Big Opportunity in 2008: Prospering In Hard Times Through Customer Insights by:David Rich

To paraphrase an old saying, "When the going gets tough

, retailers start slashing operational costs." Ironically, cost slashing usually exposes a retailer to even greater risks instead of fortifying it against economic uncertainties. All businesses have felt the impact of today's volatile economy. Retail has been hit especially hard, with sales in 2007 rising by only 2.4% - the smallest year-to-year increase since 2002.

Despite such dour statistics, there are plenty of opportunities to gain share in today's market. Possible gains, however, require aggressive actions. Moreover, gains will be even more significant if your competitors concurrently pull back on their programs and staffing following the cost-cutting crowd. Hard times offer a tremendous opportunity to increase your market share!

If hard times are indeed the time to play harder, then we need to remind ourselves how we can increase our sales.

Three Easy Ways to Increase Sales

In good times and bad, retailers' sales are, of course, dependent on several basic conditions: store locations, merchandise offered, inventory, proximity of competition, and staffing to name just a few. Beyond these basics there exists three additional, service-oriented ways to improve sales.

1. Sales Increase as Conversion Rates Rise

Today's typical apparel store retail conversion rate stands at only 18% (82 out of 100 people who walk into a store leave without making a single purchase). While this is a statistic begging for understanding, in harder economic times it makes even more sense to know why shoppers leave your stores without making a purchase. Astute executives also track transaction volume to guard against an apparent but false rise in conversion rate caused by a drop in shopper traffic.

Do you know why shoppers leave your stores without making a purchase? Perhaps you should consider asking them by employing a customer exit interview program in select locations. Exit Interviews are conducted on premise, just as customers leave your stores. Trained interviewers intercept customers leaving without making a purchase. The interviewers ask them a series of questions created to explore exactly why they left your store empty handed. Exit Interviews often dispel intuitive explanations. For example, one, big-box retailer discovered they were not losing sales t due to inventory outages, but because shoppers could not find the merchandise they wanted.

2. Sales Increase as Suggestive Selling Is Employed

Our studies show that improving suggestive selling can increase the bottom-line by millions. To effectively increase suggestive selling you need to provide your sales staff with real reasons that customers should buy your merchandise. This will help them to reinforce the customer's decision process. Next, you need assurance that sales associates follow through with each and every customer. You can further expand your suggestive sales programs by increasing sales through accessories and related products. Obviously, the more merchandise the customer is exposed to, the greater the likelihood that she will buy something. This means active selling, not passive assistance. Sales associates need to be reminded to actively sell and be motivated to follow through.

Do you know how actively your sales associates conduct follow-through selling? Use a Mystery Shopping program to objectively assess the compliance with your selling guidelines. Mystery Shopping utilizes trained shoppers to visit your stores and observe how guidelines are followed. The shoppers are sent into your stores with a list of observables (cleanliness of the store, display conditions, etc.) and a list of actions (approached by an associate, had additional merchandise suggested, etc.). After shopping your store, the shopper accurately documents her/his experience and the extent to which she/he saw each observable and received each action.

3. Sales Increase as Customers' Experiences Improve

Sales strategies and selling themes developed at the corporate level very often are not executed at the store level. Most chain executives are so busy and immersed in their jobs that they don't have enough time to objectively audit the customer experience their stores are delivering. Even when headquarters personnel make the effort to conduct store visits, it is rare that they actually experience their store in the same way that customers do.

Do you know how it feels to be your customer? A Customer Satisfaction Survey provides an direct view from your customers' perspective. In contrast to the objectivity and process orientation of mystery shops, satisfaction surveys are about perceptions - the feelings of your actual customers. Customer Satisfaction Surveys are conducted by interviewing a sample of your customers to determine their perceptions of your stores and sales associates. The result of a properly conducted and implemented customer satisfaction program is a store-level action plan defining the key drivers of your business - what most needs to be improved to increase your customers' satisfaction and therefore your sales.

