Chapter 87
Retail Close Ratio

To determine how many prospective customers become paying customers (not just window shoppers).

The close ratio measures how many customers convert from shoppers to actual buyers. It is calculated as follows:

Where

Cr = close ratio

Bt = buyers in time t

Tt = total traffic in time t

In this example, a retailer has 300 total buyers on any given day. If this retailer has total traffic of 1,500 shoppers, then the close ratio is 10%, computed as follows:

Understanding the close ratio can assist retailers in developing strategies designed to increase the conversion from shoppers to buyers, which will likely lead to increased sales. A useful marketing tool below is derived from the Ansoff Matrixii outlining available options (see Figure 87.1):

Each quadrant describes a different customer and product approach. Of course, this framework can be expanded by marketers to outline corresponding marketing programs, including pricing, promotion, and placement. The purpose is to determine a strategy or combination of strategies to inspire higher conversion from shoppers to buyers and, thus, increase sales.

Most retailers do not have the time or resources to count shoppers who visit their store on any given day, although there are tools available to assist. Electronic triggers mounted at store entrances can record each shopper that crosses their path, enabling store managers to review the visitor totals when they close the daily books. A more expensive, and arguably less precise, option is to pay someone to count the number of shoppers who enter the store over a period of a few days to develop an average shopper total for those days. Errors are reduced with electronic triggers or even doormat counters that record a shopper every time someone steps on the mat. However, these, too, can be imperfect since shopping carts may be mistakenly counted as shoppers. Furthermore, the electronic method does not distinguish between unique visitors, repeat visitors, and buyers; information which is of interest to marketers since they want to understand buyer profiles as deeply as possible to develop marketing programs that maximize purchases.

The data for buyers (transactions) is captured in the end-of-day totals and/or in the point-of-purchase software. The harder figure to determine is the total number of shoppers, but this can be done either with electronic counters mounted near the entrance to the store, or people can be hired to survey the total number of shoppers who visit each day over a period of several days to determine an average.

iRichard Young, Sales Pipeline: Five KPIs Every Business Must Consider, Sales Pop, December 4, 2013. Retrieved May 23, 2017 from https://salespop.pipelinersales.com/sales-management/sales-pipeline-five-kpis-every-business-must-consider/; SMS Storetraffic.com, Driving Your Closing Ratio…Drive Your Sales. Retrieved May 23, 2017 from https://storetraffic.com/drive-your-closing-ratio-drive-your-sales/

iiThe Ansoff Matrix first appeared in the Harvard Business Review in 1957 in an article by H. I. Ansoff entitled “Strategies for Diversification.” Ansoff discussed it further in his book Corporate Strategy (New York: McGraw-Hill, 1965).