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How And Why We Calculate Close Ratios

March 29, 2013
In my last blog, I wrote about the ICFA Sales Certificate program and promised I would tell you I have done so my sales staff can make best use of the program. This blog is going to be about how we created some basic metrics suggested by the program.

The course emphasizes that a sales consultant can only improve if he/she knows a few statistics about themselves. The most important is their “close ratio.” This is calculated by dividing the number of sales a consultant had by the number of “ups” or opportunities that consultant had in the same period. For example, if a sales consultant has ten  “ups” in a day and closes two of them, their “close ratio” would be 20%. Pretty easy but getting there requires some planning.

The first step is to define what is an “up”. The most obvious “up” is the customer who is coming into our store for the first time and is approached by a sale consultant. However, when a customer comes in for a second or third visit and has previously worked with a sales consultant, the counting of “ups” is more problematic. We arbitrarily decided that as long as the first consultant turns this customer over to the original sales person, this would not be an “up” for the first consultant. We also decided the second consulant would count this as an “up” because the customer was coming back and this should be considered another opportunity to sell them.

Then, there is the customer who has been in before but doesn't tell the sales consultant they have worked with another sales person until far into the sales presentation. If we are able to pass them over to their sale consultant at that point, who gets to count them as an “up.”  We arbitrarily decided that the second sales consultant would count this as their “up” and “close.”

In the case of a return customer who comes in the day their sales consultant is off, we decided that it would count as an “up” for the sales consultant who helps them that day. And, if they close that customer, it would be counted as their “close.” Of course, the original sales consultant would get the commission for that sale.

Finally, we elected not to thrown phone calls into the mix. If we did, we would have to count each time a sales consultant answers the phone as an “up.” To be fair, we would have to rotate who picks up the phone just like we control who is “up” for consumers coming into the store. Since we want the phone answered on the second ring or less, the time spent deciding who is supposed to answer the phone could mean delays in picking up the phone. That might adversely affect customer service. Thus, we aren't counting phone calls as "ups."

The next step is to create a form that each sales person can use to keep track of their “ups” and “closes.” Each sales consultant gets a copy of the form at the beginning of the week. They enter their name and the date of the week at the top of the form. The form has a row for every day of the week. Each row has three columns: “Ups,” “Closes,” and “Close Ratio.” Sales consultants keep track of their “ups” and “closes” with tick marks entered as soon as they finish with a customer. At the end of the day, they calculate their own daily close ratio.

They turn these forms in at the end of the week along with copies of all of the sales or orders they have “closed” that week. We aggregate the data, tell them their total "ups" and "closes" for the week, and calculate their average weekly close ratio. Then, using the copies of the sales and orders, we tell them their average ticket.

Taking a cue from the Greg Walsh’s Sales Certificate DVDs, we also create a “what if” metric. As in, “What if you increased your closes for the week by just one? What would your close ratio and total sales be?”  For example, let’s say a consultant has 16 “ups” in a week and 4 “closes” for a total of $8,000 in tickets. If they increase their closes by 1, their close ratio would go from 25% to 31.25% an increase of 25%. Their total sales would go up to $10,000 which would also be an increase of 25%. We think this helps self motivate our sales staff. After all, who wouldn’t like to increase their sales by 25%?

I am sure there are more sophisticated and precise ways to measure close ratios. If you have a system that works and would like to share it with other retailers, please post a response to this blog. Until then, I remain,

Yours in confused retailing, Bruce