Customer satisfaction has become an accepted component of many companies' intelligence programs. We believe that all Customer Satisfaction Programs should be subjected to validation.

So, How Much Does This Information Cost?

Three opportunities to increase sales in this challenging economic environment; three questions begging for information. If cost is what is keeping you from collecting this information, think again. Actually, information programs to answer these questions can cost much less than you would expect! Consider the following two cases:

Case 1. A national retailer recently increased its budget for an audit of its customer experience, moving from quarterly to monthly measurements because it was able to see definitive ROI from the insights it gained. Spending just $35 per store per month on its Mystery Shopping program turned out to be "peanuts" when information gathered allowed associate performance and sales to be improved.

$420 a year per store to increase sales turned out to be a bargain. Compare this to the costs of new fixtures or carpeting. What payback do they offer in comparison? Consider the cost of the 82% of your customers who walk out without making a purchase. Unfortunately, too many CFOs look at expenditures for gathering information from a direct-cost basis without considering the net cost. They fail to see that dollars spent to improve the customer experience drive their top and bottom lines. Expenditures on improving the customer experience are investment dollars not expense dollars.

Case 2. Another national retailer is stepping up to the plate, even in these uncertain times, by conducting Exit Interviews and implementing a Customer Satisfaction Surveys at all locations. The retailer's objective is to improve their shoppers' experience by listening to reactions from actual customers and sales associates. The retailer has commissioned an IVR-driven customer satisfaction program and is rolling out exit interviews across its chain. The cost for these systems is less than $800 per location annually.

Combining all programs from these two retailers (Mystery Shopping, Customer Satisfaction, and Exit Interviews) totals about $1,200 a year per store. From this investment a retailer receives a 360 view of its business. This essential view provides the potential for dramatic payback in the toughest economic climate we have faced in the last 15 years.

Commitment Instead of Retreat

Our message is clear, in today's economy, reductions in programs and information systems will leave retailers vulnerable to competition and leave a void in understanding of the customers' more demanding mindset. An aggressive commitment to continued information programs and complementing data services will help fortify a retailer for the long haul. So

If you have auditing and feedback programs in placedon't cut them. However, be sure you are asking the right questions and are partnered with an organization that assists you in communicating the information and in building action plans to foster system-wide improvements.

If you do not have programs in place thenget thembut let experts develop them in partnership with you.

All you have to do is invest in your sales processes and the experience they deliver to your customers. Even in today's marketplace, customers still have money, but they will become more selective - they will spend it with those retailers who offer them a better experience, no matter what.

For more information, contact:

David Rich

President and CEO

Phone: 800-444-1717, ext. 212

Email: drich@iccds.com

About the author

David Rich began his career in the May Department Stores. In 1994, he left to start DemoWorks Inc, an in-store marketing company. He later merged with and then sold his stake in that business to All-Ways Advertising in order to focus on ICC/Decision Services and expanding its core business of customer experience management. As President, David has grown ICC into a leader in the industry with a client roster featuring some of the globe's largest retailers, including: Eddie Bauer, Godiva, Coach, Best Buy, and Rite Aid. He has contributed articles to or been cited professionally in Smart Money, Progressive Grocer, Fortune, Food Trade News, Quirk's, Store's and Inc. Magazine

David is the Immediate Past President of the Mystery Shopping Providers Association (MSPA), and a member of the Young Entrepeneurs Organization (YEO), National Association of Retail Marketing Services (NARMS), and National Retail Federation (NRF). He is also a graduate of the Inc.Magazine/MIT sponsored 3-year entrepreneur development program Birthing of Giants.

David is active in several charities including the Achilles Track Club, The Sarcoma Foundation of the America, The Juvenile Diabetes Research Foundation and the Children's Miracle Network. He received his BS from Syracuse University, and lives in New York City with his wife and three children.

http://www.iccds.com

http://www.articlecity.com/articles/business_and_finance/article_9582.shtml

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