Monthly Issue
From Home Furnishing Business
July 19,
2017 by HFBusiness Staff in Business Strategy, Industry 
At a recent management meeting with one of my clients, we were discussing how to help younger new hires understand that they could develop a very lucrative and rewarding career with us in retail. Many of the articles we have read state that the value structure of the Millennials and younger generations seem to be quite different from the Boomers and their parents. Not better or worse, just different.
One of the major aspects of this is that they desire and therefore demand more from their job than perhaps the previous generations did. Not necessarily from an income or financial security standpoint, although that is certainly very critical, their focus appears to be on what they personally get out of the experience. They are often equally or more concerned about what it does for their feelings of self-worth than how it impacts their net-worth. Don’t get me wrong, money is still very important to these younger people, but in many cases they have even bigger dreams than we did. However, their satisfaction in life is more determined by the inner rewards they get from what they do, than it is by how much money they make and what they can buy. As a result, they may value things from their job and ultimately their careers, that perhaps they don’t feel we in retail are offering them.
We all know that a successful sales person on our floors can make a very good income. In most cases better than they can in other industries after spending more time and money on additional education. However, even when we show them what they can earn, many of the ones we really want, turn up their noses and go elsewhere. Why is that? Perhaps it is centered on the fact that they are more interested in “making a great living” than just a good income. In other words, they are focused on the total picture of what we can do for them as employers and we are mainly talking about only one important aspect of it.
So, the most important question becomes: in addition to money, do we indeed offer the type of lifestyle and self-worth rewards they seek? In other words, can we feed their soul as well as their pockets? I firmly believe that we do have the potential to be a very attractive career opportunity for many of the younger, potentially successful sales people that we are either not getting or not keeping. The problem is that we ourselves may not fully understand how vitally important we are to our customers. Even if we do, we don’t properly and consistently communicate it. Therefore, when we talk to prospective employees we do not give them a vision of what our real mission truly should be and if we do hire them we don’t constantly reinforce it throughout our training, coaching and management efforts.
The fact of the matter is that we spend far too much time and effort selling our products, when it is the result of the service we perform for our customers that is really the most important thing we deliver. The products are a big part of it, but they are mainly a means to an end for us. To better illustrate this, let’s go back to one of the basic elements of selling anything – a thorough understanding of the features and benefits of what you sell, be it a product or a service.
When I first started in the furniture business, Sears was the king of the hill for most home products. They were very different from the shell that remains of the former giant. For years, Sears offered a great lifetime career opportunity, including top earnings potential and solid benefits to all employees. A major factor in their success was that they trained their people and had a solid selling process in most big-ticket departments, including appliances, tools, furniture and bedding. A big part of my first role with their largest furniture resource was helping in that training effort. Before I could do that, I had to be taught the Sears approach to selling, which at the time included a heavy focus on product knowledge and understanding how to use it in the selling process to find the best product for your customer.
Their approach was that a feature was a physical element of the product and the benefit was what it did for the consumer, or as they said: “Features TELL and Benefits SELL”. The first session I attended began with that statement. To emphasize his point, the trainer held up a power drill and asked, “If this drill is the feature, what is its corresponding benefit?” No one got it. Then he said, “OK, tell me what this drill does for the owner?” Finally someone said, “They can drill holes in things”. Then the trainer said, “So what does the owner get from the drill?” It actually went back and forth a bit until some bright person said, “A hole!” The trainer responded, “Exactly, they get a hole. Therefore, the major benefit the buyer gets from owning the drill is a hole, basically wherever they want it. The feature is the drill and the benefit is a hole.” In this simple example nothing else matters, because when the drill isn’t producing a hole it provides no other benefit and ownership of it does nothing else to enhance the customer’s life, unless he is Tim the Toolman.
Later in my career I realized that while this was a very useful analogy to help understand the relationship of a feature to its benefit, it does not really help us learn how to better use features and benefits in the selling process beyond that. Since I am kind of Tom the Toolman, I developed a way to use the drill analogy as an example of how important product knowledge is in driving the selling process, through the understanding of the benefits a product provides to the owner. It goes like this:
A guy walks into Sears and the clerk says, “Hi, what can I help you with today?” The guy replies, “I need a power drill”. The clerk says, “Well we have dozens of them. Here’s our best seller at $19.99, you want it?” The customer says, “I guess so” and buys the drill. Simple deal. But was it really what the customer needed or not? Truth is, we don’t know because the clerk didn’t ask enough questions to find that out before recommending a product.
