Case Study: Cost Of Not Managing Sales Performance
Furniture World Magazine
By Joe Capillo
Case Study: If you title your sales manager “Store Manager” you’re making a mistake.
Sales Management by Joe Capillo
Sump’m ain’t right in retail furniture stores. Salespeople are employed to generate sales revenue... at least that is the way it’s supposed to be. So what’s the problem? The problem is that in most stores, salespeople are not permitted to reach their full potential. It’s a shame, because helping salespeople to succeed isn’t rocket science. It’s sales management... the topic of this article.
A whole lot of sales training has been done over the years. I began with Ethan Allen in 1972 as a marketing representative in metro New York and northern New Jersey. In 1976 I moved to the retail side managing a group of salespeople in Norwalk, Connecticut. At the time, Ethan Allen was madly developing its dedicated store network, and took a wise view of sales training for the people who would be interacting with the American public on its behalf. The work done by that company still underpins much of the sales training offered in the industry.
Years later as I began developing sales and management training programs, my work was based on personal observations and principles taken from the early days. First, I believed then, and do now, that salespeople in our industry are under-trained, under-led, under-valued, and under-paid.
Given the: uncivilized lifestyle offered by the nature of our business (evenings, weekends, holidays); the amount of information salespeople are expected to know regarding thousands of products from hundreds of different suppliers; the stress of interacting with hundreds of different kinds of people each month (including the crazies who own the business); the need to be an interior designer, an advisor, a service representative, a computer expert, and a closer; it’s a wonder the psych wards aren’t overflowing with furniture people. And for all this salespeople can earn a whopping 5% or less in commissions on their sales. The daily agenda of too many independent store owners seems to be to find ways to reduce the pay of their salespeople – all in the name of saving the company money – so they can continue to be under-trained, under-led, under-appreciated, and under-paid.
One thing I learned early on in my career as a furniture guy is that I did not manage “the store” – I had to be a leader to my people. I had to serve them, train them, coach them, support them, be with them, be one of them. Let the owner or someone else manage “the store.” My job was to add dollars to the top line (hence my book “Living on the Top Line”) and that only happens out there on the floor – where the salespeople and customers are. Any furniture sales manager who is not on the floor every hour the store is open is simply not earning his or her paycheck. Let me repeat that in other words: If you call yourself a sales manager in a one-to-one selling environment and you’re not coaching someone, teaching someone, encouraging someone, showing someone how to do it, every hour of every day, you are not doing your job.
Oh, you may be doing what the owner wants you to do, but you’re failing in more ways than you know. In the vast majority of independent furniture stores there is a blind adherence to the way things have always been done. Many sales managers work under the people who live by the credo, “If it was good enough for my father and grandfather, it’s good enough for me.” Nonsense! Granddad would likely have been the first one to take on new ideas and technologies – that’s how he started the business in the first place!
Sales Managers are Performance Managers
If you title your sales manager a “Store Manager” you’re making a mistake. The store doesn’t need a manager. The salespeople need a leader. They need a coach. They need a teacher, a guide, a caring mentor, a person who knows stuff and can help them. Look at the real-life example below to understand why:
The chart on the previous page provides sales metrics for three salespeople (A, B & C) who work in the same store, with the same products, promotions, and opportunities. These are real numbers for a three-month time period captured electronically and verified.
Here’s the cost of not managing performance: For the 1,443 shoppers in this example, total revenue was $395,577. If all three salespeople had performed at A’s level, sales revenue would have been $737,373. So, somewhere between a zero improvement factor and the maximum improvement there was $341,796 to strive for. Would you take half of this? So you can see this for what it could mean, annualized improvement would be $1,367,184. Is that worth doing something about? And, this is for three people on a staff of ten! When this analysis is extended over the entire staff, the potential gain (or actual loss in revenue) is over $2.4 million for this store.
If your sales manager is in his or her office, or behind the sales counter acting like a support employee to save you a salary, how does that decision look from this perspective? If your gross margin is 44% and your performance looks like this, you could have $1,056,000 additional gross margin dollars to pay for one or more support employees so your sales manager can go out and get these revenue dollars – and have a lot left over for other expenses and profits.
Other things of note about this example include the fact that the poorest performer had the most customer opportunities. That’s because not much happened much of the time and salesperson C was always available to take another UP. For salesperson B, the average sale – the average amount purchased by buyers – was 18% lower than for A’s customers. Salesperson C closed sales at a rate 43.5% lower than salesperson A.
This is the job of sales strategy, sales management and the purpose of sales training. This is what your sales manager should be doing all day, every day. This is what having a selling system – a strategic company initiative for how your customers are engaged and served is all about. This is what technology can help you to achieve, and why having a fully integrated strategy that includes evey point of customer contact from your website to post sale follow up is critical.
But, here’s the sad truth about the state of things in a large number of retail furniture companies:
- There are no statistics on any of the things that need to be known, and this lack of information can kill you.
- There is no integrated corporate strategy for improvement because there are no statistics showing what can be improved or what needs to be improved.
- There is no training initiative that ties statistically monitored performance improvement to specific behaviors aimed directly at improving specific metrics.
- Without sound, documented performance metrics, every fix can seem to be too expensive.
- Training and strategic planning are never tied together. In furniture retailing there is such a prejudicial leaning toward products, prices, and promotions that the very core idea is missed completely. This is a person to person business at the consumer level. You don’t need to fix your lineup, you need to fix your people and how they interact at the point of contact.
- Most sales training programs retailers buy are generic and pointless when it comes to improving the three critical metrics in the selling equation: Customer Opportunities (Ups), close ratio, and average sale. That’s all there are – there ain’t no more.
For all of you reading this, the way you see the problem is the problem. If your sales managers aren’t working on this kind of stuff all day every day, if your sales goals aren’t based on the reality of true sales metrics scientifically gathered and carefully analyzed by people who know what’s going on out there on your selling floors, if you don’t know exactly how many shoppers are coming through your doors every day and how many are served by each salesperson, you know virtually nothing about your business and can’t take appropriate actions to improve it. And, if you think you can rely on manual counts, I’d like to talk to you about a bridge I have for sale in Brooklyn. Sound a little strong? Then go back and look at those numbers again.
Joe Capillo is a 41 year career veteran, experienced in managing and consulting with furniture retail operations. He is also a contributing editor for Furniture World Magazine. He is a contributing editor to FURNITURE WORLD and a frequent speaker at industry functions. See all of Joe’s articles on the furninfo.com website.
Read other articles by Joe Capillo