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.
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
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?”
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.
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.
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
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.
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.
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?
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.
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
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?
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.
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.
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?
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.
Habit: Measure the Productivity of Your Sales Staff
June 9, 2008