What if instead of a clerk, the customer encountered a caring sales person when he entered the store? The conversation might have gone like this: “Hey, welcome to Sears Brand Central, thanks for coming in today! What project can I help you with?” The customer thanks him and says, “I need a power drill”, to which the sales person says, “Well you certainly came to the right place because we have every kind of drill you could possibly need. If you let me ask you a few questions we will find exactly the one you want”. The ensuing conversation goes as follows:
Sales Person: Are you planning to use this drill only to drill holes or will you be driving in some screws with it? Because if you will be doing that I strongly suggest a reversible drill so you can also unscrew any you want to remove.
Customer: Oh yeah, I have a deck to repair and other projects where I will want to drive screws, so a reversible drill makes perfect sense.
Sales Person: OK. Next I need to know if you are planning on using it to drill into several different materials, because as an example, you need to drill at a much higher RPM in metals than in wood.
Customer: Yes, I have a lot of different needs as far as the materials I will be working with.
Sales Person: Well then, I highly recommend you consider getting a variable speed drill so you can use it for all those different materials.
Customer: Wow. Yeah that makes sense too!
Sales Person: Great. Do you plan on just using this drill in the workroom, garage and deck or will you be using it in many different places where you might not have access to power?
Customer: Well I have a boat and some other things I work on that aren’t near the house or any power supply.
Sales Person: Then I think you will be much happier with a rechargeable drill. Our better models do everything that the ones you plug in can do and come with two batteries plus a charger in a nice case. Charge one battery while using the other and you don’t run out of power!
Customer: I like that idea a lot!
Sales Person: Ok. Lastly, we have a new quick release chuck option on our better drills that makes it much easier to change bits. No chuck key to lose either!
Customer: I definitely need that option. I’m always misplacing things like that!
Sales Persons: Great! So, you need a variable speed, reversible drill that is rechargeable and has the quick release chuck option. We have our 18-volt model on sale. It has all the power you will need, includes the case, charger and two batteries I mentioned for only $99. Can I get one for you?
Customer: Yes, I think that is exactly what I want.
The key is that it is the same customer in both scenarios. In which case do you think he will end up most pleased with the ownership of the product he bought? Obviously, it is the second one, where the sales person used his knowledge of his products’ features and the benefits they deliver to the customer to drive the selling process.
So why tell you this big long story? Because In many cases, we need to have a complete paradigm shift from our current focus on “selling furniture” or “helping our customers find the product they really want” to what our customers truly desire as the ultimate benefit or end result of their relationship with us. If we think it is the pride of owning our products or only the fact that their room is prettier or more comfortable, we are short changing ourselves, and what we do.
We have a much higher calling than just providing products to people. Our overriding mission should be to make people’s lives better by helping them be happier in their home, which is the center of their life. Think about it, we don’t just sell furniture for a living, we live to make our customers happier with their home and in turn their life. I never want to hear anyone I have trained tell someone they sell furniture for a living. Instead they should say they consult with people to make their home a better place to live.
In other words, the main feature of our service is that we sell home furnishings products and the ultimate benefit of our efforts is that our customers are happier with their homes and thus their lives. Now that is a really great feature/benefits story if I ever heard one!
Perhaps if we look at what we do in that way and carry that message down to our entire staff, plus use it in the job descriptions we give to prospective employees, we can change the perception of our career opportunity and get better people who stay longer. It is sure worth a try!
July 19,
2017 by HFBusiness Staff in Business Strategy, Industry
In October 2013, Bob Sherman stunned the mattress industry when he resigned as CEO of Serta, the nation’s largest-selling mattress brand.
It was a brand that had become No. 1 during his 25-year watch, aided by effective marketing programs like the Counting Sheep and a revolutionary product line called iComfort that would rack up $1 billion in retail sales faster than any brand in the industry’s history.
But Sherman, who spent more than four decades in the mattress industry, soon realized he wasn’t ready to ride off into the sunset. So he and his wife, Barbara Bradford, a former Serta executive who has been in the mattress business more than four decades herself, began looking for ways to get back in the industry.
And in January of this year, the 65-year-old Sherman again stunned the industry by announcing he had formed a company called Visionary Sleep Products that had acquired a pair of Restonic licensees that operated factories in Buffalo, N.Y., Fayetteville, N.C., and New Albany, Ind. The deal included the licensees’ stock in Restonic, giving the new company majority ownership of the Restonic brand.
