Retail TouchPoints: Retailers Counting on Conversion Analysis to Drive Store Metrics

Discussion
Mar 14, 2008

By Amanda Ferrante, Assistant Editor

Through a special arrangement, what follows
is an excerpt of a current article from the Retail TouchPoints website,
presented here for discussion.

With physical expansion slowing, many retailers
are taking a harder look at the performance metrics of their existing locations.
Forward-looking retailers such as Virgin Megastores, Marks & Spencer, and Crabtree & Evelyn
are adopting sophisticated traffic counting systems and developing conversion
rate analytics to precisely track how many shoppers are actually making purchases.

“Knowing your conversion rate lets retailers see how well they are doing, how much the shopper felt the promise of your brand at the door, delivered on the rack, and how much money you might be leaving on the table,” said Bob Phibbs of The Retail Doctor, a sales training consultancy specializing in the retail sector.

Virgin has credited the analysis with uncovering variations of up to 20 percent in average transaction values between stores, as well as a 15 point difference in conversion rates between its highest and lowest performing stores. Jason Toy, a division manager for Virgin Retail, said the analysis has been beneficial in highlighting store level performance, as well as regional customer profiles.

More and more retailers are also providing the analysis directly to store managers and other personnel. For example, Marks & Spencer has used its visitor count system to build staffing plans to each department within a store. “By making small, simple, sustainable changes in staffing, product availability and service based on our findings, Marks & Spencer has been able to drive measurable improvements in conversion, units per transaction and basket size,” said Bill Donald, a manager with Marks & Spencer.

In addition to highlighting operational opportunities for staffing and merchandise adjustments, traffic counting and conversion rates also help measure the effectiveness of a retailer’s marketing efforts. “You can see if your advertising creates more traffic or more sales from the existing traffic,” said Mark Lilien, consultant with Retail Technology Group.

Laura Davis-Taylor, founder and principal with Retail Media Consulting, suggested that the bigger opportunity for retailers is learning more about the in-store behavior of shoppers.

“Frankly, any retailer that is interested in shopper insights that unveil the desires and causal triggers for the human behaviors of the people in their aisles benefit from conversion rates,” Ms. Davis-Taylor said. “What we are doing is finally bringing the best practices of marketing into the store environment. It’s interesting that it’s taken so long, as those insights lead to the knowledge on what works and does not work to positively affect these valued people.”

Discussion Questions: What do you think are the major benefits of traffic counting and conversion rate analytics? What might be some of the shortcomings, or areas where the technology over-promises? What’s the best way for retailers to take advantage of data gleaned from conversion analysis?

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14 Comments on "Retail TouchPoints: Retailers Counting on Conversion Analysis to Drive Store Metrics"


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Joel Warady
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Joel Warady
14 years 2 months ago

There is something missing in this analysis. Unless the retailers are also tracking how many customers walk into a physical store, see a product that they like, and then ultimately purchase the product online, they are missing a key component of data. It would not surprise me to read 24 months from now about retailers who have closed a large number of brick and mortar stores due to low conversion numbers, only to find their online sales dropping as well.

While one can’t have physical stores solely for browsers, the fact is a true multi-channel strategy has to take all of these potential customer touchpoints into account.

Don Delzell
Guest
Don Delzell
14 years 2 months ago
This is a long time coming, and will become an extraordinarily important metric. Consider: the purpose of all marketing expense is to drive foot traffic. Once in the store, other factors such as customer service, store environment, merchandising and assortment enter into the productivity equation. Prior…it’s all about the foot traffic. Online retailers had no other choice…the metrics they COULD use were site visits (foot traffic), conversion rates, and average order value. Sophisticated tracking systems are used to determine when site abandonment occurs. While I’m not sure that this is really possible in the brick and mortar environment, it is forcing analysis where it belongs. As a retailer, the success of our marketing was always in sales…short term, for that matter! Buyers were held responsible for the productivity of advertising…without any real understanding of the efficacy of the advertising in the first place, forget about the value of the merchandise offer. Conversion rates help tell a retailer where and when to concentrate on driving footsteps as opposed to increasing spend on conversion. If you have… Read more »
Peter Fader
Guest
14 years 2 months ago

Another point to add here is the fact that much can be learned about conversion patterns from seemingly unrelated domains (e.g., online –> offline). A number of researchers (including me) have looked carefully at behavioral patterns in both areas and find that the similarities often dominate the differences (despite managerial intuition to the contrary).

So before you start tracking, counting, projecting, and making decisions about this issue, first do your homework and learn what is already well-known about conversion behavior. You’ll get up to speed much more quickly and will avoid going down dead ends that others have already learned about and mapped out.

Camille P. Schuster, Ph.D.
Guest
14 years 2 months ago

Conversion rates are useful but the methodology described only identified conversion rates in-store. What about the consumers who come to the store to browse or listen and then go home and order online from your store or another store? There was still conversion? What can stores do to capture those consumers? How can you identify those sales?

