Habit: Measure the Productivity of Your Sales Staff
We thought times were harsh a few
years ago. In this tight housing
market, customers are even tougher. With less discretionary money, they’re more
anxious about making a bad selection,
buying from a dodgy company, or over paying. They are more apt to raise
stubborn objections. And don’t forget your competitors have also become
tougher. They are aggressively pursuing your customers even if it means
distorting the truth and undercutting your prices. It also doesn’t help to hear
your salespeople complain about the scarcity of shoppers. Your old sales and
marketing strategies aren’t cutting it.
We thought times were harsh a few years ago. In this tight housing market, customers are even tougher. With less discretionary money, they’re more anxious about making a bad selection, buying from a dodgy company, or over paying. They are more apt to raise stubborn objections. And don’t forget your competitors have also become tougher. They are aggressively pursuing your customers even if it means distorting the truth and undercutting your prices. It also doesn’t help to hear your salespeople complain about the scarcity of shoppers. Your old sales and marketing strategies aren’t cutting it.
But sales have not stopped. People are still buying flooring. Why shouldn’t they buy from you? But you need to act now-before your competitor does. Your success (and perhaps even your survival) depends on your ability to say “No more business as usual!”
Were I in your place, the first thing I’d address is the productivity of your salespeople. If you’d invited me to your store to suggest better business practices, I’d ask a few questions beginning with: “How do you now measure the productivity of your salespeople?” “Are you basing your decisions on facts or just impressions?” And, “How often do you measure and discuss productivity with your salespeople?”
If you ask how I’d measure productivity, I’d start with the obvious: “total sales.” The motivational power of tracking the performance of each salesperson and holding them accountable is inestimable. However, if you track only total sales, you miss the total picture. You may even encourage salespeople to distort their sales. That is: They may push for sales that customers later regret … and tell their friends. They may sell at a discount or sell cheaper goods, just to land a sale. Better to measure productivity in a number of different ways so they are not tempted to “game” your productivity measures.
After total sales, I would measure their closing or conversion rate. That is the number of people they talk to versus the number they sell to. Closing rate is the percentage of sales to selling opportunities. This measure discourages salespeople from “cherry-picking” customers-dropping low-end customers and those who may not buy today.
You also need an “UP system” to measure closing rates. An “UP system” tracks every customer until they buy from you or elsewhere. It assures that no potential customer falls through the cracks. It encourages salespeople to follow-up with those who don’t buy. It deters salespeople who would either “cherry-pick” or do not record their “Ups”. The system offers another valuable benefit, (assuming the sales manager enforces it): It assures that each shopper gives her name and address, later receives a handwritten thank-you note (whether she buys or not), and receives calls from salespeople inviting her to return for special events or to look at other products. Please be aware that you want a tested system, one that answers all the questions your salespeople will raise. (If you would like details, Email me at sam@allmanconsulting.com)
The third measure is “average ticket.” (Divide each salesperson’s total sales by the number of sales.) This reveals your salespeople’s habits. Some habitually sell exactly what the customer came in for; others do more. They enliven the customer’s imagination. They take the time to determine the shopper’s specific needs and tastes. Ultimately they sell more than the customer had originally planned to buy while achieving a high level of customer satisfaction.
Measurement No. 4 involves the salesperson’s average square-foot in each category and the selling price: one for carpet, another for hardwood, for tile, etc. These numbers will reveal which members of your sales team rely on promotional items and lower-priced goods. On the other side of that coin you can identify the sales pros who have the talent and knowledge to steer customers to better products. They know how to convince the customer to spend more initially and they are confident that the customer will be satisfied with their purchase for years to come.
Measure No. 5 is the average number of items on each ticket. This reveals their success selling add-ons. Are they asking the flooring equivalent of “Would you like fries with that”? Are they offering cleaning products, hallway carpet runners, protectors to assure furniture does not scratch a new floor? How about a window treatment that coordinates perfectly with the new floor? Are your salespeople taking the time to explain the benefits of these products?
The sixth measure is average gross margin, broken down into residential sales and commercial sales. Great salespeople can comfortably move customers to the higher end. They know the products well enough to explain to customers the long term value of their investment.
Here, I would remind you that two components, not one, determine your gross margins. You, the owner, select a gross margin when you set the asking price. However, it is the salespeople on the floor that determines the gross margin by the sale price. You can prevent them from under-cutting your set price by several methods. First, grant them no authority to cut; or limit their authority to what you can afford. (If they are used to cutting prices without permission, you may need to impose severe penalties for violations, such as deducting the difference from their compensation.) Second, do not disclose your gross margins to salespeople. Some may consider the margins too high. They may sympathetically offer to drop prices. Third, teach your salespeople that flooring customers (who are overwhelmingly female) typically do not like to negotiate. Instead of offering to negotiate a price, salespeople should explain the superior value she is receiving for the set price. Usually, women are willing to pay you more when they believe they are receiving a better value. Can your salespeople articulate your value-proposition to customers? Can you articulate it to your salespeople?
