By shopping yourself, I simply mean determine exactly what your customers experience, record it, and review it to determine areas for improvement.
Paco Underhill actually wrote a great book titled, Why We Buy: The Science of Shopping, that talks about much of what he has learned through his Mystery Shopper business. His book and experiences are all geared toward improving retail closing ratios or conversion rates. In other words, he wants to figure out how to get the highest percentage of people to buy the most often. He doesn’t help with marketing or lead-generating in the sense that he helps get people into the stores, his business simply specializes in converting those people who have made a trek to your store into customers (or repeat customers).
Why do you NEED to invest so much time and money into your conversion rate? Because leads are expensive! In my business, leads cost around $78. In other words, to get someone to call me and be interested enough in our products to provide their name and contact information costs me $78 per call ($159 per call for Yellow Page contacts). To convert those to sales costs me around $268. So right now I’m converting 1 out of every 3.5 prospects who call me into customers. As you’ll learn, these numbers are never perfect and this doesn’t include people who call me for service of existing equipment or to purchase ancillary products. This is simply the people who don’t have anything I offer right now and want it.
Now what do I stand to gain from increasing our conversion rate? Potentially thousands of dollars in revenue and profit. Since some of my new customers are rentals (or equipment leases) and some are sales it’s hard to get an exact “average dollar sale” of my new customers however here’s how it breaks down for new customers in 2009:
- Average new sale – $3798
- Average new monthly rental/lease – $52.78
Roughly 24% of new customers are rental/leases but let’s ignore that for a minute to keep the math simple. If I can increase my conversion rate for sales by 10% so that 1 customer buys for every 3.15 people who call (instead of every 3.5) that would have added about $32,283 to my business this year. In addition, though my cost per lead would remain the same at $78, my cost per sale would drop to $249 ($241 if I assume a 10% increase for both sales and rental/leases). To say that an even simpler way, increaseing my conversion rate by 10% results in a direct increase in gross profit of 10% on all of my sales. Not bad. And don’t forget we just increased our top line revenue at the same time so my actual Net Profits just increase by much more than 10%.
In the past I’ve reviewed how to increase your conversion rate. Since I’m always looking for new ways to do that, I’ve bumped into Paco Underhill’s book and into a company called teleXpertise. teleXpertise does the same thing that Mr. Underhill’s company does except they do it over the phone. They’re phone mystery shoppers and I must say they’re very good. Their recorded calls with your sales people will tell you a whole lot about the efficiency of your sales process. My business model requires onsite inspections before quoting prices so our process can be quite lengthy from the first call to a closed deal. Keep in mind that every interaction with the customer is a potential step where they can be lost forever however each step does not result in a sale… So each and every step has to be improved. To clarify what I mean by “steps” you’ll want to check out my blog on increasing your conversion rate.
Let’s talk a bit more about how they can help you increase your conversion rate by evaluating what I’ve learned. Keep in mind that I have my sales phone calls scripted and have gone over individual training with all of my team members on how to handle sales inquiries and the following still came up:
- Answering questions that we didn’t know the answer to. (though we thought we did)
- Not asking for the caller’s name or contact information (including email).
- Answering questions that we shouldn’t (because they’re based on what information we gather from an onsite inspection)
- Quoting exact prices over the phone
- Not using proper NLP techniques
- Didn’t always ask about what prompted them to call us
And what we did right:
- Cross-sold products (i.e. they called asking about X and we told them about Y)
- Tried to set the appointment with the customer (several times)
- Returned the customer’s inquiry within minutes (our lead catchers don’t set appointments our sales people call the customer back to set the appointment)
- Upsold products (i.e. they called about a service we didn’t offer and we suggested a better alternative)
- Differentiated ourselves from our competitors
So you can look at this information in 2 ways.
- After all that training we still did more things incorrectly than correctly so we suck (me in particular as the Team Leader).
- After all that training we still did more things incorrectly than correctly so just look at how much more money we could make if we always did things correctly!
Obviously I focus on the latter. It’s one thing to do the right thing by training and scripting, but it’s just as important to constantly train and improve. What was most surprising to me was I didn’t tell a single person on our team that we were using mystery shoppers until after they were done. When I did tell them their conversations were being recorded they weren’t at all mad about it, they were actually excited to hear themselves. This may be partially because I set the bar for myself to constantly improve so I’m not asking them to do anything they haven’t seen me do over and over again and I stressed that before I told them what was going on. I also let them know how much we pay for leads so they can get a grasp of just how valuable each and every call is. The best part, however, was that they were very receptive to improvements and looked forward to doing better next time. That’s right, I assured them their would be a next time… 😉
To your increased conversion rate success, Bryan
P.S. As an additional note, if you’re buying a business you should definitely Mystery Shop the business ahead of time. If they did more right than wrong you may want to look for a different business. If they have a LOT of room to improve that might be the perfect business for you. Keep in mind that you prefer to buy businesses that just need to tweak the front end.