Sherman recently spoke with Larry Thomas, senior business editor of Home Furnishings Business, about what it’s like to be back in the mattress business and what he hopes to accomplish with his new venture.
Home Furnishings Business: Why did you decide to come out of retirement and return to the mattress industry?
Bob Sherman: We’re a 24/7 mattress couple. We would go out to dinner at night and talk about how the day went, and we really missed those conversations. We missed the people that worked for us for 25 years and helped us build the company. We missed the retailers, the excitement of the business, the analysis of the business, the weighing of the competition and looking for opportunities.
A couple of our former management people left their jobs, and we had conversations with them, and they really wanted to get back into the business. So we decided to set the criteria: We were going to be happy working in that environment. We decided that we wanted control over whatever we were going to do. We didn’t want to be owned by a private equity group. We did not want to take on substantial debt. And we wanted to have fun!
For over a year, we looked at numerous opportunities, made an offer on a couple, but they just didn’t work out. And all of a sudden, this one came into play, and we really thought the situation was perfect for what we wanted to achieve. And so far, it has been a blast. I’ve really enjoyed being back. My wife is enjoying it. Our management team, which is younger than I am, has bundles of energy, and they’re really putting in an ‘A’ effort.
How can you not have fun when you have a 50-foot banner (announcing his return to the industry) at the Las Vegas Market? (laughs) I mean, that’s really what we’re about…being creative…making a statement…getting people to think and talk about you. We know how to do that, and it’s fun.
HFB: It sounds like those guiding principles are similar to the ones you had at Serta.
Sherman: Most definitely. The company we have today is not a heck of a lot smaller than what we started out with. Our first (Serta) license was $4 million in sales. And Serta back then was only about $200 million (in annual sales). Obviously, the industry was smaller, and the competition was smaller, but we’re really putting in a lot of the same principles that we utilized there.
HFB: What are some of the more significant changes that have occurred in the industry since you left?
Sherman: The biggest change I’ve seen is the consolidation at retail. Mattress Firm, over the last 3 ½ years, has purchased a lot of their competitors. Most markets had two or three sleep shops competing against one another. Today, a lot of them only have one. That has really opened up a phenomenal opportunity for the large local retailer or the regional retailer to step up his bedding advertising, to go after that business, to get into the sleep shop business if he desires. Bedding was growing in importance when I left, but the departments today are so much larger. Some of these large furniture retailers are carrying 60, 80, or 100 sets of bedding on the floor. They’re not afraid to have 5,000 to 10,000 square feet in their store dedicated to it. That is really a change from where it was a few years ago.
I’ve also seen consolidation of (furniture) retailers. The big chains are continuing to grow. The mom and pops are disappearing. In almost every market I look at, the retail furniture environment is so different from what it has been. There seems to be one dominant retailer that is growth oriented.
Obviously, the bed-in-a-box has also been a big change. A few years ago, it was a few retailers doing a lot of business online. But I think a lot of that has been replaced by the bed-in-a-box. (The success of online companies such as Casper) just reinforced that people do not enjoy the bedding shopping experience. Some of the stores are starting to understand that they must make this a more enjoyable process. And I’m not sure all the retailers know how to deal with the bed-in-a-box. I don’t think they know how to deal with social media and the digital advertising that needs to be done today. I think most retailers are floundering in that regard.
HFB: What opportunities do you see for your company and the Restonic brand as it goes up against several much larger competitors?
Sherman: Today, you go onto a floor and all the mattresses are gray, black, and white. It’s very male oriented. They look like sweat pants (laughs). The women who design our products view this as a tremendous opportunity for us going forward.
The industry has gone to inward thinking, where a supplier will look at a floor and say, ‘how can I make more money on this floor.’ We look at it and say, ‘how can we help them get more business and make more money.’ It seems like all the analysis today is about how to improve profit. It’s not really thinking about how to help the dealer grow his business. We’ll make money if the dealer grows his business.
Today, there are a lot of people selling similar products. The major lines today put out a lineup, and you pretty much have to pick from this lineup. We do it a little differently. If you’re best-selling bed is $799, we want to figure out how to make you a $999 product that’s different so you can step up and sell better bedding. If you’re key price point is $999, we want to work on $1,299, and so on. We feel we have the flexibility of working with retailers to customize product to fill whatever the dealer’s needs are.