The seventh measure: count the customers each salesperson attracts through referrals. I teach salespeople they can build their own “personal trade”. When their compensation is based on the amount of high-quality sales, they are self-motivated to ask for referrals every time. One salesperson I know makes this a habit, and has continued to grow his paycheck during these down times. When he asks a customer, he never uses the “r” word. He asks, “Do you have any friends that I can help, as I helped you?” Are you giving your salespeople reason to ask for referrals?
A close cousin of referrals is the practice of inviting former customers back for a visit. In tough times, productive salespeople peruse their databases or customer files to find former customers that might be ready to buy again. When they identify one, they come up with a customer-focused reason for calling … a special sale, a new product particularly well suited to that individual, or just to refresh a good relationship. If you worked for me, you’d be required to “report back” on the referrals you acquired from satisfied customers.
The eighth measure is credit. We recommend to our consulting clients that they calculate the percentage of retail sales each salesperson makes using credit. Why? Because a credit program improves the dealer’s total sales, gross margins, and net profits, as well as raising sales for the salesperson. Private-label credit cards are particularly effective when working with shoppers on a limited budget. GE Capital’s data suggests that the average ticket bought through a private-label finance program is nearly four times greater than a cash ticket. Teach this amazing fact to your salespeople.
Dealers we consult with often ask how to hold salespeople accountable. I tell them the first step is to measure in these eight specific ways. This way, discussions are based on facts, not just impressions. Then, hold a weekly, private, “return and report” conference with each salesperson. You show them the facts. You ask how they achieved the good numbers, and what they plan to do to improve the poor numbers. You offer suggestions to help them improve and then you “shadow” them while they sell to customers, to judge progress and to coach. This return-and-report method assures higher accountability and productivity. Non-accountability degenerates into mediocrity.
One of my consulting clients boasted about the stellar performance of her two “star” salespeople. She was so star-struck that she paid both a six-figure salary. I asked her how these salespeople played the total game. She did not know; she had measured only their total sales. Upon investigation, we found one’s margin to be 39% and the other’s 24%. Operating expenses were higher than 24%, so the second salesperson was essentially being paid six figures to lose money for the company. The client was shocked. Part of the problem was that she paid these salespeople a salary regardless of the gross margin they produced. Is your compensation system like that? Does it entice salespeople to make themselves winners while you come out the loser?
I find these eight measures, coupled with return and report conferences, have built productivity faster and higher than any “rah-rah” sales meetings or threats. My sermon to you this month: build a habit of measuring salespeople and holding them accountable. Of all the things you can do, this is the most fruitful way to quickly build sales, gross margins, and net profits.
Adopt this as an all-the-time habit, not a sometimes habit. Consistency beats flashes of brilliance every time.
We thought times were harsh a few years ago. In this tight housing market, customers are even tougher. With less discretionary money, they’re more anxious about making a bad selection, buying from a dodgy company, or over paying. They are more apt to raise stubborn objections. And don’t forget your competitors have also become tougher. They are aggressively pursuing your customers even if it means distorting the truth and undercutting your prices. It also doesn’t help to hear your salespeople complain about the scarcity of shoppers. Your old sales and marketing strategies aren’t cutting it.
But sales have not stopped. People are still buying flooring. Why shouldn’t they buy from you? But you need to act now-before your competitor does. Your success (and perhaps even your survival) depends on your ability to say “No more business as usual!”
Were I in your place, the first thing I’d address is the productivity of your salespeople. If you’d invited me to your store to suggest better business practices, I’d ask a few questions beginning with: “How do you now measure the productivity of your salespeople?” “Are you basing your decisions on facts or just impressions?” And, “How often do you measure and discuss productivity with your salespeople?”
If you ask how I’d measure productivity, I’d start with the obvious: “total sales.” The motivational power of tracking the performance of each salesperson and holding them accountable is inestimable. However, if you track only total sales, you miss the total picture. You may even encourage salespeople to distort their sales. That is: They may push for sales that customers later regret … and tell their friends. They may sell at a discount or sell cheaper goods, just to land a sale. Better to measure productivity in a number of different ways so they are not tempted to “game” your productivity measures.
After total sales, I would measure their closing or conversion rate. That is the number of people they talk to versus the number they sell to. Closing rate is the percentage of sales to selling opportunities. This measure discourages salespeople from “cherry-picking” customers-dropping low-end customers and those who may not buy today.
You also need an “UP system” to measure closing rates. An “UP system” tracks every customer until they buy from you or elsewhere. It assures that no potential customer falls through the cracks. It encourages salespeople to follow-up with those who don’t buy. It deters salespeople who would either “cherry-pick” or do not record their “Ups”. The system offers another valuable benefit, (assuming the sales manager enforces it): It assures that each shopper gives her name and address, later receives a handwritten thank-you note (whether she buys or not), and receives calls from salespeople inviting her to return for special events or to look at other products. Please be aware that you want a tested system, one that answers all the questions your salespeople will raise. (If you would like details, Email me at sam@allmanconsulting.com)
The third measure is “average ticket.” (Divide each salesperson’s total sales by the number of sales.) This reveals your salespeople’s habits. Some habitually sell exactly what the customer came in for; others do more. They enliven the customer’s imagination. They take the time to determine the shopper’s specific needs and tastes. Ultimately they sell more than the customer had originally planned to buy while achieving a high level of customer satisfaction.
