Retail ‘Moneyball’: 3 Sales Strategies for Maximizing Revenue
Whether you’re a store manager, regional chief or vice president, your time and resources are limited. Like many in retail, you look to the bottom of ranking lists to determine how to allocate your time and those resources. After all, poor performers obviously need a hand, right?
The traditional response to the question of resource allocation is to help those that need the most help. As a retail leader you may have often thought, "If I could just get Store/Rep B to sell more like Store/Rep A, our numbers would really jump up!"
It seems like common sense to push a lagging performer, but is it really that sensible? Is spending your precious time and resources with the bottom of your roster really the best way to boost your bottom line. Similar to the story of the Oscar-nominated film, Retail Moneyball (sans Brad Pitt) takes a fresh approach to retail "stats" in order to maximize your bottom line.
Retail Moneyball is about finding the balance between existing sales and opportunities, opportunities that could be measured by metrics like foot traffic, door swings, conversion and more. Furthermore, because numbers do tell a story, we make sure to take a realistic look at analytics so decisions are based on data and not conventional wisdom. It’s still about "getting on base" and "scoring runs," but we believe retailers do so best by identifying the stores, reps and locations that exhibit the greatest opportunities, not those with the highest or lowest sales.
Yes, there are still times when your greatest opportunities line up with your lowest performers, but more frequently those big opportunities exist at the top or middle of the organization where, often, resources aren't allocated.
Once you’ve accepted that your best bets are with your top performers, you’re ready to win big with Retail Moneyball. So, what’s next?
As a busy retail leader, your focus should be assigned primarily to those stores and reps that can provide the best results to scale. For high-opportunity performers, bumping up the sales on-base percentage one point or two points results in more revenue when compared to moving lower performers the same amount.
Example A: Attaching Widgets
For this example, let's assume your business sells furniture as its primary revenue source but earns additional revenue from selling protection plans. You realize your stores are leaving money on the table by not attaching more protection plans to each sale, so you start working with the ones with the lowest attachment rates. Smart strategy?
You know it’s nearly impossible to make huge jumps, but in the limited time you have you feel you can get a 3 percent lift out of three stores. So, which would you pick?
Conventional wisdom would have you choose the three highlighted in red. Those have the lowest attachment rates and, in this situation, would have produced an additional 137 protection plans sold.
Now take a look at the stores highlighted in green. Moving the needle just three points in high-performing stores produces 204 additional protection plan sales. Focusing efforts on high producers generated more results with fewer resources.
By assigning location and rep support around top performers, you can minimize resource waste and maximize efficiency.
Teaching vs. Training
Teaching = imparting knowledge; training = imparting skills. Many companies mistake teaching for training. Often the focus is on "refresher courses" that teach sales teams knowledge they already have, as opposed to proper training that arms them with skills to execute what they already know.
Example B: A Line in the Sand
OK, now it's your turn. Where would you place the following three topics:
- compliance/regulatory guidelines;
- closing a sale; and
- following up post-sale.
While we do suggest a knowledge check at the beginning of any training to ensure the group doesn’t need to be taught, gaps should be plugged within the first few minutes. Once those gaps are filled, it’s time to build some skills.
You’ve built up those skills; now it’s time to set some new expectations. Establish your new key performance indicators (KPIs), but limit them to key growth areas so reps can focus on what really matters to the business, not just what’s important at that moment.
Accelerate earnings for top performers — i.e., those who maximize the opportunities presented by Retail Moneyball. And hey, you can motivate the back of the roster as well. Compensate those that charge into the newfound space and incentivize them to reach your new standards. A rising tide lifts all boats.
Don’t stop there, however. Once the majority of the organization meets the new standard, continue to raise the bar and let them charge into the opportunity again. And be sure to be a stickler about reporting. By following through and consistently updating your team on key measures and performance progress, you can build confidence and inspire even greater performance. Remember, if you can measure it, you can move it.
Example C: Setting Proper Goals
Typical commission structure practices reward higher-performing sales reps with tiered incentives. In this example, a higher attachment rate delivers a higher commission.
With such a high percentage of reps already achieving the "Medium" tier, and a decent number already hitting the "High" tier, it’s time for this sales organization to up their tiers.
If you’ll notice, we did see a slight drop in sales reps reaching the "Low" tier, but the increase of 15 percent more reps moving into the 40 percent attachment tier means more sales for your stores. We even added a $15 bonus for reps that reach the newly established "High" tier. With the percentages in good balance, management can leave the tiers where they are for awhile.
Eighteen months in and we’ve already had to add a "Peak" tier into the structure. Although few have reached it at this point, it’s provided the 25 percent of the staff who have moved into the "High" category something to really strive for. Also, over the 18 months we had an additional 45 percent of the sales staff reach a 40 percent attachment rate, helping them earn some serious cash and giving the retailer a huge boost in overall revenue.
It’s Important to Note
The Retail Moneyball concept is a process, not a magic pill. And like any process, it takes effort over time. Support your top performers, make the most of your efforts and we’re certain that success will follow.
Kevin Cundiff is the vice president of warranty retail for Fortegra, an insurance and warranty portfolio provider.