Quantifying Clienteling

Quantifying Clienteling

I have been involved in dozens of Clienteling projects over the years, and am quite actively engaged in consulting on the topic with retailer to this day. One question that invariably arises is how do you go about quantifying the results of clienteling efforts?  If we are going to commit to a broad-sweeping change, how can I know if the efforts will work, or are working?

While it is a simple question, the answer is a bit more complex. This is the case for a number of reasons.

First, many retailers that have previously implement Clienteling did so with the intent of using this heightened service as a competitive advantage over their competition. As such, they are hesitant to discuss real-world successes, as they are content to be among the few who reap the benefits for as long as possible. So while there are clear benefits, you are unlikely to get much detail on them.  

Second, many of the retailers that undertake a new software-based clienteling initiative have already been practicing clienteling activities manually; so any measurable gain can really only reflects the incremental value of systematizing an already existing practices – not the entire gain of performing an activity versus not performing an activity. For retailer that are looking to implement clienteling for the first time (manual or software), the potential gains are even greater.

Third, many factors can impact the sales at a given point in time including staff, product, management, weather, Marketing efforts and events, seasons, etc. Isolating the value of one specific initiative if often fairly complex, especially as retail typically has numerous initiatives design to impact revenues.

So how then can we measure the effectiveness of clienteling?

The Scientific Method is the most accurate way to measure the success, or lack of success, of new methods, practices, or activities. Using this Scientific Method a retailer would identify “like” customers, associates, stores, etc. then divide these combinations into two groups – a study group and a control group. Using the study group they would then take the new actions, and in the control group continue to perform business as usual. Regrettably, as described above, there are so many factors that can impact sales that the combinations of these various factors make the Scientific Method impractical if not impossible.  

There are, however, a number of useful measures that can be used which in their combination serve to be more scientific in their approach, and help to quantify the value of Clienteling. 

1.        Affiliated Sales – affiliated sales is a concept that tracks the sales as a percent of total sales which can be attributed to “Affiliated” clients.  An affiliated client is one who belongs in a store associates book. A common measure for this ranges from 20-40% depending on the retailer. High-end luxury retailers tend to be on the higher side, while mid-priced retailers more toward the lower side of this range. What makes this number perhaps less valuable, however, is that simply affiliating with more customers can grow this number, even if no actual clienteling actions are implemented.
2.       Outreach Sales % – whereas Affiliated Sales does not focus on the actions taken by an associate, Outreach Sales shifts the focus primarily to the impact of a very specific activity – outreach communication. Outreach Sales % is a measure of the percent of all business that happened in a defined time-frame as a direct result of a personalized communication from an associate. If an associate proactively reaches out to a customer, and the customer makes a purchase (within a defined time-frame such as 14 days), this is then considered to be a direct result of the outreach. This is then expressed as a percent of total sales for the time period (most often 1 month). This is a common metric I suggest tracking, as it is rewarding measuring the effect of the efforts, and not just the activity.  This Outreach Sales number most typically ranges from 15% to over 25%, meaning that as much as 1 in 4 dollars can be a result of associate outreach activity. An interesting point of note on the topic of outreach is that one to one personalized communications coming from the store associate are far more effective than those coming from the Marketing department. In fact, a very typical response rate (making a purchase) to a personalized communication falls in the range of 12-20% -- exponentially better than even the best marketing campaigns.
3.       Affiliated Outreach Sales – an argument can be made that many of the customers who received an outreach communication may have wished to shop regardless, and therefore even this number is not 100% proof of the effectiveness of personal outreach to a customer. Affiliated Outreach Sales attempts to address this issue head-on. It is a measure of only those customers who are affiliated, and then looks at the percent of business derived from the affiliated customers who received an outreach communication in comparison to the percent of business for those who had not received a communication. A recent 1 month analysis showed that associates had communicated with approximately 1/3 of their affiliated customers, and this third represented 2/3 of all sales to affiliated customers. Literally ½ the number of customers generated twice the sales for the given month demonstrating the clear value to associate outreach communications.       

While the above metrics help to prove the viability of Clienteling, they are not always the only metrics tracked in a clienteling initiative.  In fact, the most common measures used to gauge the success of Clienteling are much more common statistics most often already in use. It is the impact on these metrics that helps to demonstrate the benefits of the initiative. Some of these include:

•          Total Sales
•          Average Transaction Value
•          Items/Units per Transaction
•          Margin
•          Sales Per Hour
•          Customer Frequency

Looking at these measures on the whole provides the most value in gauging the success of a program, but looking at these metrics as they relate to a specific set of customers (for example affiliated customers, prospect lists, targeted segments used for outreach tasks, etc.) can provide even more insight, and can help to prove the value of the efforts being performed.

Over the years I have been involved in a number of Clienteling deployments, and have had the pleasure of monitoring their success through most of these performance metrics. By focusing efforts in the store toward a specific measure, all of the above metrics can and have been impacted by clienteling activities with great success.