The art of upselling to your customers
Leading change management consultant Alan O'Neill has advised top Irish and international retailers on how to enhance their businesses. In this three part series he explains his formula: footfall x conversion x average transaction value = sales. This week he explores upselling
On my way through Dublin Airport last week, I bought a Clarins moisture gel. In conversation with the salesperson, she extracted from me that I was on my way to Riyadh. So I ended up also buying a sunscreen. In a very friendly way, The Loop in Terminal 2 got more of my money.
As I shared previously, the fundamental levers that drive sales for all type of retailers are in this formula.
Retail Sales Formula: F x C x A = S
'Footfall' (the number of customers entering the store) multiplied by 'conversion' (the percentage of those that actually buy rather than just browse) multiplied by 'average transaction value' (ATV), equals sales.
After doing the hard work that's required to attract customers into your shop in the first place (covered two weeks ago), your next two priorities should be conversion (covered last week) and ATV. Increasing the average transaction value is often quite easy. Yet bizarrely, it's an ongoing challenge for retailers the world over
Put Your People First
Most importantly, your sales people have an important role to play in increasing ATV.
1 Give yourself and your people the skills to up-sell. When a customer asks to see a product, don't just show one item. Offer them two to three options across the good-better-best spread (see below). A professional salesperson will skilfully encourage and up-sell to a customer by talking up the added benefits. The beauty houses are masters at this, so go and mystery-shop some and they'll tell you how they do it if you just ask.
2 Aim to link-sell a second item to every customer. As soon as the customers commit to buying what they came in for, only then should you suggest that they also buy a related item. Using a non-pushy phrase 'just so you know, we have a fabulous bracelet to match those earrings' is a gentle way of introducing the idea to a customer. Be careful and don't be greedy. Make the additional item an easy and small decision for the customer. If you link-sell an extra item to every fifth customer (to the value of say 15pc of their primary purchase), that adds 3pc to your overall sales.
3 Introduce a competition in your team and incentivise your team to link-sell. Keep it short and focused - perhaps for a week or a weekend. You can measure this with even the most basic till systems. Make it fun and non-threatening.
4 Ensure your salespeople have great product knowledge. When your team has a greater knowledge of the products (than the customers with phones in their hands) and the best sellers, they will speak with more confidence about the product.
5 Revisit your commission structure. If you do pay commission, refresh how you structure it. For example, if you're paying a set percentage rate across all products, where is the incentive for your people to sell higher margin product?
Focus on your Product Mix
The fashion industry is structured around seasons, so those retailers are forced to plan their product mix twice a year. For other sectors where the product ranges are more continuous (such as with pharmacy, food, homewares, some gifts, technology), they can fall into a rhythm of simply replenishing out-of-stocks. Consequently the buyers don't get to lift their heads enough above the daily grind to give adequate consideration to their buying. Replenishing continuity stock is not buying. Buying requires preparation, planning, curating, negotiating and then ordering.
1 Plan your product mix and price architecture. Mindful of your brand positioning and margin expectations, select a range of brands (and products within those brands) that spread from 'good' to 'better' to 'best'. For example, Arnotts in Dublin have frying pans from Tefal (good), Stellar (better) and Fissler (best). This gives them an appropriate selection for their chosen customer base. It also gives the sales associates more choice to up-sell.
2 Remove the recession mindset. There is now more disposable spend and while customers are savvier post-recession, they do spend when they feel they're getting value. Customers are more conscious too that 'when you buy cheap, you buy twice'. Don't be afraid to introduce higher priced merchandise into your selection.
3 Stop discounting. I completely understand the pressures that come with being an independent retailer. When sales are not hitting target and cash-flow gets tight, panic and stress can set in. A knee-jerk reaction is to start discounting, which plays havoc with your image, ATV and your margin. This should be a last resort after you have tried all the other things that successful retailers do. In a project with Ann Summers (which has very aggressive online competition) we increased ATV by reducing discounting activity. Exclusive product was just one enabler of that.
The Last Word
I've been privileged to consult with and train some of the most iconic retailers around the world. From food to fashion, luxury to mass, multiple site to department stores. Every one of them is challenged in the same way with the pace of disruption and change in the industry. But regardless of their size, sector, scale and balance sheet, there are common themes that shine through the more successful ones.
