this or struggle with making sense of this stuff? For some it’s the expense of buying traffic counters; for others it’s the lack of internal resources to analyze the data; and for many it’s just a lack of appreciation for what these simple but powerful metrics can reveal. The excuse I find most curious is, “We’re too busy worrying about sales to think about customer conversion.” Sort of ironic, isn’t it?
Successful retailers “get it,” and traffic and customer conversion metrics are on their daily dashboards right alongside “average ticket” and “comp sales.” They couldn’t run their businesses without it.
If you don’t track traffic and customer conversion in your stores today, you are at a significant disadvantage. It’s like flying without radar. If you do track traffic and conversion, but aren’t really effectively using it on a daily basis, get help. It’s a gold mine of insights. And, if you are tracking traffic, measuring conversion and using the insights effectively, I apologize for giving away your competitive advantage.
Mark Ryski is the founder and president of HeadCount., a retail analytics company, and author of “When Retail Customers Count.” He can be reached at mark.ryski@headcount.com.
Reggie Johnson commented:
The problem with not analyzing turnovers in sales is that most sales professionals are blissfully unaware of the number of lost opportunities. Many of them remind me of the patient who is afraid to go for an examination … because he might find out he has cancer. The first step of any treatment is to admit there is a problem.
There are ten reasons customers do not buy the first time. All of them can be overcome with proper training. If my competitors walked their clients eighty percent of the time … my goal is to prevent them from returning … one hundred percent of the time. Once you rely on “be backs”, you are building the foundation of your business on euphemistically-crumbling sand.
Respectfully,
Reggie Johnson, “How to Close More Customers”
Marty Brooks commented:
While I’m in favor of sales analytics, I’m not sure that sales transactions/traffic is the most meaningful number, although it’s certainly a clue. A customer who didn’t purchase today is not necessarily a lost customer - he/she is just a customer who is in the process of making a purchasing decision and hasn’t made it yet.
I do a weekly 22-mile bike ride and in the middle of that ride, I almost always stop in to my local CE retailer. I probably purchase something 20% of the time. I am not a lost customer the other 80% of the time.
Having said that, I think both retailers and manufacturers leave money on the table. Retailers leave money on the table by having poorly trained (or missing) staff on the floor, poor signage or other failings that either cause customer confusion or don’t provide the customer with enough information to make an informed purchasing decision.
In the world of CE, the biggest problem I see are poor demonstrations of the products. There are certainly a large number of products out there that can “blow somebody away” if properly demonstrated, but they rarely are. Hi-res TVs are demonstrated with poor signals or low-res content. HD radios don’t have antennas connected. Surround systems are demonstrated with no surround. Blu-Ray DVD players are demonstrated with a standard DVD. Computers are locked or have no application software.
The problem is that many (most?) CE retailers have become supermarkets. Aside from shelf location, they’re geared only towards delivering a model that the customer already knows they want via other marketing methods. Is it not surprising then that manufacturers have slashed retailer margins?
Another issue is not providing the consumer with enough information to make a purchasing decision. Go into any CE retailer and ask them the difference between a Sony TV “W” series and a “Z” series. Aside from, “the Z series costs more and is a better set”, you won’t get much of an answer. Ask them the difference between a Sony and a Toshiba and you’ll get a blank stare.
Manufacturers/distributors leave money on the table by poor inventory management, thereby not being able to supply existing models that consumers want. Or they have a confusing product line with too many models. Apple is a great example of a company who some years ago, caused customer confusion by having too many lines and models. When Steve Jobs returned to Apple, he cleaned up the line and ended customer confusion which was part of the formula to Apple’s resurgence and success.
Reggie Johnson commented:
Mark, your company comes highly recommended. Consequently, your reputation preceeds you. If you will leave an appropriate address for mailing at: rvjohn@optonline.net it would be my pleasure to send you a complimentary copy.
Regards ...
Reggie Johnson
Mark Ryski commented:
Thanks for the comments.
Reggie, based on the title of your book, I can see why this would make sense to you…I will be checking out your book.
Anon, I appreciate your skepticism. While it is true that my business is traffic and conversion analysis, and consequently I do have an interest in seeing retailers do this, my “pitch” isn’t for my service, but rather for traffic and conversion analytics in general. I mean everything I say, and however retailers get there (either my service or some other alternative), doesn’t matter. Retailers just need to do it!
Reggie Johnson commented:
Mark, I agree with your poignant article. My experience has taught me that very few companies have empirical data on this giant-profit-sucking hole.
Reggie Johnson, author, "How to Close More Customers"
anon commented:
sales pitch?
