Baseball, as a metaphor or analogy, can teach us about many things.
�Hitting a home run� could mean making a big sale in the business
world. �Reach for the fences� inspires people to achieve their
dreams. A �ballpark� figure allows for a broad area of
approximation. But can baseball really be used as an analogy for the
Industry thought leader Mark Ryski shares new and innovative
techniques for extracting powerful insights from basic store traffic
and customer conversion data, delivering a game-changing look at
this crucial retail information.
The Trouble with Traffic � What Retailers Can Learn from Baseball
By Mark Ryski
When a retailer is asked if traffic is up or down, there�s a very
good chance that the answer provided actually refers to the store�s
�transaction count� or what is sometimes ambiguously referred to as
�customer count.� No one seems to probe on this, so by default
transaction count has become an acceptable proxy for store traffic
count. But there�s another rub: transaction count is not the same as
Transaction Counts vs. Traffic Counts � Hits vs. At-Bats
To say that transaction count represents a reliable proxy for store
traffic is analogous to saying that hits are a reliable proxy for
at-bats in baseball. Yes, the two stats are related, but they are
not proxies � not even close.
If baseball statisticians only tracked hits, without considering
at-bats and batting average, how much less would we understand about
the greatness of players like Ty Cobb or Babe Ruth? A lot less. The
same is true for retailers. Transaction counts (hits) may be up, but
knowing if it was a result of an increase in store traffic
(at-bats), or that the retailer was more effective at converting the
store traffic is an important distinction. This is not a subtle
point. Here�s why.
Why Store Traffic Matters
Store traffic is a measure of all the people who visit the store,
including buyers and non-buyers. Traffic is a leading indicator that
tells us something about a chain�s sales opportunity � more traffic,
more opportunity. If traffic is trending up, this is clearly a
positive sign. It suggests that the brand is in favor and
opportunities abound. The converse is also true. If store traffic is
waning, this is disconcerting and it could indicate that the banner
is falling out of favor. The number of sales opportunities is
The problem with relying on transaction counts as a proxy for
traffic is that they could be going up regardless of whether actual
store traffic is going up or down. To understand this apparent
paradox, you need to consider the retailers� batting average.
Conversion Rate � Retail Batting Average
As mentioned, store traffic count defines the sales opportunity and
is analogous to at-bats. Transaction count represents buyers only
and is analogous to hits. Therefore a retailer�s batting average, or
conversion rate, is calculated by dividing the transaction count by
the store traffic count � just like in calculating batting average.
Store traffic and conversion rates tend to be inversely related.
When store traffic falls, associates are able to deliver a higher
level of service, check-out lines are shorter, and generally it�s
easier to buy. The transaction count often goes up, despite the fact
that there is actually less traffic in the store. In this case store
traffic didn�t increase, but if the retailer only has transaction
counts to rely upon, then he reports �traffic is up.� But it�s not.
And yet all parties � the retailers and the inquisitive analysts �
seem to tolerate the ambiguity.
Don�t Ask, Don�t Tell
One Wall Streeter told me that you can�t ask a retailer about
traffic counts if they don�t track traffic in their stores. True,
but you also can�t have two definitions for this basic metric
either. If you want to ask about transaction counts then ask for
transaction counts, and if you want to ask about store traffic, then
ask for store traffic. This shouldn�t be open to interpretation.
There is a simple way to inject clarity into what has become a
convoluted question. Instead of asking retailers if it was �ticket
or traffic� that drove results, analysts should ask if it was
�ticket, traffic or conversion.� While most retailers don�t track
store traffic and so won�t be able to answer, at least it will be
clear that they don�t and you will know they mean transaction count
� which on its own tells us little about what drove results.
As for the retailers who do track store traffic and measure
conversion rates, you will have a much deeper insight into what
actually drove sales results. Maybe retailers, and Wall Street, need
to take a page out of the baseball playbook.
Mark Ryski is the founder of HeadCount Corporation and author of
Conversion: The Last Great Retail
Metric and When Retail Customers Count.
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