I believe journeys start with a few steps. For example, an exercise program doesn’t start with a marathon; it starts with walking around the block. Let’s take a little walk around the analytics block and see what we can do.
Here is a basic scenario for a small retail venue—a boutique shop (the garden shop I talk about from time to time).
Retail sales rely on two basic principles: average sale per customer and frequency of visit. To increase revenue, you need to increase one or both. It’s really simple. You have customers show up more often and/or spend more when they do.
The first rule of analytics is to get the data.
The second rule is to not to mess up the measurement.
The third rule is that the act of observation changes the observed.
Rule #1: Get the Data
With our first rule in mind, we want to establish a baseline of average sale per customer and frequency of visit, for that we will need a people counter which can be had for <$200 (just Google it) and your point of sale system (POS). Just a note on the items: a people counter can be as simple as a tick counter if you have a very small shop, or as complex you can imagine. Two hundred dollars will get you a basic counter. Your POS can be anything from a receipt tablet all the way to a fully integrated system. Most average systems will do what we are asking for this analysis.
Rule #2: Don’t Mess Up the Numbers
If you have a people counter that is automatic and near the front door, and you continue to walk in and out of the front door it’s going to mess with the numbers, so keep that in mind. If you have thousands of visitors a day, you are just a fraction of the total. If you have ten customers all day, and you walked in and out 40 times you are 80% of your numbers and it will skew the result significantly. If you find you are tainting your own numbers you are going to have to figure something out. The same goes for sales; you or your employees don’t necessarily count. Just make sure the percentages are as small as possible of the total.
Rule #3: Why Are People Acting Weird?
As a general rule, customers are accustomed to being monitored. There are few stores you can go to that don’t monitor customers. Employees on the other hand sometimes get a little paranoid, mostly with anything that looks like a camera, or something that can be used to measure performance. You can speak with them as you see fit, but it’s something you should be aware of. Past experience has taught me that if someone acts really weird or very inquisitive, your bells should be going off big time!
Three simple pieces of information are all that is necessary to take any retail store from the analytical middle ages to the modern era—not necessarily state of the art—but leaps and bounds from where you were.
What can we track?
- Customers per day that entered the store (CPD).
- Sales per day, both count and dollars (the POS system will do this) (SPD# and SPD$)
- How did you hear about us sheet?
I’m going to speed up here, so hold on:
SPD#/CPD is conversion rate (50 sales today, 100 customers in the store, 50/100 = 50% conversion).
SPD$/CPD is average customer value ($1000 total sales/ 100 customers in the store, $1000/100 = $10 ACV).
SPD$/SPD# is average sale value ($1000 total sales/ 50 sales today, $1000/50 = $20 ASV).
With just a little math you can now come up with conversion rate, average customer value (ACV), and average sale value (ASV). This is where I tell you that a little knowledge is a dangerous thing, but do think about what you have. We’ll discuss later on what to do with it.
Average Customer Value (ACV) is the value that you place on the face of each person who walks through the door. So, in our example when I walk into your store I am worth $10 in revenue.
Average Sales Value (ASV) is the increase in value because your store has something I want to purchase. I found something I want; I am walking to the register I am now worth $20 in revenue.
Conversion rate is simply your batting average.
“How did you hear about us?” determines your marketing effort.
This is the point where patience is necessary, because you are going to collect data for a while before you do anything. A month would be the absolute minimum I would estimate before you should adjust anything. I have a data series that goes back years and years with notes and annotations about the collection methods, because if you don’t get the baseline numbers you will have no idea if you are helping anything or making it worse so you’ll be bouncing and that is devastating to a company and your efforts.
Pointers on data collection:
The more information the better, if you buy a people counter, get one that has a time feature so you can calculate people per given hour. Make sure the POS and the people counter are both on correct time and date so you can sync the information. If you use a tick counter, write down the result every hour.
If you want to spend some time figuring out the number of parties that enter the store, it might be valuable information. For example, if you service a family industry where the entire family shows up at the store, you are going to want to know that. Just write down how many people in each group for 15 minutes a few times day. It doesn’t have to be rocket science, just get an average. This will make a big difference in the numbers because it’s a denominator; 1000 customers each, is very different than 200 parties of five.
If there is something that you KNOW you rely on for revenue figure out how to measure it now! If you rely on foot traffic past your location, get two people counters and start collecting data immediately. This won’t apply to everyone; some are word of mouth, which is harder to directly measure. If you sell umbrellas, count the number of rainy days. Think along those lines.
Right wrong, good and bad, always do it the same. Do not change how you do you measurements, pick the best methodology you can think of and stick with it for a while. Changing the methodology from time to time is ok as long as you really think about it and make note of it.
This is where really implore you think about the basic analytics, just a few pieces for data is the difference between life and death for so many stores and shops. I’m not trying to get preachy here, but imagine you go to the ER and the doctor cannot take your blood pressure, temp, heart rate and they have to decide what’s going on; a lot of patients wouldn’t make it. These are those exact same stats for your business, but because of the uniqueness of business, no stats are the same so we need a history of yours to be able to make the right prescription for success. The only way to get that is time and patience.