Measurement No. 4 involves the salesperson’s average square-foot in each category and the selling price: one for carpet, another for hardwood, for tile, etc. These numbers will reveal which members of your sales team rely on promotional items and lower-priced goods. On the other side of that coin you can identify the sales pros who have the talent and knowledge to steer customers to better products. They know how to convince the customer to spend more initially and they are confident that the customer will be satisfied with their purchase for years to come.
Measure No. 5 is the average number of items on each ticket. This reveals their success selling add-ons. Are they asking the flooring equivalent of “Would you like fries with that”? Are they offering cleaning products, hallway carpet runners, protectors to assure furniture does not scratch a new floor? How about a window treatment that coordinates perfectly with the new floor? Are your salespeople taking the time to explain the benefits of these products?
The sixth measure is average gross margin, broken down into residential sales and commercial sales. Great salespeople can comfortably move customers to the higher end. They know the products well enough to explain to customers the long term value of their investment.
Here, I would remind you that two components, not one, determine your gross margins. You, the owner, select a gross margin when you set the asking price. However, it is the salespeople on the floor that determines the gross margin by the sale price. You can prevent them from under-cutting your set price by several methods. First, grant them no authority to cut; or limit their authority to what you can afford. (If they are used to cutting prices without permission, you may need to impose severe penalties for violations, such as deducting the difference from their compensation.) Second, do not disclose your gross margins to salespeople. Some may consider the margins too high. They may sympathetically offer to drop prices. Third, teach your salespeople that flooring customers (who are overwhelmingly female) typically do not like to negotiate. Instead of offering to negotiate a price, salespeople should explain the superior value she is receiving for the set price. Usually, women are willing to pay you more when they believe they are receiving a better value. Can your salespeople articulate your value-proposition to customers? Can you articulate it to your salespeople?
The seventh measure: count the customers each salesperson attracts through referrals. I teach salespeople they can build their own “personal trade”. When their compensation is based on the amount of high-quality sales, they are self-motivated to ask for referrals every time. One salesperson I know makes this a habit, and has continued to grow his paycheck during these down times. When he asks a customer, he never uses the “r” word. He asks, “Do you have any friends that I can help, as I helped you?” Are you giving your salespeople reason to ask for referrals?
A close cousin of referrals is the practice of inviting former customers back for a visit. In tough times, productive salespeople peruse their databases or customer files to find former customers that might be ready to buy again. When they identify one, they come up with a customer-focused reason for calling … a special sale, a new product particularly well suited to that individual, or just to refresh a good relationship. If you worked for me, you’d be required to “report back” on the referrals you acquired from satisfied customers.
The eighth measure is credit. We recommend to our consulting clients that they calculate the percentage of retail sales each salesperson makes using credit. Why? Because a credit program improves the dealer’s total sales, gross margins, and net profits, as well as raising sales for the salesperson. Private-label credit cards are particularly effective when working with shoppers on a limited budget. GE Capital’s data suggests that the average ticket bought through a private-label finance program is nearly four times greater than a cash ticket. Teach this amazing fact to your salespeople.
Dealers we consult with often ask how to hold salespeople accountable. I tell them the first step is to measure in these eight specific ways. This way, discussions are based on facts, not just impressions. Then, hold a weekly, private, “return and report” conference with each salesperson. You show them the facts. You ask how they achieved the good numbers, and what they plan to do to improve the poor numbers. You offer suggestions to help them improve and then you “shadow” them while they sell to customers, to judge progress and to coach. This return-and-report method assures higher accountability and productivity. Non-accountability degenerates into mediocrity.
One of my consulting clients boasted about the stellar performance of her two “star” salespeople. She was so star-struck that she paid both a six-figure salary. I asked her how these salespeople played the total game. She did not know; she had measured only their total sales. Upon investigation, we found one’s margin to be 39% and the other’s 24%. Operating expenses were higher than 24%, so the second salesperson was essentially being paid six figures to lose money for the company. The client was shocked. Part of the problem was that she paid these salespeople a salary regardless of the gross margin they produced. Is your compensation system like that? Does it entice salespeople to make themselves winners while you come out the loser?
I find these eight measures, coupled with return and report conferences, have built productivity faster and higher than any “rah-rah” sales meetings or threats. My sermon to you this month: build a habit of measuring salespeople and holding them accountable. Of all the things you can do, this is the most fruitful way to quickly build sales, gross margins, and net profits.
Adopt this as an all-the-time habit, not a sometimes habit. Consistency beats flashes of brilliance every time.
Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!
