Retail KPI management. Conversion

In this article, I will review the methodology and technical solutions to effectively use the conversion as part of the management of a point of sale for KPI.

There are three main ways to increase sales of retail outlets:

• attract more visitors
• increase average check size
• increase conversion

Today, only the first two are used more often. The third way is still underestimated and therefore, if used properly, can become a competitive advantage of the retailer. I can not say that in general I treat the management of KPI is very ambiguous. However, retail is just the case when KPI management is not only justified, but can also give a great economic effect.

Conversion is a delicate matter

Conversion is the ratio of the number of visitors to the outlet to the number of transactions.

For example, if a store has been visited by 100 people, 50 of whom have bought something (completed a transaction), then the conversion will be 50%. The fact that conversion is an important indicator of the effectiveness of the outlet, probably, is not necessary to convince anyone. Unfortunately, most of the councils are recommendations: "But it would be good to have more ...".
')
Note. There are a huge number of articles with general tips on increasing conversions. For example: "5 Ways to Turn Shoppers Into Buyers" or "How to Raise Your Retail Associates' Conversion Rate" .

Of course, it would be nice - but to use the conversion effectively, it needs to be linked to the staff motivation system. Only in this case it will become not just a useful business indicator, but will turn into an effective sales management tool. In order to achieve this, you need to solve at least two tasks:

1. Measure conversion with high accuracy (and not approximately, as is done in most cases now).
2. Measure conversion not only for the point of sale as a whole, but also for each sales assistant separately.

Today, the number of visitors is usually measured using an infrared sensor or video camera installed at the entrance to a point of sale. The number of transactions is imported from the accounting system. It would seem that everything is very simple, we divide one by the other, multiply by 100% and get a conversion. Everything is correct, but only the metric obtained in this way (let's call it the Raw Conversion ) is unsuitable for KPI control.

The reason is as follows. Most visitor counters on the market today with more or less accuracy can track only incoming (outgoing) “objects” or “heads” at the point of sale. The number of "objects" is measured as the number of interruptions of a horizontal infrared (invisible) beam. The number of “heads” is measured using video cameras installed at the ceiling and tracking incoming / outgoing flow in vertical projection. Despite the fact that the video camera gives slightly more accurate results, it does not matter in principle.

Neither the infrared sensor nor the video camera can separate potential buyers from random visitors to the outlet.

Example. A woman with two children entered the outlet. Potential buyer one, visitors - three. Entered husband and wife. The potential buyer, most likely, one, visitors - two. A group of teenagers came in, the seller came from lunch, a repairman, etc. It is a lot of visitors, potential buyers, probably, are not present in general.

You can conduct an experiment and determine what percentage of potential buyers are in the total number of visitors, but such data will be very inaccurate, and you cannot use them in the staff motivation system without fear of demotivating staff. Therefore, the Raw Conversion is an interesting, important and necessary indicator, but if we are talking about KPI control, then it is not enough.

Complete the Raw Conversion with the Precise Conversion . (Let's add, not replace!) The difference between the Precision Conversion and the Crude Conversion is that when calculating the Precision Conversion the number of potential buyers is used , not of all visitors to the point of sale.

You can use the Sales Point Tachometer solution to measure Accurate Conversion. The solution architecture is shown in the figure.


Solution Architecture Tachometer Sales Points

The idea of ​​the solution is as follows. Each sales assistant has a key fob with a wireless communication module (an analogue of a car alarm key fob).

Only a person (seller) can separate a potential buyer from a visitor, and sometimes only after a conversation. Therefore, going to the visitor and entering into a conversation with him (or ending the conversation), the sales assistant presses a button on the key fob. If the visitor is a woman with two children, he will press the button not three times, but only one. The likelihood that a consultant will make a mistake or not press a button is very low for several reasons. On the one hand, the underestimation of the number of contacts should be unprofitable for the consultant. (The motivation system should be such as to motivate the consultant to reach all potential buyers, a little later on.) On the other hand, the extra (fake) keyfob keystrokes are relatively easily tracked using special techniques and technical tools.