The national promotions that are being run by the majors force dealers sometimes to take reductions in costs that aren’t completely supported by the manufacturer. Retailers believe they have to match those prices in order to be competitive. That’s quite beneficial to the manufacturer, but less beneficial to the retailer. This provides us an opportunity for merchandising and marketing what the retailer wants to sell, instead of what the manufacturer wants to sell.
HFB: Serta became the largest brand in the industry while you were CEO. Do you have a similar long-term vision for Restonic?
Sherman: No, not really. When we started Serta, it was not our goal to be number one. Our goal here is pretty simple. We want to have an increase every year that is larger than the industry. So if the industry is up 5%, we want to be up more than 5%. That means we’re capturing market share and somebody is losing market share.
At our monthly meetings, we remind ourselves that we’re here to have fun. We’re not here to take on a lot of debt. We want to enjoy that we’re doing.
As we go forward, it’s not our plan to go out and just keep buying (more factories) and growing. We want to do it strategically. We want to make sure we can handle it. We want to make sure that it fits with what we’re doing, and how we’re doing business.
HFB: How have the other Restonic licensees reacted to your new company?
Sherman: Their support has been really exciting and encouraging. I met with them a couple of months ago -- every owner showed up -- and we had a discussion about what the vision could be and what we could do together and what it would take in terms of cooperation. Restonic has been extremely strong in regional pockets, but hasn’t really had the ability to do anything outside of where the factory is located.
The thing you have to remember is that each of these licensees … are all successful in their own markets. So to make investments, whether its people, equipment or facilities, sometimes is very difficult. So for the licensees to step forward and say, ‘let’s do this,’ was very encouraging.
For example, we have rented a new space at the Vegas market, and will move there in January 2018. It’s twice the amount of space we currently have. We want to make a stronger statement. This requires an investment in the build-out and rent, and things of that nature, and the other licensees were unanimous in their support to do this. They have been extremely cooperative.
HFB: Will your company be taking the lead in product introductions, or do the licensees do that in their own markets?
Sherman: We laid it out for the licensees that there had to be consistency of product from one facility to another. There had to be consistency of specs. We are instituting national specs and putting together product lines that really tie everybody together. They are embracing that concept.
However, our number one goal is to help the retailer grow his business, and sometimes retailers need special products or special tweaks. So the local plants have the flexibility to design products to fill the need for major retailers in their markets. We’re really doing the best of both worlds. We’re providing a national umbrella and national specifications, and that’s going to be the majority of our sales, but we don’t want to take away that ability (to be flexible) because then we’re just like the other major companies. We want the local plant to fulfill the dealer’s needs so he can do more business.
For 80 years, Restonic has been building outstanding beds. One of the big surprises that we came across is that they really overbuilt beds. They just didn’t spend millions on marketing. If anyone took the time and actually compare (Restonic with competing products) spec to spec, they really had an outstanding value. We just want to add consistency to it.
June 19,
2017 by HFBusiness Staff in Business Strategy, Industry
In 1917, A. Leon Capel got his first look at a mechanical tractor, and quickly realized there wasn’t much future for his tiny business making rope plow lines that farmers tied to their mules while working their fields.
The forward-thinking Capel was undeterred, however, and decided to buy a sewing machine so his ropes could be braided instead of twisted. The braids were then sewn together to form the first-ever reversible braided rug.
Two years later, Sears Roebuck bought 5,000 of them and included a picture of Capel’s creation in its famous catalog.
And the rest, as they say, is history.
One hundred years later, those braided rugs (and woven rugs, as well) are still produced in the small town of Troy, N.C., where the company’s founder fashioned that first rug. About 150 of the company’s 200 employees work at facilities in Troy, and its domestically-made product accounts for roughly half the company’s annual sales.
The founder’s three sons, A. Leon Capel Jr., Jesse Capel and Arron Capel ran the company after their father retired, and when the trio retired a decade ago, four of the founder’s grandchildren took the helm.
Today, Leon Capel Jr.’s daughter, Cameron Capel, who is vice president of national accounts, and her cousins Ron (managing director of the company’s eight retail stores), Richard (director of manufacturing), and Mary Clara Capel (director of marketing and administration) are leading the company into its second century. But they’re taking time to celebrate the first 100 years with a year-long series of events that have included a cake-cutting ceremony at the High Point Market and a festive catered lunch for employees, where each worker received a $100 gift card.
