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RECALL No11 Mature Markets

Shock the system: Driving sales via in-store execution

41

06 Shock the system: Driving sales via


in-store execution

Many telcos are witnessing a reduction in store transactions. McKinseys retail sales approach can serve to
boost a telcos frontline results by 15 to 40 percent.

service activations per store varied by over 50percent,


up-selling rates by more than 30 percent, and crossselling by nearly 180 percent.

When markets slow, telecoms players need some powerful retail magic to draw in new customers and drive
up profits. To help them pull off this conjurers feat,
McKinsey has developed the Storanomics approach
to telco retail. In engagements across Europe, the US,
and the Middle East, Storanomics has triggered surges
in sales performance ranging from 15 to 40 percent.
Whats more, experience shows that impact is both
rapid and sustainable. One telco garnered an increase of
over 10 percent in monthly gross subscriber additions
(gross adds), while enhancing its customer satisfaction
by over 30 percent. The Storanomics approach relies on
rigorous execution that teams drive from the field with
significant guidance from top managers.

While these retail opportunities may seem challenging


to capture, managers can seize them by taking a comprehensive approach that links objectives to a meticulous and sustainable frontline transformation process.
Storanomics pilot projects can show impact within a
single quarter and broader results within six months.

Missed opportunities
In many cases, telco managers misread their retailing
reality. They assume that opportunities out there are
mostly small and that any large ones will be difficult to
capture, take a long time to implement, and ultimately
generate only a short-term effect. McKinseys experience tells a very different story (Exhibit 1). Even after
retail improvement efforts, initial mystery shopper visits often reveal significant missed sales opportunities.
They also expose high variability across shops, markets,
and regions. In one instance, mystery shoppers noted
140 walkouts per day in one store and found that the
network engaged in only limited proactive selling activities. In another case, an operator discovered that total

Storanomics delivers an effective way to resolve the


traffic/customer-handling paradox. Stores in dire need
of traffic stimulation exist without question. However,
high traffic alone will not ensure higher sales. This is
because sales productivity has a strong negative correlation with traffic (i.e., high traffic levels reduce the time
sales staff can spend with individual customers, thus
limiting sales effort). Depending on the store, traffic
stimulation might actually prove counterproductive.
Store managers need to use other ways that complement or precede traffic growth. Such approaches might
include efforts to manage existing in-store traffic,
reduce walkouts, increase traffic-handling speed, or
enhance staff skills to better capitalize on traffic.

Storanomics fundamentals
McKinseys Storanomics delivers sales uplift by
focusing on store-level retail improvements in three
areas:
Traffic generation seeks to increase store traffic from
attractive shopper segments.

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01

The retail experience up front and behind the scenes is often unoptimized
The retail experience up front and behind the scenes
is often unoptimized
Up-front customer experience
Competitor store or exclusive dealer right next door

Behind the scenes


Store positioning,
network architecture, merchandise

Three times more traffic per FTE in top quartiles


compared with bottom quartiles

Dirty windows without product/service displays


Lack of destination products or services

Store layout prevents reps from approaching customers,


leading to a high number of walkouts

Sales reps taking orders, not selling proactively


(< 30% closure attempt)
Technical product explanations rather than structured
need identification and interest raising

The responsibility for own and third-party retail is not


coordinated

Traffic generation

Traffic/customer
management

Frontline
execution

Follow-up calls almost nonexistent


Sales reps spend 30% of their time on administration;
store managers, 30 to 50%, leaving less time for selling

40% of staff would not recommend own product to


a friend
High attrition rate (> 50%) among sales reps
Little floor time (< 50%) per week for store managers
Three to four times higher sales productivity in top
quintile compared with bottom quintile

SOURCE: McKinsey

Traffic and customer management focuses on reducing the number of store walkouts, freeing up sales
reps and managers to concentrate on selling, and
improving customer interactions by reducing average waiting times. Objectives include increasing
product trial rates, enhancing the speed and quality
of service request handling, and lowering the number of stockouts.

