Convert Averages to Trends for Analyses

Are the numbers you’re using to make your business decisions overall averages that mask trends which change over time? Do the averages represent a smoothing of extremes, none of which are typical situations?
     Many owner/operators fail to even measure their store conversion rates. You measure it by counting the number of people who come into your store during a specified period, counting the number of transactions during that same period, and dividing the number of transactions by the number of people. A conversion rate of 40% means that four out of ten people who came into your store did make a purchase.
     There are four refinements I’d add:

• Count potential buyers, not all the people who come into your store. The family of four shopping for a washing machine is highly unlikely to buy one for each family member. 
• The benchmarks for conversion rates depend on the type of merchandise or services you sell. An art gallery might be satisfied with a 1% conversion rate, while a pharmacy would expect almost a 100% conversion rate. 
• The size of the transaction in number of items and dollar amount of the purchase should be analyzed as well. 
• The most accurate conversion rates track shoppers over repeat visits. On the first visit, the shopper might ask about the items; on the second visit, consider the alternatives; and on the third visit, make the selection and purchase. 

     As traffic volume goes up, the conversion rate goes down. That is mainly a function of the availability of sales help and cash/wrap access. One significant reason people in a retail store don’t buy is that they can’t get somebody to help them and they anticipate a wait to pay. Small to midsize stores usually have the same number of staff working for a whole shift, but traffic patterns vary during that shift. Research indicates that another reason for the inverse relationship between traffic volume and conversion rate is that during slower traffic times, those who do make it into the store are more likely to be interested shoppers.
     Paying attention only to average conversion rates impedes your aligning your staffing to the traffic patterns. Take samples of conversion rates at different times of day and week. Then plot the patterns.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Explore What’s Behind the Numbers 
Treat Shopper Psychology as a Science 
Acknowledge the Power of Cycles