Recently, Cameron Capel spoke with Larry Thomas, senior business editor of Home Furnishings Business, about the challenges of running a 100-year-old family business and the growth prospects for the rug category.
Home Furnishings Business: As you know, a very small percentage of family-owned companies remain in the hands of the founding family in the third generation and beyond. What have been the keys to keeping the business strong – and family members happy – for such a long time?
Cameron Capel: It can be challenging, and not even because it’s family. In any work environment, you’re going to have disagreements, but when you’re family, it obviously brings other challenges. There are four of us from the third generation who are involved, and we each have our own strengths. We all handle different areas of the business, so we’re not stepping on each other’s toes. It just kind of worked out that way.
When we come together for board meetings or management meetings, sometimes there are disagreements, but we’ve found that the four of us are very open to listening to other points of view. We keep an open mind. It’s not just ‘my way or the highway.’ You can’t have that in a family business.
Plus, we’re able to leave (problems) at work and not bring them home. We don’t let it get in the way of birthdays, anniversaries, holidays and other family events.
HFB: What are your earliest memories of the company?
Capel: I remember going to visit my Dad in his office when I was a little girl. Just being a little kid, I didn’t really understand what was going on. But I also remember going to the outlet store (in Troy) and climbing on piles and piles of rugs. It was like a jungle gym (laughs). That was before we had display racks.
All four of us started working here in our teens. Some of us worked in the outlet store, learning to sell rugs. I worked in the office -- answering phones or filing. The boys did a little harder labor. They got to drive forklifts and stuff like that.
After college, the other three came back to Troy and started working for the company. I went straight to New York and worked in the Garment District in the fashion industry for two years. I always say I went from rags to rugs, but it was an easy transition.
HFB: In addition to parties earlier this year in your Las Vegas, Atlanta and High Point showrooms, what other anniversary celebrations are being planned?
Capel: We’ll continue to celebrate all year. We’ll be doing a big party in High Point on Oct. 14, the first day of the October market. One thing that we did in April that everybody seemed to like was ‘pop a balloon for cash.’ When you placed an order, you got to pop your balloon. Inside was anywhere from $20 to $100 in cash. Some people who got $20 were just as excited as the people who got $50. We’ll continue to do that, because I think that was a big hit.
Recently, we had a big employee celebration here in Troy. We had lunch brought in for all of our employees. They didn’t have to work for a couple of hours, and everybody got a $100 gift card to celebrate our 100th year. I think they really appreciated that. We wouldn’t be where we are without all of our loyal employees.
HFB: What challenges and opportunities do you see for the rug category?
Capel: The market has shifted so dramatically over the past decade. The price points have had a major drop. It’s such a different animal now, and it’s constantly changing. For years, our sweet spot was $499 wholesale for a five-by-eight. Now, with machine-made rugs, you can get down to $99 or $199 for that five-by-eight. But I feel like we were able to respond to that change the past two markets with some great-looking products.
We have really worked hard on revamping our line and listening to our customers’ needs. We have had a lot of introductions (in the past year), and we’ve had a great reaction to them. I think it’s because we’re listening to our customers and giving them what they want.
The Millennials are the ones driving these lower price points. They’re buying rugs at $199 or $299 retail. They move around, and since they didn’t spend much money on their rug, they’ll just leave it and go buy another one. As they grow and settle down and become more prosperous, I think they’ll spend more money on rugs and home furnishings in general. But they’re buying them more often because their tastes change, or they move. We’re not specifically marketing to them (Millennials), but we’re responding with product lines at those lower price points. That was a huge focus for us at the April market. There was a time when we really didn’t have a product that was applicable to that generation.
HFB: Does is present any special challenges being a domestic producer in this pricing environment?
Capel: It does. We have thought about going offshore to complement our braided rugs with a less expensive line. We’ve toyed with that, and even brought in some samples and some proprietary items for (specific customers.) But we’ve found, frankly, that the quality is just not there. Yes, it’s less expensive, but there are a lot of reasons why it is less expensive. We’re completely vertical, and there’s a lot of labor involved. But we feel like we make the best braided rug out there. People appreciate the quality. They appreciate that it’s American-made. And they will pay more for an American-made product. And they will pay more for quality.
