Secrets of metrics

We are talking about additional KPIs — the key performance indicators — that really determine how well you are doing. Sure, the hard financial numbers tell you what has happened to your retail business. But what about the soft KPIs? They tell you the bigger picture — a why — and sometimes, the story isn’t what you expect.

measuring is managing

Are you looking at your numbers on a regular basis? Often, business owners order inventory, spend on marketing and hire staff based on guesswork, gut instinct or the feeling that, “I think it was a good weekend.” After all, it’s what’s been working so far, right?

But has it? Are you sure? Do you know how to course-correct in the right places?

Running a business based on gut instinct alone may not be sustainable for you, making it tough to weather storms that come your way.

Hard metrics are the anchors in your business. They are the reality that you sometimes want to ignore when the wind has died or the waters seem choppy.

The good news is that you probably have access to most of them — you just don’t watch them regularly. The key is to watch two to three hard KPIs — beyond the bottom line revenue or cash flow — that make sense for your business style, size and season. It’s also a good idea to get into a regular habit of checking these KPIs.

Here are some strong numbers to consistently watch:

• inventory levels
• sales by product
• sales by category
• sales by employee
• sales by time of day or by day of the week
• average transaction value
• items per transaction

When you look at these metrics (they are called “key” performance indicators for a reason), you will be able to save time when making decisions because you have the data to back up what is already happening.

Let me rephrase that: You will save time in your decision-making. And who doesn’t need more of that?

Some other questions to consider: What could you do if you knew exactly what to tweak or change in the next week? The next month? The next 90 days? Your data patterns will help you see the areas of your business that need to change.

So instead of trying to read your gut, assuming sales are slow or hoping foot traffic turns into sales this weekend, look at your real data to know the truth — and you can do something about it.

What are soft metrics?

Yes, the revenue may determine whether you can pay the bills and your employees this week, but growing your business in a sustainable way — without capsizing it — takes more than watching the weekend sales in high season. It takes noticing patterns, spotting problems early, and making small corrections before you are miles off course.

Hard KPIs like sales, product profit margins, and foot traffic numbers, are all important in telling you what is happening. What I call “soft KPIs” often reveal WHY something is happening.

Here are some examples of soft KPIs to track:

• Staff engagement. Are your employees upselling often? Are they helping you get a feel for what customers are browsing for? Or are they glued to their phones at every chance? Why isn’t the staff actively participating? Do they need training? Incentives? Ask them regularly to find out.

  
  

• Customer sentiment. Do you get return shoppers? Do customers recommend the store to their friends? Or are you a one-and-done shopping spot? Why aren’t customers buying? Do you need to change the front windows? Update your online store hours? Track these questions to find out.

  
  

• Product buzz. Which items are getting picked up and talked about — even if they aren’t selling? Why are some items selling and others aren’t? Track the movement of products on the floor effectively to decide what to do with them next.

  
  

• Low-tech ways to catch secret metrics. While it is a great idea to have a dashboard to catch all of your financial and marketing numbers, you can use simple systems to reel in the soft metrics.

  
  

• Staff observation. Keep a notebook at the register or use a shared Google Doc. When they notice something — good or bad — they make a note. Who lingered at a new display? Which questions keep popping up? Discuss patterns in your team meeting.

  
  

• Customer conversations. Train staff to ask friendly questions such as, “What brings you in today?” Encourage staff to note any trends — which products are picked up, why people visit the area/your store, and what questions they have. Look through comments in store reviews and on your social media, too.

  
  

• Engagement heat map. Print or sketch your store layout. For a week or two, mark the areas or displays where people frequently stop and browse. You will quickly see the hot zones and the cold ones. Use different color markers for hot or cold, and you’ll start seeing patterns. Match the data against your goals to make some tweaks, such as moving a hot new product into a “cold” zone.

  
  

Your 3-Step Action Plan

It’s time to put KPIs into action. Here are three steps to analyze them:

1. Pick two hard KPIs and two soft KPIs to track monthly. Schedule a repeating time where you or a staff member pulls the numbers and put them into one document. Keep it simple and consistent.

   
   

2. Hold a monthly metrics meeting. Take a look at those numbers and review what’s working, what’s not and where you might make some small tweaks.

   
   

3. Test one small change each month. You don’t need to reinvent the ship’s wheel; tweak a display, try a different upsell or rearrange products based on your heat map. Check in on that change in your next Metrics Meeting.

   
   

A Simple system

You don’t need something fancy — just a simple system. Consistent tracking will uncover patterns that help you decide what your shop needs to grow and stay ahead of churning waters or calm sunshine.

Melissa Steadman owns Moonbridge Consulting, where she helps business owners find balance, clarity and growth by untangling their marketing and operations with systems and metrics — so it’s smooth sailing to grow. Contact her at melissa@moonbridgeconsulting.com.