In addition, knowing whether or not consumers purchased is minimally useful. What did they look at and what did they buy? Without that knowledge, how can you know what assortment of products is most interesting to your consumers?

Paula Rosenblum
Guest
14 years 2 months ago

In my 20 years in Retail IT, I always “talked up” the value of traffic counters. I never worked for a retailer that actually ponied up and bought one.

The logic is always sound…how could you not want to know conversion rates absolutely, rather than anecdotally…and the answer was always “we know.”

I would love to see that change. I believe it’s a powerful metric.

Marc Gordon
Guest
Marc Gordon
14 years 2 months ago

These retailers have finally taken the first steps in realizing that a positive shopping experience will result in a higher conversion and spend rate. It took too long coming.

I can only hope they understand that no amount of internal marketing will compensate for a poor selection of products, high prices, and uncooperative staff.

Jerry Gelsomino
Guest
14 years 2 months ago

While I believe metrics tell you where you are and where still need to go, these techniques need to be tied into the experience and knowledge of a merchandiser who can analyze and knows what to do with the information. Whenever I hear a reported testimony about how well a new technology has worked or how happy a company is with the installation, it makes me suspect about who is doing the speaking and what their vested interest is.

While I am not necessarily doubting that the system added value to the retailer’s understanding of what was accomplished, is the spokesperson the head of IT who originally bought the system?

Let’s hear from those responsible to sell the merchandise to the shopper to understand how well the technology has aided the store.

Liz Crawford
Guest
14 years 2 months ago

Discovering conversion rates is important to business success–but it is only half of the story. Arguably, the more important half is understanding why. Supplementing the conversion data with say, wayfinding conversion (ala Herb Sorensen) and interviews is bound to help improve performance. Measurement without diagnostics is a scale without a diet.

Anne Howe
Guest
14 years 2 months ago

Conversion rate data is a really good start. But the shopping journey and purchase decision is also an integrated emotional path for the shopper. Metrics that don’t connect to the emotional journey are only useful to a degree. We all need to factor in what is really driving the shopper in a more human context.

Nikki Baird
Guest
Nikki Baird
14 years 2 months ago
Honestly, I don’t know how retailers can function without understanding and tracking conversion rates. How many opportunities you had to sell something, and how many times you actually sold something is a fundamental part of your business. That said, tracking conversion rates isn’t always as straight-forward as it seems, and everyone who uses those numbers–store ops, marketing, merchandising–needs to agree on how they are measured. I heard a story from an electronics retailer that had a miserable conversion rate, and they were killing themselves and their employees trying to figure out how to bring it up. That is, until a store manager pointed out that people coming to buy a big screen TV tend to come in family groups. So having the traffic counter at knee level wasn’t actually helping them track conversion rates. So the retailer raised the traffic counters to 5 feet high, and got a better understanding of how many true “at bat” opportunities their sales people got–which led them down a completely different path in understanding the customers that were coming… Read more »
Susan Rider
Guest
Susan Rider
14 years 2 months ago

Customer profile data is always good. If you know where you are, you can then discern where you want to go. Guessing about who the customer is and what they like, where they come from…is not as relevant and can be riddled with error.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 2 months ago
I’ll weigh in because this topic rubs up so closely to my doctoral dissertation, and because I was involved in the development of an innovative electronic store traffic analysis system in New Zealand a few years ago. I am so cool. I spend thousands monthly with Google Search and Yahoo Search to drive clicks to my retail websites. Both of these services encourage me to use their “conversion” services, but I don’t because they’re not useful for my businesses. Their pitches are basically this: “Let us help you understand which of your search terms are the most successful.” The sticking point is that my businesses have only two or three significant search terms, so deciding between them for additional promotion is just stupid. I’m not selling shoes, which could use dozens of search terms. Now, please reset to the brick and mortar (B&M) paradigm proffered by this topic. No traffic counting or conversion rate applies if we don’t know the intentions of each shopper when they enter a store. Sometimes they make a beeline to… Read more »
Marty Walker
Guest
Marty Walker
14 years 2 months ago

One thing that has compelled me throughout my retail marketing and merchandising career has been the incredible range of factors that can and/or do impact the success or failure of stores, particularly what happens on the sales floor. If there’s one lesson learned, it’s that any single one of these factors (specifically measured data) cannot possibly drive a direct response action to that data with certainty that it is based on any one factor. It is what it is; information, and using information to better the opportunities at store level, even if it’s under good old “trial and error,” teaches the proactive retailer more about what works and yes, sometimes what doesn’t.

As long as we acknowledge that retailers have been successful, or not, in spite of themselves, as well as because of actions of those around them or in competition with them, then information such as this will always be useful as another tool, even if it takes awhile to learn how to use it.

Mark Lilien
Guest
14 years 2 months ago

Great book on retail traffic counters and their usefulness: “When Retail Customers Count” by Mark Ryski. Yes, he owns a traffic counter company, but his book is superb. I can’t imagine anyone reading this book and then deciding against traffic count analysis.

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