June 19,
2017 by HFBusiness Staff in Business Strategy, Industry
The ultimate sales performance metric is total sales. Everything else rolls up into it. If life was simple, this would be all we need, since it is the main end result we all want to maximize. However, as with any result, in order to understand how we got it we have to look at its main ingredients and analyze them. That is because you cannot teach, train or coach a result, you must work instead on the individual elements that go into making it happen. Only when the right things are being done in the right order and at the right time, do we generate the consistent high-performance results we desire.
Each of these main factors has its own elements that go into making it happen and so do the individual elements down the line. Over the past few years, we have dissected and discussed many of these individual performance measurements and how to use them as you work to improve sales performance. I think this time we should step back a bit and look at the process of analyzing our sales performance metrics. Perhaps in doing so it will make more sense to anyone that has struggled to put a sales management process in place.
It is really a process of digging down through the numbers until you find something that needs to be either corrected or congratulated. This is a similar method to what you would go through to analyze your P & L. First you would review each of the major expense categories against your target for it and if it is not where you want it to be, you would drill down to the line items that roll up into it and try to determine where you went south. Once you find a line item problem, you would look into all the things that affect it and see what might need to be fixed.
Using sales performance metrics to help drive improvement in that important part of your business is roughly the same. You look at each of your sales people’s individual sales results, then look deeper into the ones that did not perform to your target for them or at least to the store’s average. As with your financials, you would be searching for the specific performance area that is holding back or dragging down that person’s results. Having zeroed in on the specific number that is hurting performance the most, you then need to determine what they are doing wrong or not doing at all that is causing it. In essence, the sales metrics numbers are the objective measurements you use to point you towards a problem area. Once you have that, you will often use more subjective processes and information to fix the situation.
We need to note here that we are not always looking for those metrics that are low. It is very possible to be super high in any single measurement (even total sales) and actually be hurting the overall store effort. For the most part though, there is more to gain by bringing under performers up to an acceptable level. Therefore that will be our main focus.
First, you must establish a target for where each number needs to be in order to be at least acceptable. It is not fair to expect everyone to be a super star. So looking at your top writers and comparing the rest to them is not a good idea and will lead to jealousy and failure. The best approach with all of these metrics is to use the store average as your “line in the sand”. Certainly, if you have more than one type of sales effort in your organization, such as a design or in-home team, you can separate each type of selling process and use separate averages to establish your targets.
Total Sales
As stated earlier, the main metric we are all concerned with is total sales, which if you read this column regularly, you most certainly know is the result of the following equation: Ups X Close Rate X Average Sale. The more you can get your sales staff to understand that their success is the product of how many people they work with times the percentage of those they actually sell something to, times how much on average they sell each one, the more important these sales metrics numbers will be to them.
UPS
Once you have determined which total sales performances fall below where you want them to be, the first thing to look at is the number of Ups that the individual took. The number of Ups that a sales person goes through each month is very indicative of how they sell. If someone consistently needs more opportunities in order to hit your total sales target, they could be hurting you more than you realize. It is what I call the “double whammy”, because people that take less time with each customer will wait on more customers and they most often sell less than the store average to each one (see Revenue per Up), which means that the more customers you let them wait on, the more they hurt your business!
You also need to be aware that those who wait on too few customers may be taking too long with each one. Generally, their total sales will be lower because they are so inefficient with the Ups you give them, but it might not put them below your target. So, you need to be aware that this is happening since it hurts you by causing you to need more staff to handle your traffic.
The Ups you allow each of your staff members to interact with are truly the most valuable asset you have as a retailer. Therefore, how they handle them from both an efficiency and effectiveness standpoint is extremely important to your business. Traffic per sales person is one of the very first things I review when asked to help improve a client’s sales. It is at the core of the store’s staffing needs, it lets me know how each person shares the workload and when compared to sales results it says a lot about their value to the company. Don’t forget its importance. And, when you do see a possible issue, then go on to the next metric which is revenue per Up, to see if there really is a problem and how bad it might be.
Revenue Per Up (Performance Index or PI)
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 the next critical metric used by management to understand the true effectiveness and efficiency of each salesperson. It is valuable because it 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. This is the best way to determine how much of an issue you have with an individual. As an example; if the store average PI is $600 and your lowest person is delivering under $300, then every time they take an Up it is costing you over $300. If they are seeing 120 customers/month, there is nearly $40,000 walking out the door that you had a chance of getting, if virtually anyone else had waited on those people. If you rank your staff by PI, you will know where you need to spend your coaching time and effort!
