Now that the strategic initiative, commitment and goals were set, the “meat” of the plan, execution, was outlined. Below is a summary of the actions XYZ Furniture decided to execute.
Score in the Forefront
To keep the focus on the “North Star”, metric reports would now feature bold and large, average sale numbers against goal for the entire company, for each store, and by each salesperson. Reports would also feature in a smaller font, traffic, close rate and margin numbers. Then, total sales, again would be listed in bold. This would be done every day for month-to-date. XYZ would report all the above metrics for the previous 120 days, every day!
One might question how the proper number of salespeople could affect the average sale calculation. After all, people are not part of the equation, Average Sales = Sales Volume / Number of Tickets. There is, however, a hidden element. Some salespeople need to spend more time with customers than others to deliver the highest sales ticket. If they feel rushed, average sale will suffer. So, every business must determine how many salespeople are needed to handle average customer traffic. In this instance, the business felt that one salesperson for every 140 customers per month was optimal. Additional people were hired to reach this staffing level for each store.
Refine and Simplify
A selling system defines a set of actions salespeople must go through to best serve their customers. These systems are typically segmented into major steps such as: Greeting, Understanding, Solving, Finalizing, and Followup. Every home furnishing business must define the sales steps that work best for their particular business model. Weak systems produce weak results. Complex and cumbersome systems are hard to follow. Systems that are not revisited, practiced and updated, become stale and eventually ineffective. For all these reasons, retailer XYZ found it necessary to redefine their systems in concise, easy to follow steps for each of their four major product categories; furniture, mattresses, appliances and electronics. Tactics were included to improve average sale.
There are many reasons why salespeople achieve a range of average sale and close rates, however, the best salespeople tend not to get off topic or distracted. They have deep product knowledge and have “go to” items proven to effectively solve shoppers' furnishings challenges. This approach is common in mattress sales with either a test bed or bed mapping system. Top salespeople cut through the clutter, maintain focus, begin, and then go through the selection process more effectively. With this in mind, certain of XYZ Furniture's SKUs were designated “test items”. For example, salespeople were instructed to direct shoppers looking to purchase a sectional to a specific sectional ("test item") that had been well reviewed and that everyone on the team knew how to impeccably present. From there confidence was built.
Monthly Payment Customers
Industry-wide, furnishings customers who use third party financing produce significantly higher average tickets. Overall, the higher the percentage of customer financing, the more merchandise will be sold. Yes, there is a cost, however, I would argue that any financing terms except maybe for over 48 months, are worth the cost. Ask yourself, Would you rather have a $3000 sale at 45 percent realized margin or a $1000 sale at 50 percent realized margin, or maybe no sale at all? The answer is obvious. If you are still concerned about the cost of giving up margin, consider having a higher regular price that includes long-term financing and a discount available to customers who pay with their credit card.
In this case, XYZ Furniture decided to focus on increasing the percent of total sales financed. They required their salespeople to ask customers this simple question, “Our customers generally choose to buy in two ways, either with low monthly payments, or by getting points from using their credit card. What is your preference?” If the customer shows interest in making monthly payments, the salesperson gets them approved immediately so their budget can be determined prior to merchandise selection.
Focus on Protection Sales
furnishings getting soiled or damaged due to entertaining, pets, kids, etc. XYZ Furniture company was pretty good with protection sales, however, they were pricing it too low compared to other retailers. Once their pricing was re-aligned – presto – higher average ticket and higher sales! A whole separate toolbox to increase protection volume will be presented in a future article. For now, just know this. It can add six percent or more to total furniture and bedding volume for retailers that do a good job of communicating its value.
There are two types of home furnishings stores, those that sell a lot of accessories, rugs, lighting, and those that hardly sell any. If you decide you want to be in the game, there are two primary strategies. The first is to have your designer accessorize displays in the customer's home after the merchandise is delivered. The second is to be really heavy in the category selection-wise, in the showroom, and treat your accessory merchandising and selling strategy similar to your bigger ticket items. I really don’t expect all furniture stores to be great at selling accessories. However, just about any retailer that has weak accessory sales can profit from a "Qualified BOGO" strategy. It works by telling shoppers, during the course of the furniture selection process, that today with the purchase of any "set" they will qualify for half-off all accessories, lighting and rugs. And, if they are interested in doing the whole room, they should consider accessories in the process of choosing their room package. This tactic, requires building proper margin into the regular prices.
More Return Customers
Return customers, lifetime customers, your loyal followers, all produce higher average sales and greater lifetime value. You get these golden customers by providing a top-of-the-line shopping experience, product value, and post-sale follow up and service. It therefore makes sense to implement a formal follow-up system to continuously grow the number of loyal followers, right? This topic warrants an article in itself, but here I’ll mention briefly the points of follow-up that this company committed to doing:
Rewards and Support:
- Thank customers for the visit before they exit the store.
- Thank them for their purchase and any next steps such as delivery within one day of their purchase.
- Send a vendor acknowledgment.
- Perform delivery scheduling.
- Send a post-delivery thank you and collect survey information.
- Make a one-year after purchase follow-up call.
Another of my clients came up with a fun tactic to promote protection sales. They awarded a big WWE-type Champion Wrestling Belt to top performers.
So, at XYZ Furniture it was decided to add a twist, applying that same tactic to promote average sale focus and growth. The company purchased a champion wrestling-type belt online. Then, every month the store sales team with the highest average sale was recognized. The team member with the highest average sale was photographed holding the trophy surrounded by the rest the team. The picture was sent to the other stores, building healthy competition and fun.
An extra pay for performance bonus for average sale was added to reward the top three salespeople in the entire company, provided their volume and margin goals were also met.
XYZ Furniture also changed the way their up system worked. Instead of running a rotation based on when a salesperson showed up to work, the company re-ordered its up system based on the prior 120 day average sale ranking for those with above-goal volume. The top hitter gets to bat first, and this honor is top-of-mind for everyone else on the team, every day. They become hyper-aware.
Finally, there will always be people who under-perform. And sometimes, those under-performers are top salespeople. When these folks hit a rough patch, a huge amount of earning potential is lost. For this reason, XYZ Furniture started a “Saturday School” program. Anyone that produced lower than standard performance month-to-date, had to show up 30 minutes early on Saturdays to practice role playing techniques that would lead to a higher average tickets.
On the subject of rewards and consequences, it is important to keep things fun, tied to income and serious. It's counterproductive to just hand over dollars to your best performers, and threaten low performing team members. Embrace a fun team approach to skill development and encourage people who can thrive within that type of atmosphere.