One of the most commonly asked questions when selecting or implementing clienteling initiatives is, “How do you go about quantifying the results of clienteling efforts?” If we are going to commit to a broad-sweeping change, how can I know if the efforts will work, or are working?
While it is a simple question, the answer is a bit more complex. This is the case for a number of reasons.
Challenges in Quantifying Clienteling Results
First, many retailers that have previously implemented clienteling did so with the intent of using this heightened service as a competitive advantage. As such, they are hesitant to discuss real-world successes, as they are content to be among the few who reap the benefits for as long as possible. So while there are clear benefits, these retailers are unlikely to be willing to share them.
Second, many of the retailers that undertake a new software-based clienteling initiative have already been practicing clienteling activities manually; so any measurable gain can really only reflect the incremental value of systematizing an already existing practice, and not the entire gain of performing an activity versus not performing an activity. For retailers that are looking to implement clienteling for the first time (manual or software), the potential gains are even greater.
Third, many factors can impact the sales at a given point in time, including staff, product, management, weather, marketing efforts and events, seasons, etc. Isolating the value of one specific initiative is challenging, especially as retail typically has numerous initiatives designed to impact revenues.
So how then can we measure the effectiveness of clienteling?
The Scientific Method
The scientific method is the most accurate way to measure the success, or lack of success, of new methods, practices, or activities. Using the scientific method, a retailer would identify “like” customers, associates, stores, etc., then divide these combinations into two groups: a study group and a control group. Using the study group, they would then perform new actions, and in the control group continue to perform business as usual. Regrettably, as described above, there are so many factors that can impact sales that the combinations of these various factors make the scientific method impractical if not impossible to follow.
There are, however, a number of useful measures that can be used in combination to be more scientific in their approach, and help to quantify the value of clienteling.
Affiliated sales are used to track sales attributed to affiliated clients as compared with total sales. An affiliated client is one who belongs in a store associate’s clienteling book. A common measure for this ranges from 20-40% depending on the retailer. High-end luxury retailers tend to be on the higher side, while mid-priced retailers trend toward the lower side of this range. What makes this number perhaps less valuable, however, is that simply affiliating with more customers can grow this number, even if no actual clienteling actions are implemented.
Whereas affiliated sales do not focus on the actions taken by an associate, outreach sales shift the focus primarily to the impact of a very specific activity: outreach communication. Outreach sales percentage is a measure of the proportion of all business that happened in a defined timeframe as a direct result of a personalized communication from an associate. If an associate proactively reaches out to a customer, and the customer makes a purchase (within a defined timeframe, such as 14 days), this is then considered to be a direct result of the outreach. This is then expressed as a percent of total sales for the time period (most often 1 month).
Affiliated sales is a recommended metric to track, as it is rewarding for the associates to quantify the effect of their efforts. This outreach sales metric typically ranges from 15% to over 25%, meaning that as many as one in four dollars can be a result of associate outreach activity. An interesting point of note on the topic of outreach is that one-to-one personalized communications coming from the store associate are far more effective than those coming from the marketing department. In fact, a typical conversion rate (defined as making a purchase) from a personalized communication falls in the range of 12-20%, which is exponentially better than even the best mass marketing campaigns.
Affiliated Outreach Sales
An argument can be made that many of the customers who received an outreach communication may have wished to shop regardless, and therefore even this number is not 100% proof of the effectiveness of personal outreach to a customer. Affiliated outreach sales attempts to address this issue head-on. It is a measure of affiliated customers, and then looks at the percent of business derived from the affiliated customers who received an outreach communication in comparison to the percent of business for those who had not received a communication. A recent one month analysis showed that associates had communicated with approximately one third of their affiliated customers, and this third represented two thirds of all sales to affiliated customers. Half the number of customers generated twice the sales for the given month, demonstrating the clear value to associate outreach communications.
While the above metrics help to prove the effectiveness of clienteling, they are not the only metrics recommended to track in a clienteling initiative. In fact, the most common measures used to gauge the success of clienteling are much more common statistics most often already in use. It is the impact on these metrics that helps to demonstrate the higher-level benefits of the initiative. Some of these include:
- • Total Sales
- • Average Transaction Value
- • Items/Units per Transaction
- • Sales per Hour
- • Margin
A Holistic View
Looking at these measures on the whole provides the most value in gauging the success of a program, but looking at these metrics as they relate to a specific set of customers (for example, affiliated customers, prospect lists, targeted segments used for outreach tasks, etc.) can provide even more insight, and can help to prove the value of the efforts being performed.
Over the years I have been involved in a number of clienteling deployments, and have had the pleasure of monitoring their success through most of these performance metrics. By focusing efforts in the store toward a specific measure, all of the above metrics can and have been positively impacted by clienteling activities.