From Home Furnishing Business
Tracking the Sales Power of Your Adverting Efforts
2016 by in Business Strategy, Industry
By Tom Zollar
One of the basic retail facts of life that we have often referred to in this column is that whatever happens on your sales floor is the result of three major business dynamics working together: Advertising, Merchandising and In-Store Experience. I often find that many retailers look at their sales metrics as only giving them the results of their selling effort. When in reality, virtually any sales report you analyze also provides great insight into how your two other important areas are doing. Since the theme of this issue deals with Advertising, we will take a look at ways for you to use some existing sales metrics reports to help you improve the power and focus of your efforts in that area.
As we have often said, your Total Sales Volume = Traffic X Close Rate X Average Sales. Traffic is really the main driver of your sales engine and dramatically influences your results. Without customers there will be no sales or as an old retail axiom goes: “A strange thing happens when you don’t advertise – NOTHING!” That’s a good way to look at it, but in reality the number of potential customers your advertising efforts drive into your store is only part of the equation.
Many retailers end up being a bit short sighted in that they tend to only judge the success of their marketing program on the amount of traffic it creates. However, there is another dynamic of the opportunities it creates that is just as vital and in some cases more important than the QUANTITY of bodies delivered to your doorstep. That is the QUALITY of those that answer your call! In other words, no matter how many people you bring in, if they are not the ones your merchandising and sales effort are targeting, you will never maximize your potential.
At this point you might say: “Well DUH, I know that, but what do I track and how do I analyze it to determine the quality of the Ups my promotions, ads, online presence and events are bringing in?” Of course the main indicator will be your total sales, but that is basically the end result you are looking for from all three of your main business efforts and as we have often said, it is very hard to coach a result because too much goes into it. You really need to break it down into its main ingredients, the “what makes this happen” elements, that can be analyzed and improved.
We have found that the most useful number in your entire sales measurement process is Revenue Per Up or Performance Index as many call it. It is the main indicator of both the effectiveness and the efficiency of your overall effort, with serious implications about each of its ingredients. In the June issue we defined it and briefly discussed how it can be used to help direct your coaching efforts with your sales staff. Several articles last year went into more depth about using it as a sales improvement tool.
To a certain extent, your staff is only as good as the traffic you feed them. So the QUALITY of the Ups your advertising generates has a direct impact on how well they perform. Therefore, by default, Revenue per Up can be a great indicator of how well you are doing at delivering qualified potential customers to your selling team. Similar to its sales use, it can also serve as a value or contribution generated measurement for your Advertising effort. We use it as a “Red Flag” for where we need to focus our sales coaching effort and it works well that way for advertising too. For the most part its best application is as a trend indicator, meaning it can show you the direction you are going and also give you extremely useful comparatives to other previous promotions or events. The latter seems to be its strongest asset for analyzing your advertising program.
As stated, you need to judge your promotional efforts based on both the quantity of Ups generated and the quality or qualifications of those that respond. Therefore, you will need to find a way to get your sales reporting system to produce a report that gives you all the information you need to not only analyze those two important metrics, but also the main elements that create Revenue per Up, which are Closing Rate and Average Sales (remember that CR X AS = Rev/Up). That will allow you to actually drill down further into the data to determine where the weaknesses or strengths exist. Then you can develop a strategy to maintain or enhance the good and improve the bad.
The graph below gives us a dramatic visual picture of how a store’s monthly traffic and Rev/Up have fluctuated over a 12-month period. It also indicated how the two have interacted, since we know that the level of traffic will heavily influence how well a store can interact with each potential customer that comes in the door. This is a great way to get an idea how well your staffing level is handling the fluctuations in traffic load that your advertising and seasonal variations cause. That is always the first thing to look at because if your store is chronically understaffed, then you will see greater fluctuations in Rev/Up as your staff struggles to service the traffic you get in busier months.
It should be said that basically the store reflected below is properly staffed and during most months its staff can deal with its workload. However, as you will see, when things like vacations, sick leave and other events reduce your normal staffing level, performance does suffer (particularly when top writers are absent). In this case, we saw that impacting mainly the summer months and December.
Here is the graph and some ideas of what you might look for:
·April – High Ups and Low Rev/Up in this case possibly indicates a good urgency in Ad message which drove people in but did not give them as strong enough reasons to buy. CR was good, AS was low - Look into what deal was offered and whether financing was part of it, something was missing.
·May – Close to being a “Normal” month with average CR and AS. Staff worked efficiently with traffic, consider repeating Ad with some tweaks to build AS.
·June – Traffic dove and rev/Up held steady. Probably should not run this Ad again, it did not drive traffic and even with lower Ups, performance did not improve significantly. Look for something else to do.
·July thru September – Strong traffic for summer season, but poor performance. How much was this due to staffing issues and how much was due to a weak advertising message? This is the biggest opportunity for improvement you have. Therefore, study it and come up with a better plan next year for both areas!
·October – What happened? Traffic tanked and so did performance! When this happens in a traditionally strong month, it is almost always caused by a failed advertising effort. Don’t repeat what you did, come up with a better program next October!
·November – Wow, the perfect storm: traditionally the best business month, ran strongest promotion and was fully staffed! Find ways to repeat this effort if you can!
·December – traffic good but performance dropped. How much was staffing related and how much was caused by a weak advertising effort? In this case it was most likely the former since long term, top writers normally get time off for holidays, which kills performance. Try to mitigate this in the future!
·January – Traffic dropped but performance shot up. Possibly weak urgency in message that failed to drive potential customers into the door, but those that came had a strong reason to buy. Good analysis, however in this specific case the traffic drop was caused by bad weather, not bad advertising. Don’t mess with Mother Nature!
·February – Weak traffic, great performance again caused by weather and shorter month. But we know that our promotion caused those shoppers to buy, so use it again.
·March – Great Traffic, but big drop in performance. What caused it? Some might have been caused by staff overload, but the reason to buy was not strong enough too. Should have been a great month. Give them more reasons to buy next time.
·April – What happened? Traffic off year-over-year, but performance improved. Possibly the urgency of message was not as strong as prior year. Definitely an opportunity to improve! Compare what you did and talk with staff to see what worked and what did not.
The winningest football teams all measure, grade and coach performance improvement in their offensive, defensive and special team’s efforts, because they all contribute to the results on the playing field! You need to do the same in Sales, Merchandising and Advertising. I hope this gives you some ideas about how to study the last but not least area!