The board room was concerned about the erosion in operating profit margins. Due to pressures of hyper competition, the store had to stock a wider range and higher volumes of inventory. This not only meant investing increasingly larger amounts into business, but also locking up such sums over a longer period. Progressively, while the customer traffic, measured by footfalls, kept increasing; it was taking longer to the convert the traffic into cash. How could the effectiveness of the ‘in store' experience be improved further?

Data points

The Product Manager identified the key determinants of ‘positive buy' behaviour through a focus group. Positive buy signifies the customer completing the purchase in a single visit to the retail store. The research pointed to the following six determinants:

Show case: Whether the products on display are grabbing the eyeballs of the onlooker?

POP display: Whether the deals offered were irresistible enough to bewitch the customers?

Personal attention: Did the front line workforce manage to strike a positively charming chemistry with customers?

Choices: Did the store offer the most delightful array of buying options?

Functionality: Were the features friendly and persuasive enough in its appeal to the user?

Personalisation: Whether the offer could be configured quickly enough and customised to the customer's unique needs?

If these six key determinants were to be tracked for spend effectiveness, it was argued that the payoff for the business could be more quantitatively established.

The measures were qualitative in nature and needed to be converted into hard measures.

How the data connect

By measuring the strength of each of these to evoke a ‘positive buy' behaviour, they aimed to improve the effectiveness of their promotional budget classified along the following dimensions — display, promotions, customer attentiveness, product range and service quality

Using the concept of Mystery shoppers, the store got the buyers to poll the customer experience in the retail store. Each of the five dimensions carried 100 points. Each buyer had therefore to award the 500 points between them. The consolidated result of a significant sample of respondents is depicted graphically.

Question for the Directors

The board noted that the product manger had connected the needs of customers to their buying experience at the retail store very well. It was still uneasy about this approach on one count. The board was focused on improving operating margins. It failed to see a connection between the measurements and the likely impact on eroding profit margins.

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