Note (upd). Extra clicks are tracked as follows. 1. On the technical side. Each keyfob is recorded in the database of the monitoring system (we call it Consolidated database) as a separate entry indicating the time of pressing. The recording also contains a link to the video (the moment when the video was recorded when the button was pressed). All these clicks are visible in the special console of the monitoring system management, where their reliability can be assessed in a special field. Clicking on the link next to the keyfob you are interested in, you get on the video and watch what actually happened at the moment when the keyfob was pressed. 2. From the organizational side. There is such a thing as a checklist of observations. Once in a while, unknown to the employee, is monitored. A selection of the clicks made by him is done, and the POS administrator watches the video and puts the estimates in that very special field: which click is valid, which is not. Based on these data, the confidence coefficient for the employee is calculated. If any suspicion arises, you can do unscheduled inspections. 3. Is it easy for a video to distinguish an honest press of a button from a false one? In most cases - it is easy. Our task is to cut off unnecessary visitors, such as children who came for a company with relatives, relatives and friends, employees themselves, porters' cleaners, etc.

By pressing a button, the key fob sends a radio signal to the receiving device. The receiving device (radio signal receiver), receiving a signal that the button on the key fob is pressed, closes the corresponding output relay connected to the discrete input module. The discrete input module is constantly polled by the monitoring system. Thus, the information about pressing the keyfob button immediately goes into the monitoring system. Having received this information, the monitoring system supplements it with data, when the button was pressed, who clicked the button, where the sales point is, etc., after which all information is recorded in the database (which contains information on the number of completed transactions), and based on this information is formed by the metric, which we call the exact conversion.

findings

Tachometer Point of Sales solves two problems at once:

1. Obtaining accurate conversion values ​​that can be used in staff motivation systems without fear of demotivation of staff. (Employees generally rarely get excited about KPI implementation.)
2. Measurement of conversion not only for the point of sale as a whole, but also for each sales assistant separately. Why this is necessary, probably understandable.

Note. Exact Conversion and Raw Conversion are complementary metrics. At the same time, the Raw Conversion is used to determine the threshold values ​​(“threshold”, “plan”, “challenge”) of the Precise Conversion. For KPI control, only Precise Conversion is used.

Every visitor - in the buyer

The goal of KPI management is to increase sales. The ability to measure Exact Conversion is a necessary but not sufficient condition for effective sales management. For this, you must meet at least two conditions:

1. The correct system of staff motivation (oh, how much is written on this topic!)
2. Monitoring the loyalty of visitors to the outlet.

Today, the seller’s KPI, as a rule, depends only on the fulfillment of the sales plan, and does not directly depend on the extent to which he tried to fulfill it, i.e. on the number of sales attempts (fittings, consultations, etc.).

I will not argue whether such a tactic is correct or not. But its disadvantage is that it does not motivate the seller to fight for each customer. This means that unpromising, in the opinion of the seller, visitors may not receive sufficient attention and proper maintenance and therefore do not make purchases. It is known that only 20% of staff on average do not need to be motivated, but in the remaining 80% of cases, the point of sale administrator has to spend time and effort “manually” to encourage sales assistants to be more active.

If the seller’s KPI (and accordingly the bonus) will also depend on the number of sales attempts, the number of attempts (customer calls) will increase, and with them the sales volumes will increase. As for the point-of-sale administrator, he will rarely have to adjust sellers - they will be motivated by an automatic system.

Example. Here is a simplified example of calculating bonuses for a sales point employee. Suppose the seller’s basic bonus is 5% of sales. Then, if the number of attempts to sell the seller is more than 90% of the number of visitors to the outlet, the bonus increases to 6%, if less than 80%, then it drops to 3%. The scheme may be more complicated. The main thing is that the bonus depends on the number of sales attempts, but by themselves the attempts to sell (without sales) the bonuses of employees do not increase.