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.
Close Ratio
Defined as: Number of sales divided by number of Ups and expressed as a percentage, this metric really tells you how well your people are connecting to their Ups. It also gives you direct indications of the quality of their selling skills, since understanding and consistently using the right steps in an effective selling process is key to higher closing rates.
If this number is below the target you establish, there may be several reasons. It could be Ups related, such as having to take too many Ups because the store is short staffed, so they rush each one. Or, perhaps they burn through too many Ups because they can’t connect to most of the people they approach on the floor, so they keep getting back into the rotation. A big part of connecting is people skills related, which is the toughest thing to fix - you just can’t train “personality”. Often though, the problem lies in a failure to establish trust with the customers, which also can be caused by a lack of product knowledge, poor needs analysis and/or bad listening skills.
Lastly, many people can do all of the selling steps but just can’t or don’t ask for the order. Closing is just as important a step as it has always been, but with today’s customers we see that opening the sale properly and gaining the customer’s trust is the biggest issue we face. If they can’t open they can’t close and that is what a low closing rate tells you to look for.
Average Sale
Defined as: Total sales volume divided by the number of sales made, expressed in dollars. Average sale tells you if your people are maximizing their opportunity with each Up. When measuring individual performance and comparing 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 consistently apply selling skills that lower performers do not possess or do not apply. Therefore, we must look for ways to improve how low average sale performers use the needs analysis process and whether they have the product knowledge they need to step customers up to better goods. Some people struggle to understand and use a store’s established good, better, best story to make sure their customers get exactly the product they want, short circuiting the process by just selling the low priced or advertised goods.
Ways to improve this include: training and coaching the sketching process to slow down/focus needs analysis, checking category and vendor performance reports to see if they avoid selling case goods or better vendors, and adding design skills or in-home abilities to their toolbox.
Finding the Answers
As stated, these numbers are the objective measurement of performance within your selling team. They tell you a great deal about what is happening, but they only give limited insight into why it is happening. They are indicators that should be used to point you in the right direction so you can find the answer the only way possible, through getting out on the floor and actually seeing what your people are doing with the customers you let them wait on. Observation, joining sales and giving feedback for improvement during the game is the best thing your sales manager can do to create a winning team by improving the performance of those that lag behind the rest.
May 17,
2017 by Jane Chero in Business Strategy, Industry
This month’s issue is dedicated to Sales Management, which is of course the focus of this column. Over the last few years we have presented many aspects of this critical function within your retail organization, touching on things like recruiting, training, performance measurement and coaching. Interestingly, I don’t believe that we have ever truly defined some of the basic principles, beliefs and understandings that are the basis of every successful sales management effort. So, this column will pull some information from the beginning of our Sales Management Training Guide that is intended to set up the proper foundation for any program a client implements in their store. Sometimes going back to review the basics is a valuable way to assess where you are and where you need to go with your current efforts.
The question the title of this article presents, is based on what is meant to be a humorous commentary about what a sales manager ends up doing much of the time in most retail stores. Unfortunately, it is often a more accurate depiction of the situation than any business owner would want it to be. The reason is that many mangers get so wrapped-up in solving the daily issues of their staff, that they lose sight of their real role which is to provide performance leadership that consistently improves the team’s results and actually makes all of their lives better.
There are many reasons this happens, but the biggest one is that most managers are normal human beings that just want to be liked by others, and a lot of what it takes to be a great manager and leader, might be perceived as running contrary to that goal. I am talking about setting up and maintaining two of the most important principles of performance management: accountability and discipline. It takes dedication and courage to take a stand on very important issues. Most of us tend to negotiate and give in more than we should which dilutes our management efforts and reduces our impact as a leader. In the end, we allow our sales floors to become “Democracies” where everyone has a vote and we do whatever the majority (or in many cases just the strongest personalities) wants.
While that might be a good way to run a country, it is a terrible way to manage a performance team. Yes, you most certainly want to listen and take input from your players. They, along with your customers, are indeed your most valuable source for feedback to improve how you do things. Getting your staff’s “buy-in” for what you do is extremely important. But, in the end, it is not absolutely necessary. I have always thought that most businesses need to be Benevolent Dictatorships in order to maximize their results and be as effective as possible at whatever they do. Your sales floor is no different. Jack Welch said, you need three people to run any business: a visionary to set the course, a business person to run it and oversee how things work, and lastly an SOB to make it all happen! If you are in business for yourself you must at times be all three. Your sales manager is certainly someone who has to make things happen and therefore will be called upon at times to make some tough decisions and do the “dirty work”. That is what you pay them to do.
