Be an Ethical Entrepreneur, Marketer, and Business Builder

Shopping yourself – The best way to improve your business' conversion rate?

August 11, 2009 by Leave a Comment

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:

  1. Average new sale – $3798
  2. 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:

  1. Answering questions that we didn’t know the answer to. (though we thought we did)
  2. Not asking for the caller’s name or contact information (including email).
  3. Answering questions that we shouldn’t (because they’re based on what information we gather from an onsite inspection)
  4. Quoting exact prices over the phone
  5. Not using proper NLP techniques
  6. Didn’t always ask about what prompted them to call us

And what we did right:

  1. Cross-sold products (i.e. they called asking about X and we told them about Y)
  2. Tried to set the appointment with the customer (several times)
  3. 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)
  4. Upsold products (i.e. they called about a service we didn’t offer and we suggested a better alternative)
  5. Differentiated ourselves from our competitors

So you can look at this information in 2 ways.

  1. After all that training we still did more things incorrectly than correctly so we suck (me in particular as the Team Leader).
  2. 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.

Filed Under: Business Accounting, Ethical Marketing, Leadership, Team Building Tagged With: , , , , ,

How to increase your conversion rate by 10% in the next 30 days…

March 23, 2008 by Leave a Comment

No matter what business you’re in, if people have to buy something from you, there is a sales process. If that process involves them walking past your store or entering, that’s a step in the process. If it involves them browsing through stock or trying things on, those are steps. The following material was used as a bit of an educational marketing piece for a company I worked for but it applies to every business everywhere. 🙂

 

No matter what you’re selling there is a step-by-step process that takes place from initial contact to completed install. Each step in the process presents an area where you can be losing prospects who are ready and willing to pay you, but unfortunately you haven’t done the best job of helping them learn that!

 

Here’s the idea. There are 3 main areas to improve in your sales process:

  1. The script

  2. The person

  3. The system (i.e. are we following up? are our materials effective?)

 

And each of those areas can potentially be improved for each step in your sales process… So if you’re sales process has 6 steps, then there are possibly 18 different areas you can improve. If that doesn’t make sense, don’t stop reading yet!

 

Unfortunately,

the ONLY way to determine your weak areas AND make an educated decision on how to improve them is through detailed tracking for at least 2-4 weeks.

 

Ultimately you should be tracking every lead with this level of detail FOREVER to make sure no weak-links pop-up down the road.

 

So here’s my 8 step process for plugging those holes and increasing your closing ratios to the best they’ve ever been in the next 30 days.

  1. Write out the steps in your sales process. From the initial phone call, email, or trade show contact to the post-install request for referrals write down every single step. Your steps may look something like this:

    1. Initial Contact: Telemarketing, Call-in, incoming email, fair/trade show sign-up

    2. Call-back: Phone call to set appointment, Email response to inquiry

    3. Confirm: Call to confirm.

    4. Appointment: In-home presentation

    5. Follow-up:

    6. Schedule Install

    7. Install:

  2. Write down the possible results for each step. “Cancel” is NOT a specific enough result. It’s better than nothing, but the goal is to determine “Why did they Cancel?” and address that issue. For instance:

    1. Initial Contact: We’ll call you back, Too expensive, Just gathering information, Appointment Set

    2. Call-back: Call me back later, I’ll call you once I check with my spouse/mom/dog, Too expensive, Appointment Set

    3. Confirm: X was here yesterday and we’re going to go with them, Too expensive, An emergency came up, We’ll be home and waiting!

    4. Appointment: Too expensive, Have to ask my spouse/mom/dog, Think we’re just going to go with X instead, I don’t think we need that right now, Sounds great sign me up.

    5. Follow-up: Credit was turned down, Sign us up!, Check Bounced, Credit Card denied, We changed our mind.

    6. Schedule Install: If you are losing leads at this step, look at the time from the previous step to the install date. You may need to look at working non-standard hours to get installs taken care of right away.

    7. Install: Looks and works great!, Emergency came up and we can’t be home, We changed our mind

  3. Make a flowchart of the steps. The flowchart is very helpful for showing everyone each step and to help you to setup your software for tracking. Notice that all of the items above in italics are reasons a step becomes a dead lead. All of the other results from above are what leads to the next step. Reference the Sales Flowchart example below:

    1. They sign up and you have to get “Credit Approval”

    2. They sign up and pay with cash, a check, or credit card so you “Schedule the Install”

    3. You have to “Follow-up” with them

    4. They’re not interested and it becomes a “Dead Lead”

    4. Example Sales Flowchart

    Notice how it can get a bit tricky. If you look at the “Appointment” step you have 4 options:

  4. Make a list of all of your lead sources. If you’re going to put all this effort into tracking your leads you might as well track the lead source to answer 3 questions:

    1. Did that lead source pay for itself with after sale profits?

    2. What is the acquisition cost of that lead/customer? (maybe it paid for itself but other sources have a lower acquisition cost and therefore generate better profits)

    3. Are there any steps in our sales process where we’re losing a lot of people from this source?

  5. Track every lead. If you have to, funnel every lead through a specific “Sales Coordinator” in your office or be sure to train everyone. Just make sure your tracking everything – Including those referrals that are going directly to your sales representatives. At a minimum, you NEED to track the following information for each lead:

    1. Name

    2. Phone or email (you need to be able to contact them somehow)

    3. Person in your office who spoke with the prospect (this is the only way to determine if your weak link is a person)

    4. How they heard about you (i.e. lead source)

    5. If they’re no longer interested, WHY NOT? If you believe you have a great product that you KNOW will help them you should be shocked that they’re no longer interested and ask.

  6. Make sure EVERY lead gets input into a spreadsheet or database so you can get quick/accurate results on each lead. This is where simple to use database can make huge improvements in your business! Let’s face it, the first 4 steps are relatively easy. You’re a responsible and effective owner or sales manager and you can put the steps, results, and flow chart together. However the people in your office who are tracking lead information may not be quite as dedicated as you… Therefore the process MUST be simple to track and input. Moreover, since you’re already wearing 10 hats, its very important that managing this process is simple for you. 🙂

  7. Analyze the data. Determine the weak step (i.e. from step #1). You determine the weak step by looking at the step prior to it becoming a “Dead Lead.” For instance, if after the initial “Call-back” they say they’re not interested, your weak step was the “Initial Contact” and/or the “Call back”. Now to determine the weak link (script, person, system) you have to look at the REASON they became a dead lead. Not Interested will never tell you the weak link! Too expensive, husband says our water is fine, we already bought from X competitor, are reasons that allow you to start addressing the weak link. Obviously, you also need to record which person handled the “Initial Contact” and which person handled the “Call-back” to determine if it’s a people-problem.

  8. Plug the hole. Improve the weak link. How do you do that? Simple. You make a change, test it for the next few weeks and measure the results. Be careful to only make ONE CHANGE AT A TIME PER STEP or else you won’t know which change made the difference. Your change may be additional training for the person, improvements to the script, or a better method for tracking follow-up within your sales process.

    9.  

    Rinse and Repeat. Once you stop tracking each lead your closing ratio starts to go down immediately.

To your success, Bryan

Filed Under: General Business Tagged With: , , , ,