From Home Furnishing Business
“What is not measured cannot be changed”
Literally every sales management training program I have seen during my forty years in our industry, has at some point made the statement “what is not measured cannot be changed” or something very similar! It is so basic to performance coaching that it is usually one of the first points covered and it is made abundantly clear that without the proper tracking, reporting and use of selling metrics, sales management will not be as effective as we need it to be! It is like having a map to navigate an unknown country with your desired destination plainly marked on it. Nice to have, but absolutely useless unless you consistently and constantly know where you currently are! The ultimate example would be the GPS system in your car that keeps you informed and allows you to make the proper course corrects in real time.
Owners/managers all have one goal or target that they do this with, since it is the main metric that drives their business – total sales volume. However, the major problem with only focusing on total revenue is that it is the end result of our efforts in so many areas within our business. Unfortunately, it is virtually impossible to improve a result if that is all you focus on! You just can’t “Coach” a result! You need to break it down into all of the individual factors that deliver what you want, then improve those that are deficient and maintain/maximize those that are sufficient.
As an example, a golf coach would never be successful if all he/she focused on was just getting the final score down to par. First it would have to be determined which aspects of the pupil’s game needed the most help: driving, fairway shots, chipping, putting, etc. Next they would work together on the behavior changes necessary in each of the weaker areas to cause improvement. The result would be an overall lower score, moving them towards the goal of par. Of course if it was my game we would not need to measure the individual facets to determine which to coach, since they ALL are bad!
Similar to golf, selling has a number of facets that greatly influence our end results. Breaking your individual staff member’s performance down to the basic areas that help them make the sales is the best way to know where to focus your attention, then observation and other tools will help guide your coaching/training efforts to deliver sales performance improvement. We have discussed a good deal of these sales management functions in previous articles, but here is a brief overview of the numbers you should be paying attention to and how to analyze them.
Four Key Effectiveness Metrics Tell It All
Effectiveness is a key issue in any environment in which person-to-person selling is the backbone of the business. To be successful in these situations high levels of individual interpersonal skills must be present. The only way management can determine if these skills are, in fact, being applied by salespeople is to measure those elements of sales performance that reflect their use.
Keeping in mind that Total Sales = Traffic X Close Rate X Average Sale, the following four measurements should be used to determine all baseline statistics (where you are now), to prepare on-going performance analyses and to develop goals (where you want to go).
Traffic is defined as: the number of potential customers (or family groups) who come into the store for any reason connected with the store’s business.
Most retailers call these “Ups”. This term derives from the colloquial use meaning that a salesperson is up to bat for this customer opportunity. Effectiveness is based on the number of opportunities that exist to make a sale. All opportunities must be counted because each one requires that a salesperson make personal contact with the customer or prospect. Traffic counts also provide the base measurement for determining close ratios and Revenue per Up, two important indicators of salesperson effectiveness discussed below.
Close Ratio is defined as: Number of sales divided by number of UPs, expressed as a percentage
Are your people connecting to their Ups? The key factor for calculation consistency is how you will measure the number of sales made. We strongly recommend that you combine all sales slips written for one customer on any one day by one salesperson into one total sale amount so that you are always measuring average sale and not average ticket. Doing this will ensure that you are getting a true picture of the total contribution of each sales process and are not inflating your close ratio due to administrative considerations. It is our experience that stores that measure only average ticket hold an unrealistic view of their close ratio that understates the need for training or improvement.
Average Sale is defined as: Total sales volume divided by the number of sales made, expressed in dollars
Are your people maximizing their opportunity with each Up? Here, again, the way the number of sales are counted will affect the outcome. Counting only the number of tickets will cause the average sale to be understated and will provide you with an understated view of performance. When measuring individual performance and comparing one person to another or one person to the store average, the conclusion to be drawn regarding higher performers is that they have the ability to recognize the greater needs of some customers. In other words, higher performers have and apply selling skills that lower performers do not possess or do not apply.
Revenue per Up is defined as: Total sales volume divided by the number of customers seen (UPs), However it can also be calculated by multiplying Close Rate X Average Sale
Revenue per Up is a critical measurement for use by management to understand the true effectiveness and efficiency of each salesperson. This measurement takes into account the effects of both close rate and average sale by combining their effects into one comparative index that indicates how many dollars of revenue are generated each time an individual salesperson greets a customer.
It is the variance among salespeople from high to low that shows the opportunity for store and individual improvement. This variance highlights the cost to the company of allowing high and low performers to have equal customer opportunities without making every possible effort to enhance the selling skills of the low performers. Keep in mind though, that Revenue per Up, like total sales, is a result that can’t be directly coached, it is mainly a “Red Flag” that makes you aware of how staff members are contributing to your business. Since Rev/Up = Close Rate X Average Sale, you must drill down to those numbers to find the driving factor for the performance.
The above four measurements are the most important metrics that should be used in all furniture stores’ sales performance analysis programs. However, in most stores there may be additional key performance measurements that should be considered. Here are a few additional performance numbers to track, report and coach:
Protection/Warranty Close Ratio
In many stores, Protection/Warranty sales is the most profitable product category and provides a significant contribution to the overall success of the company. Many stores currently only track the percentage of these sales to the total. Again, that is a result and can’t be directly coached. We recommend that this closing ratio be tracked, since it directly reflects how effective each person is at presenting these products to their customers and it can be coached.
Product Category Performance Percentages
It is extremely important to know how each of your staff members are performing in every product category a store sells. You will find that some of your people don’t sell bedding, others might fail to make the grade in case goods, a few don’t sell stationary well, etc. As an example, if your store has a lower average sale than it should, chances are you are under performing in Case Goods – find out who is pulling you down and fix it!
Sketching and In-Home Business Development
We recommend that Sketching be an integral part of every store’s selling process, but this is particularly critical in any store that deals in better goods and design or In-Home sales. Therefore, it can be very helpful to understand how many customers each staff member sketches with and how much In-Home business they are generating, based on appointments set up, made and sold.
Sales performance metrics are a management tool that should be used to better understand the dynamics of the store and to gain valuable insights into what is actually happening on the selling floor in the relationships between salespeople and customers. Comparative data should be used within a framework of clear goals, training, one-on-one coaching and counseling, and a structured feedback system. This is how to best develop a winning team and keep it winning!