With an underlying passion for giving great customer experiences, every single one uses the FCA model detailed here over the last three weeks. Each one is investing in their stores and yes, they each have an online presence of varying sorts. They also have belief and confidence that they can effectively compete in their bricks-and-mortar stores.
But for me, the most significant attributes are that they embrace change and are proactive. They work on their business, not just in it.
Cast study: Customer-first jewellers are outstanding in their field
Business: Field’s Jewellers
Set up: Retail division established in 1981
No of employees: 200
Location: 14 stores in Ireland, plus online presence
The jewellery business is one of the sectors most impacted by online in Ireland, according to Lorraine Higgins of Retail Excellence Ireland. The possible reasons for this include the availability of colours and sizes, the quality of imagery (360-degree close-up rotations), better download speeds, and more branded ranges that are easy to compare. Nevertheless, I’m delighted to see that we have an established Irish company continuing to invest in physical stores.
Field’s Jewellers are Ireland’s largest multi-site jewellery and watch retailer. With 14 stores around Ireland and an online store, the company has grown organically by focusing on the mid-range customer. The business was originally founded in the 1940s by the Obernik family. Tony and Nicky Obernik since developed the wholesale businesses of Solvar and Emarno and subsequently founded a retail division in 1981. That now trades as Field’s Jewellers. In 2007, the company acquired Fraser Hart, a well-established UK-based retailer with 40 stores. Headquartered in Dublin, the combined entity is a formidable force in the sector, with the customer being at the heart of all decision-making.
Gail Banim, its marketing and e-commerce director assured me that the online platform is a significant portal for communicating with a changing customer. “Although our website is an extra store and needs to be thought of like that, we see it as a key enabler for drawing footfall to our physical stores,” she said. “We know that when we attract customers to our stores, we can wow them with great customer experiences. And that’s one of our differentiators.” Gail is planning lots of omni-channel experiences, such as ‘click and collect’ and booking of in-store appointments.
Clearly Field’s have a strong emphasis on maximising average transaction value (ATV). I met with people director Sarah Murtagh and found that she and I are very like-minded. In her five years with the company, she has led a culture change that genuinely puts people first. For many organisations this is a cliche, but not so in Field’s case. For example, all management meetings now have ‘people’ at the top of their agenda.
Field’s have invested widely in training. “All of our managers are undergoing in-house training in ‘situational leadership’, which gives them the skills to better engage with our people,” she said.
All of the store teams have been trained on the ‘outstanding service model’. “This is the Field’s way of carefully matching our products to a customer’s needs,” said Sarah. I experienced it first-hand this week when I mystery-shopped the Jervis Centre store. I had great banter with the girls as we chatted about watches. I was most impressed with how they established my needs using open-ended questions and then used an iPad to show a wider offering. Another example of ‘people first’ is that each morning before a store opens, the managers brief their teams on new products, product knowledge, sales targets, other news and points for action. Aside from informing the teams it motivates them to prioritise customer experience and to use the skills they have learned.
Field’s have a very structured approach to buying merchandise, headed up by Natasha Gregory. In addition to general jewellery she and her team want Field’s to be destination stores for engagement rings, bridal and ear-rings. Within these categories they have given much consideration to how they can differentiate from online and maximise ATV.
In terms of good-better-best engagement rings, they have ranges from €1,000-€6,500. The ‘good’ range is a core offering at entry-price level. The ‘better’ range is a collection curated by Irish designer Kathy de Stafford. This is a range exclusive to Field’s that cannot be compared online. There is also a wonderful in-store experience where customers can design their own ring.
Field’s also have watches across the price spectrum, from entry level to luxury. Even though branded watches have tighter margins and some of the lower priced brands are available online generally, Field’s believe that they are instrumental in attracting customers into the physical stores to try them on.
Fields of Gold
I do appreciate that not every retailer has the scale to negotiate exclusive product ranges, as Field’s can. But it should inspire retailers to delve deeper as they explore the marketplace. Perhaps you might be able to negotiate exclusive styles or even colours within branded ranges for your town?
As a best employer in retail, Field’s have a very low turnover of people. This is testament to the people-first culture. I have seen this first-hand in organisations too many times over the years, for it to be a coincidence. Good managers and salespeople can make or break an organisation.
Sting sings about walking “in fields of gold”. Pardon the pun, but that’s what makes Field’s a great success. Like all great retailers, they too have a relentless focus on the three pillars that drive sales, FxCxA=S.
Sunday Indo Business