Traffic and customer management. One telco discovered that up to half of the people entering its stores
with the intent to buy something ultimately left emptyhanded. Surveys revealed the key reasons behind this.
These included not finding the desired product, needing
more time to consider the purchase, finding that waiting
times were too long, being in a crowded store, or dis
covering that items desired were out of stock.

Frontline execution works to improve store and sales


rep productivity in terms of offer rates (e.g., service
versus sales requests), how often reps convert initial
service requests into sales, the value captured per
sale, and the service fulfillment rate.

Another case had to do with a lack of available sales rep


time during peak periods. Here, the team analyzed how
the sales reps worked and found that they spent just
under half of their time actually involved in the sales
process (e.g., speaking with customers, inputting sales
data). Furthermore, product activation times tended to
be high. ADSL broadband activations, for example, took
as long as one full hour.

McKinseys modular approach to retail rejuvenation


covers the entire flow of customer interactions (Exhib
it2), providing effective tools and techniques telecoms
players can use to tackle their biggest retail challenges.
The first step involves identifying the root causes behind issues.
Traffic generation. One operator, for example, discovered that about 40 percent of its store and staff were
underutilized, with traffic levels far below the average.
Local promotions, improved signage, and street hunters
directing passers-by into stores helped increase both
traffic and sales by 17 percent.

To ensure shoppers are promptly and properly engaged


when visiting the telcos stores, managers can apply a
segmentation strategy to both traffic and the staff who
serve them. Instead of treating all customers and reps
the same, shoppers identified as having high sales or
care-to-sales potential (e.g., those lacking current
postpaid service with the telco) are handled by skilled
sales specialists. Less promising shoppers (e.g., angry
customers), in contrast, are served by care specialists.
In some cases, they are even directed to care hotlines if

RECALL No11 Mature Markets


Shock the system: Driving sales via in-store execution

02

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The Storanomics toolbox covers the entire customer flow


The Storanomics toolbox covers the entire customer flow
Customer touch points
Store positioning, product portfolio, network strategy
(e.g., store density), and channel strategy

Enablers
Store positioning,
network architecture, merchandise

Store ownership model, retail organization

Processes and organization for store support, campaign


management, merchandising

Store appeal, national/local trade marketing, in-store


services, outbound calls, hunters, referrals
Traffic generation
Opening hours, triage (ticketing, meeter-greeter), in-store
channel diversion, live experience, services as retail
SKUs

Traffic/customer
management

Selling and servicing skills


Frontline
execution

Staffing, staff segmentation, activity management,


PoS/order management and other systems/processes,
inventory management
Sales tools, people management, and performance
management

SOURCE: McKinsey

their issues cannot be resolved in the store. By applying


this segmented approach, the telco increased its total
sales conversion rate from 18 to 29 percent. Operators
can further reduce waiting times and walkout rates via
lean techniques. One telco noted differences in average handling times per request type of 40 to 50 percent between medium and low performers. Increased
automation and changes in processes were designed to
reduce average waste time by about 20 percent.
Finally, staffing levels always need to reflect customer
traffic. Successful operators deploy scheduling tools to
optimize agent staffing as well as store-manager time.
Measurements show that productivity can vary by up to
50 percent depending on whether the store manager is
on the shop floor or not.
Frontline execution. As an example in this dimension,
one telecoms player noted a high level of performance
variability across its store network. By conducting
f urther investigations into why this was happening,
the operator discovered that the problem centered on
poor area management capabilities, since 6 of 18 area
managers were responsible for 16 of the bottom-20
stores. In order to address this, the company instituted a r igorous performance management approach,
involving dialogues during three different types of
staff interactions:

