Over 148 Years of Service to the Furniture Industry

 Furniture World Logo

Easy To Keep Metrics Avoid Wasted Ad Dollars

Furniture World Magazine


on

Track your advertising cost per opportunity to make more effective advertising decisions and leverage better media buys.

On The Sales Floor by Dave Mink

You have probably heard the quote from John Wanamaker (a famous retailer from the old days) who said, “Half the money I spend on advertising is wasted...The problem is, I don't know which half.”

What if I told you there was an easy way to find out which half is being squandered, so you can fix it. A process so powerful it literally holds your media reps accountable for poor performance and almost guarantees make-goods for those ads that fail. You will finally have genuine proof of success or failure for each ad campaign.

I used to own a seven store home furnishings chain in Houston Texas, the 4th largest metro market at that time. I created lots of TV commercials, ran countless full page ads, placed billboards all over the city and ran radio like crazy, when I was not doing TV. Millions of dollars were spent, and the truth is, I probably wasted more than half of it because I had not yet realized how to measure the effectiveness of what I was doing. Of course I would calculate cumes (1000 units of audience) and costs per point. I used to study Arbitron and Nielsen ratings and spent countless hours measuring sales performance compared to ad dollars spent.

Finally, I am ashamed to admit, that many of the ads I ran were based on how well I liked the sales rep. I also remember running several ad campaigns based on earning enough points to win a trip to Europe. I wish that I knew then what I know now. If you have an advertising agency, or in house employee making buys for you, you may also be frittering away huge gobs of cash disguised as your ad budget.

If you or your company, or especially your ad agency are accepting freebies... you are getting killed. Make darned sure your ad agency is not taking free stuff from your buys. You are steeling from yourself if you trade one red cent for premiums or concessions.

Smart retailers already require their sales associates to fill out a guest (5” x 8”) customer information card and possibly also encourage their sales associates to create a room sketch. If you don't You should consider it. You should create a card that helps the sales associate or designer ask what specifically brought the customer in. It should list your advertising choices, general product categories and why they didn't buy. A blank card should be in each salespersons hand before they greet any new customer.

I know some of you are possibly thinking... Most customers don't even know what advertising made them come in. My response is BALONEY, and if you believe that, you should immediately go on your sales floor and do a quick 10 customer survey and find out for yourself if you can learn valuable information or not.

Here is a funny story that emphasizes my understanding of the nay-sayers point...When I opened my first store and had a Grand Opening long ago, I stood at my front door and greeted every person who came in. The purpose was to genuinely thank them for coming in, make sure the selling process started properly and ask what advertising brought them in. The opening was supported by huge radio and newspaper buys. One of the first customers to arrive was an older gentleman who said that he had been watching us on TV for years and loved the humorous spots.

Obviously this fellow was mistaken (I thought he was actually a little bit nuts, but he bought two bedroom sets). This type of exception is the excuse many dealers give me when I suggest measuring advertising on the sales floor.

Believe me, most customers know exactly what brought them in. They have risked their lives on the freeway to get to you, and will be delighted to tell you exactly what advertising was responsible if asked properly. Most responses will be very accurate.

ADVERTISING COST PER OPPORTUNITY

Start by learning your advertising cost per sale and more importantly, your advertising cost per opportunity. These numbers are easy to get and will only take a couple of hours each month to collect.

Once you’ve tabulated the data your salespeople collected on their guest cards, you will be able to calculate how many people came in from each type of advertising and the monthly totals for each.

Take your total dollars spent (for example on Newspaper) and divide this by your number of opportunities. Lets say you spent 15K last month on Newspaper and had 300 customers who responded from Newspaper. This means your cost per opportunity on this medium is $50.

Now lets say you spent 5K on Radio and brought in 200 customers. Your cost per opportunity for Radio is $25. Every Radio customer compared to Newspaper cost you half the money. In other words, if you spent the entire add budget on the Radio you would have brought in twice as many customers.

