Chapter 76
Transactions Per Customer
Measurement Need
To determine how many in-store potential customers convert to actual buying customers.
Solutioni
Transactions per customer (TPC) measures the percentage of potential customers that actually buy. The formula is:
Where
TPC = transactions per customer
Ttranst = total number of transactions in time period t (usually one day)
Ttrafft = total customer traffic in time period t
For example, if you run a retail outlet and a particular day has customer traffic of 1,000 people, and the total transactions for that day is 100, then the TPC is 10%:
Impact
TPC is a measure of a retailer’s success in converting potential customers into actual buyers. Alternative terms are the “percentage yield rate” and/or the “walk to buy ratio,” but each measures the same thing.
Generally, the higher the percentage, the more effective the retailer is at converting those who are merely browsing into paying customers. If the figure is low, then the retailer may need to review its marketing activities, including:
–Promotions (the discounts are not attractive enough or the wrong products are being promoted)
–Point of purchase materials (stocking may be low, the display may be poorly placed, or the design may be unappealing)
–Merchandising (the look of the products on stores shelves and their location in the store may not appeal to customers or reflect how they walk through the store)
–General marketing activities (awareness-building brand development activities may not be consistently executed, print ads for specific products may be confusing or poorly executed, and the store location may be inconvenient).
The biggest challenge is measuring customer traffic since it is difficult to actually measure each individual potential customer unless a specific person(s) is devoted to counting customers for a given period of time, or a third party research firm is retained to conduct a customer count survey. There are automated tools that can count customer traffic as well, although these do not account for double counting (customers who visit more than once in the time period measured).
Finally, transactions are recorded on the digital payment systems (or similar electronic hardware and software) so these totals are more easily gathered than the customer traffic totals.
iWayne Patten, The Growth Equation—Increasing the Number of Transactions Per Customer, LinkedIn, March 18, 2016. Retrieved June 3, 2017 from https://www.linkedin.com/pulse/growth-equation-increasing-number-transactions-per-customer-patten