A look at two critical sales metrics and a plan that works to improve them.
Sales Management Magic by Joe Capillo
Let’s get right to the point. Here’s what I think you should be doing right now to generate more business.
Improve Your Store's Close Ratio
The first thing you have to do to improve sales is get more customers who shop, but don’t buy, to return to your store. With overall close rates being historically around 20-22% that means you’re talking about as many as 80% of all customer visits not resulting in a sale. Evidence and history have shown that closing rates (conversion rates for the professional retailers among us) for first-time shoppers on a given furniture purchasing project are around 10% on average. Your best closer will be at about 15%, but your worst will be at 5%, so the average is likely around 10%.
Evidence and history also show that close rates on 2nd time shoppers (be-backs) on the same project are around 70%. Again, your top people will be at 90% and your worst closers will be at 50% (or thereabouts).
So, if you have 100 shoppers and 85 are new (first time on this project), you’ll close 8.5 sales with them. If the other 15 are be-backs (on the same project), you’ll close 10.5 of them for a total of 19 sales and a 19% close ratio. That’s close enough to 20% to not call me a liar. More be-backs mean more sales closed. If you could still make those 8.5 sales to first-time shoppers, but raise your be-back customers to 20 (out of every 100), you’d make 4 more sales. 23 is 21% higher than 19, so this is one way to have a 21% increase in sales. If you’re not tracking this critical metric, you should be.
So, now I guess I’ll have to tell you how to get them back. The secret is to treat them right the first time they come in. You need to impress them. This is where the new mantra about managing your customer’s experience with your store hits home. Make an impression that deals with things that are important to your customer – like her decorating problems, her uncertainty, and her fears about making a mistake. Deal with her room, where the problem lies, and employ people and systems that can help her through all the difficult choices and decisions.
Back around 1993 Steven Covey wrote a book titled “The 7 Habits of Highly Effective People” that told us that one of the habits these people share is that they seek first to understand, then to be understood.
Suppose your selling agenda was “to understand” instead of “to sell.”
Would that change the experience customers have in your store? What if you concentrated totally on the customer; on her issues only, until you fully understood everything that’s going on in her mind and her room regarding this new furniture purchase? Then after achieving this level of understanding you offered a plan to help her resolve these issues, and offered to help her complete the project at no charge. Would that kind of service bring people back again? Maybe even by appointment! Covey also said something I’ve never forgotten: “Sometimes” he wrote, “the way you see the problem, is the problem.”
Getting furniture shoppers back to your store (and your salesperson) on the same project is the number one best way to improve your closing ratio. Improving your closing ratio from two out of ten customer visits to three out of ten, improves your sales by 50%. Think about that. If you normally convert 20% of customer visits to a sale, converting just 10 more out of every 100 customer visits will increase your sales revenue by 50%.
Where else can you get that kind of improvement without having to attract one more shopper than you already have?
Of course, this math holds true only provided that your average sale remains the same for the new sales you’ll make. Remember the selling equation:
Sales = Customer Visits X Close Ratio X Average Sale
So, you see, there is a second element of this equation, and here’s the better news: Not only do those “be-back” customers buy more often, they also buy more stuff! This is probably because many of them need more stuff which probably was the reason for them being unable to make their decision the first time.
Improving Your Average Sale
Let me state my position on this right at the start: You can only improve your Average Sale dramatically (meaning by hundreds of dollars) by selling a few customers A LOT more furniture. You can improve it a little by selling add-ons – like warranties, additional options on furniture items, and it’s important to do this to capture every available revenue dollar while providing valuable benefits to your customers. However, if that is your main focus; if you are fixated on selling add-ons or add-ins, options, or step-ups, you will surely miss the real opportunity – filling rooms.
If you’ve followed my articles over the past dozen years or so, you know my mantra is that our business is NOT about furniture, it’s about rooms. It’s rooms where people live, and where that almost indefinable feeling of home takes root. It is where children and parents exhibit the characteristics of strength and “foundation”. It’s about home! The specific things are important, but we all know after decades of visiting High Point, Vegas, and wherever else furniture is displayed, that there is way more stuff available than any consumer needs to create a beautiful room and home. It’s not as much about what they buy, as what it does for them in their home. Help with that, and you’ll have customers for a long time.
Make sure your salespeople always deal with the room. How? Simple; just have them ask every customer to “Tell me about your room.” No matter what your customer is shopping for in your furniture store, it’s a good bet that it’s going into some room in her home. If your people can help her deal with the uncertainty, the “art” of her purchase, and the design part of the decision, you’ll find those 2 or 3 customers out of 100 who will increase your overall average sale by hundreds of dollars.
Now, do you have to be a designer to serve customers like this? My answer to this question is always the same. It depends.
Every salesperson in a furniture store should be able to do some basic things relative to the end-use of the furniture he or she sells. Putting fabrics and colors together is one of them. Doing rough room sketches is another, and these days with a half-dozen or so room layout software programs available, every salesperson should be able to produce a scaled room layout on the computer. This is pretty basic stuff for our business in the first decade of the 21st century.
Here’s why I’m so big on this: In a recent study of furniture buyers, nearly half stated that they were uncertain about the design aspects of their purchase. In non-related research, 40% of respondents who reported having shopped for furniture in the previous year, also reported that they did not buy. This study was performed annually for several years with similar results.
What’s stopping these consumers from buying? It has nothing to do with the number of possibilities presented to them in our stores. The problem lies in their rooms and homes, where uncertainty about design issues causes many potential buyers to put off making the decision and to simply withdraw from the marketplace.
You’re probably missing a lot of business due to the range of performance your salespeople experience in the two major items in the selling equation they control: Close Ratio and Average Sale. If you don’t measure your close ratio and average sale, but only look at sales volume, you’ll never be able to improve your performance. Second, if your selling strategy doesn’t include dealing with your customers’ rooms, you are giving up a tremendous opportunity to make more sales. The worst part of this broad industry blind-spot is that the customers to whom you need to make these additional sales, already shopped in your store, saw things they liked, found your price to be fair and affordable, and left without buying. In fact, if research has any value, and I believe it does, 40% of your total customer traffic from the past 12 months could still be out there with their needs unfilled. Sure sounds worth thinking about.