In order to make the right decisions and run your sales effort properly, management has to have the right basis to make these judgements. They must be principle based and everyone on the team needs to understand and believe in the same things in order to build a strong culture that delivers great customer experiences and develops solid client relationships consistently. Here is the foundation we give our managers to help them be successful leading a performance based, selling effort at their stores.
All members of the Management team must understand that they share accountability for the continued growth and health of the company. No company can survive without growth for very long. Staying still usually means going backwards as competitors gain a greater share of the market. Growth can be achieved in several ways.
Share of market can be increased through aggressive advertising. This method is costly and involves risk as we seek to find the right combination of media, message and budget. We can also increase our share of market by adding additional facilities -- opening new stores or expanding existing ones. This involves capital expenditures and generally high risk.
Alternately, we can increase our share of customer by instituting sales strategies, practices and methods that concentrate on increasing the amount each customer buys from us today and in the future. Share of customer requires better management of the customers who already shop our store.
There are only three ways to increase sales in an existing furniture store: increase traffic, increase the percentage of customers sold from that traffic, and increase the amount sold to each customer. Increasing any one of these factors will increase total volume. Improving any combination of them will compound the effect even further.
Agents of Change
The sales manager as a key agent of change in any organization. In order to achieve increases in average sale and close ratio, changes are required to many of the methods in use by salespeople. Change is never achieved easily in any organization for many reasons. These reasons are often cultural, with new methods and ideas coming into conflict with long-standing and accepted company or individual practices and policies. It is the responsibility of the sales manager to champion new paradigms in the selling culture.
The principles of sales management below are aimed at aligning the sales manager’s own paradigm so that it will be possible for him or her to bring about changes within the sales force.
High-Performance Organizations
Well-managed organizations with clear visions of the future who have understandable missions that are reflected in the day-to-day work of employees and management, and who share common goals with employees, are usually high-performance organizations.
In such companies, employees can experience a high level of satisfaction and, in many cases, enjoy a high quality of life at work and at home. Owners and stockholders also share in the benefits of such organizations and provide a high quality of support and leadership in return.
Most important, customers who interact with such companies also enjoy the high-quality care and attention to their needs that they seek, developing strong loyalties to both the company and to the individuals with whom they interact. This is true customer satisfaction.
The management principles spelled out here are the basis for a high-performance organization. They are aimed at enhancing the quality of life for all parties.
Underlying Principles
In sales management as in all disciplines, it is as important to be doing the right things as it is to be doing things right. Experience with hundreds of successful furniture stores show that these are the right things for sales managers to be doing.
The following principles underlie all aspects of a solid sales management program:
- Our business is driven by the needs our customers have to create beautiful home environments. We don’t just “sell furniture”, we make people happier in their homes which is a much higher calling.
- Our universal industry mission is to help our customers discover how to use our products to enhance their quality of life instead of just how to buy our products. We turn houses into homes.
- The needs of the customer must always take precedence over the needs of the salesperson. Sales people do not own customers, customers own sales people.
- Sales managers need to manage the right things. Accountability and agreed upon goals are a key element to this.
- People want to be part of a high performing work team. This is universally true, but particularly so for those that will be most successful on your team.
- People have personal goals but lack any structured, organized way of achieving them. It would be great if our schools taught our kids to do this, but they don’t, so you need to help them learn how to create a plan and execute it.
- It is better to be fair, supportive and demanding than to just be nice and allow people to fail. It is like being a parent, do you really want to let your kids fail?
- People require and deserve dedicated, principle-based leadership. Good to great people in particular will only work in this type of environment or culture.
- What is not measured cannot be changed. The best way to show that something is important is to measure it, track it, report it and coach improvement of it.
- Managers manage individual people not groups. Only when each player performs at their peak does a team truly maximize its success.
It really boils down to using these principles to build a selling and service centered culture within your store. Without them you will end up making the wrong decisions and not doing the right things to be successful. Once your culture is in place and you have developed the discipline to consistently do the right things for your clients, life for everyone concerned will be a positive experience.