The second important indicator is the control of loyalty of visitors of the outlet. If sellers in the marketplace will grab each visitor’s sleeve, it will bring nothing but harm. Therefore, so that sellers are not too enthusiastic and do not overreact, simultaneously with the introduction of the Tachometer, which encourages sellers to fight for each customer, it is necessary to introduce a system of customer loyalty control, controlling possible “excesses”. To solve this problem, you can use the solution Loyalty Button . The idea of ​​this solution is shown in the figure.


Service quality assessment using the Loyalty Button

From a technical point of view, the Loyalty Button is practically the same Tachometer of the Sales Point, only the buttons look different and they are not pressed by the sellers, but by the visitors of the outlet. The rest is almost the same. Information about clicks is automatically recorded in the database, after which metrics that characterize customer loyalty, etc., are automatically generated.

Note. As you know, the devil is in the details, so it is very important how the survey process will be organized, and how the results will be interpreted.


A few thoughts on this topic:

1. The visitor should be clear that he evaluates, for example, a particular employee or service as a whole.
2. You should not ask the visitor difficult questions, for example, it became better than last time or worse. First, he most likely does not remember this. Secondly, it was not for this that he came here (to answer your questions).
3. The visitor should be able to respond so that sellers do not see which button (red or green) he is pressing now.
4. This should be as convenient as possible and not require any additional effort from the visitor (for example, to go somewhere).
5. We must try to motivate the visitor to take part in the survey. For example, next to the Loyalty Button you can put a vase with sweets, small calendars and some other useful trifle, of course, with company logo.

Analysis of the results and conclusions

Another important aspect is the analysis of the results and conclusions. Obviously, only the red button is informative. In principle, the green button can not be connected anywhere at all, but it should be, because from the point of view of PR, leaving only the red button is not very good. The user should be given the opportunity to praise - for the vast majority it is much more pleasant than to scold.

But what exactly should not be done is to calculate the relationship between the number of green and red button presses, and somehow link it to the staff motivation system. It is not only useless, but also harmful.

Calculate and analyze the ratio of the number of clicks of the red button, firstly, to the number of visitors measured by the input sensor (Ratio 1), secondly, to the number of potential buyers measured by the Tachometer (Ratio 2), thirdly, to the number of transactions (Ratio 3).
The correlation of these metrics with each other, as well as with the absolute values ​​of the number of visitors, buyers and transactions, will allow to control the correctness of the sellers' behavior (in terms of the tactics chosen). For example, if Ratio 2 will increase, but at the same time the growth in the number of transactions will be ahead of it, then the sellers, although they "go too far," but do everything correctly. If Ratio 2 grows, while the number of transactions decreases, something goes wrong and a correction is required.

findings

1. Conversion - an important indicator of the effectiveness of the outlet. But if this indicator is planned to be used for KPI management, it is necessary to exclude from the calculation of visitors who are not potential buyers. In other words, you need to measure conversion more accurately.
2. One solution that allows you to measure conversion accurately is the Sales Point Tachometer . In this case, visitors are qualified by the sellers, and the potential is calculated using wireless key fobs connected to the monitoring system.
3. To increase sales, in addition to accurate measurement of conversion, an effective system of motivation for sales assistants is also necessary, and secondly, the monitoring of the loyalty of visitors to the outlet. The second problem is solved by implementing the Loyalty Button solution.

Post scriptum

In conclusion, a few words about why this article was published in Habrahabr, the readers of which are mainly IT specialists.

It is well known that lately the country has been balancing on the brink of recession, and according to some experts, it is already in it. This means that the time for fatty IT budgets is about to end, but for some it’s already over. There are different ways to survive in this dismal situation, one of them is to change the relationship with the business. For example, to help in the organization of effective management of KPI using the existing monitoring system. In other words, to become not only an IT Infrastructure provider and an IT Services provider, but also a business partner.