When you show this comparison to the Newspaper rep, her jaw will hit the floor. She will instantly realize they must give you a better quality product or lose your business forever. No longer can they give you below average time slots or positions, and over a short period of time you will learn what types of ads work better than others.

The calculation assumes that customers brought in by the different media are of equal quality. That is, the average sale for a radio listener is similar to that of a newspaper reader. It also assumes that messages run in different media are of equal production quality and tone. For example, it would be unfair to compare an event ad run on radio with an image ad run in the newspaper or upscale magazine.

On balance, this simple process will help you to hold your media reps accountable for poor performance and will earn you free ads and make goods when you deserve them. When an ad bombs relative to a similar ad run in an alternative medium, and your media rep wants to keep a relationship with you, all you need is proof. Now you will have it.

Media companies must make a profit as well, and balance and fair play are involved. Keeping these metrics over time will help you to find out what kinds of ad and which media work well for you.

The trick is asking each opportunity what advertising specifically brought him or her in TODAY. Most customers have been watching your advertising for years. Some drive by your store every week, most have seen or heard your ads on TV, Newspaper, Radio and Direct Mail for years. You want to know what specifically motivated them TODAY. Trust me, it's easy for your salespeople to get this information and most good salespeople already do because it's a great ice breaker when they first meet a new prospect. Keep in mind, this information is like a Gallop Poll and is accurate (+ or -) 5%, but it's many times more accurate than Arbitron or Nielsen ratings or tracking cumes or costs per point. Your salespeople are hearing this powerful information every day, and until now have had no simple method to pass the information on to you.

You might be saying to yourself...I could NEVER get my salespeople to consistently do this. I am here to tell you that it's not only possible but easy. The real question is who benefits if you are able to reduce your advertising expense and simultaneously bring in more qualified customers for salespeople to sell. The answer is everyone in your organization, especially your sales associates.

This process must pass the WIIFM Test that every talented salesperson asks...What's-In-It-For-Me?

Once your sales team realizes that advertising information is to be used so they can be involved in a process to get your advertising under better control, and bring in more customers, they will be delighted to help. Just ask them properly and show them what you are going to do with the information.

My Father used to tell me..."The key to being a great executive is to get your people to want to do the things, that you want them to do."

Once the card system is in place, it will be easy for your salespeople to jot down important customer information. Your customers will be impressed, because anyone taking notes is more likely to be a true professional who is making an effort to satisfy their needs and desires.

By requiring a card be turned in every time (after a customer leaves and even after overflow times), you will automatically create improvement.

Everyday, you must take all cards and total the numbers. If a salesperson talks with someone and doesn't get to first base, that's OK. You gained valuable, powerful information. If you don't get a name and phone number, no problem, you can't get them all (50% is very good). If a salesperson is unable to learn who they are, they should still jot down what they looked at and what advertising brought them in. The key is get a card every time and hand it in before they move their name on the UpBoard or paper rotation system.

You must measure total number of customers, closing ratios for each salesperson and what advertising each customer responded to.

Good luck, and go get those cards printed today. One last note on the cards is to make a drop down list of all advertising, product and reason categories (multiple choice). The less a salesperson needs to write, the more successful you will be at gathering quality information.


Dave Mink is a management consultant who's company specializes in measuring and benchmarking performance on the sales floor. His front door traffic counters accurately track total hourly customer activity and his Patented Upboard system automates (first time in) customer follow-up and helps management measure and improve sales performance. For more information on topics discussed in this article or about any aspect of sales floor metrics and automation, email davem@furninfo.com.

Furniture World is the oldest, continuously published trade publication in the United States. It is published for the benefit of furniture retail executives. Print circulation of 20,000 is directed primarily to furniture retailers in the US and Canada.  In 1970, the magazine established and endowed the Bernice Bienenstock Furniture Library (www.furniturelibrary.com) in High Point, NC, now a public foundation containing more than 5,000 books on furniture and design dating from 1620. For more information contact editor@furninfo.com.