At sales meetings (best practice: 70 percent of meetings on sales topics, the rest on peer training, finding
root causes, and working out action plans)
In informal huddles (to energize and set objectives)
During individual discussions (to set development
goals and career objectives).
Structural elements of performance management
include setting sufficiently stretched targets at the individual level, establishing a daily tracking and reporting
system including SMS notifications, and offering incentives that really mean something (e.g., best performers
earn at least twice as much as their lower-performing
counterparts). In one case, increasing the granularity of
reporting and breaking store sales down into separate
offer/success rate per type of traffic, followed by rigorous discussions, helped increase pilot store sales by
16percent. Other helpful techniques are sales coaching,
where managers intensively coach the coaches during
rollout, applying peer-to-peer coaching and other effective methods. Companies can also increase staff sales
capabilities by using tools tailored to specific situations,
e.g., laminated sheets to guide customers through need
identification and proposition or cheat sheets providing responses to the most frequent customer objections or effective cross-selling catch phrases. Other

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Ten golden rules to ensure substantial,


sustainable sales impact
1. Move fast pilot in stores after two to four weeks
2. More ideas early on, narrow down before rollout
3. Focus on people-related actions (mindsets, skills,
performance management)

6. Shock the system radical ideas delivered to


stores packaged in a big-bang rollout (all ideas
in one package for each store), but sequenced
over time to manage complexity
7. L ead by the line the line assumes implementation responsibility: store and area managers with
strong project support from staff
8. Effective SWAT team in place from day one

4. By the field, for the field rapid iteration and


design lead that is adjusted by store staff on a
daily basis
5. Visible results early on clear measurement and
communication of pilot results

must-have programs include frequent in-store training


sessions and advanced skill-building workshops (e.g.,
applying irrational-buyer techniques).

9. Actions to ensure sustainability beyond the obvious (e.g., link bonuses to sustainability)
10. Proactively manage opinion leaders in the network in line with the local context

into a single, radical big-bang package yields longterm results. The overall rollout effort is still sequenced,
i.e., stores are addressed one after the other, not all at
once, in order to manage complexity.

Storanomics at work
McKinseys experience is that successful Storanomics
launches tend to adhere to several principles throughout the three phases of this sales stimulation approach.
In the test and refine phase, telcos seeking to drive up
sales tend to move fast, typically piloting solutions in
their stores just two to four weeks after beginning with
Storanomics. They also commit to idea generation, narrowing down the set of potential actions before the rollout. One final aspect of the test and refine phase is that
it is highly people-centric. Not only do the improvement
activities focus on retail staff skills and mindsets, it is
their responsibility to make rapid, daily adjustments as
needed in preparation for rollout.
The rollout phase commences with clear communication of the pilot results and prioritization of stores.
Multivariate regression allows operators to explain
more than 60 percent of store performance variability
with structural reasons, so that an initial focus can be
placed on stores with significant operational underperformance. Then, the ideas are implemented in the stores
in ways that completely shock the system. Experience
shows that incremental approaches to boosting sales are
suboptimal, but bundling the tested and refined ideas

The sustain phase is in fact an ongoing effort, where


continuous monitoring and tweaking are key. Here, the
line assumes continuous implementation responsibility (i.e., store/area managers). An effective SWAT team
is also established and drives stores toward attaining
Storanomics certification. Levers such as linking
bonuses to in-store sales improvements and actively
managing opinion leaders at the store level help attain
the performance and attitudinal buy-in of everyone
involved and ensure that early gains are sustained.
***
Storanomics incorporates new ideas based on field
data and insights from other industries with the intent
of shocking the system with outside influences at
all levels. Storanomics is tailor-made to provide that
extra uplift telecoms players need in the current economic situation.

RECALL No11 Mature Markets


Shock the system: Driving sales via in-store execution

45

Duarte Braga
is a Principal in McKinseys Lisbon office.
duarte_braga@mckinsey.com

Branislav Klesken
is a Principal in McKinseys Prague office.
branislav_klesken@mckinsey.com

Jan Mischke
is an Associate Principal in McKinseys
Zurich office.
jan_mischke@mckinsey.com

Steven Rudolph
is a Principal in McKinseys Boston office.
steven_rudolph@mckinsey.com

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