Behavior Analytics in Retail - Service Intensity

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Silicon Waves LLC Behavior Analytics in Retail - Service Intensity Optimize the Schedule to Demand 1 3/21/2014

description

Optimize the Regular Schedule to Demand, with the actionable metrics of Service Intensity, Optimized Service Intensity, Service Measurement, and the Marginal Value of a Sales Associate #retail #analytics

Transcript of Behavior Analytics in Retail - Service Intensity

Page 1: Behavior Analytics in Retail - Service Intensity

Silicon Waves LLC

Behavior Analytics in Retail - Service Intensity

Optimize the

Schedule to Demand 1 3/21/2014

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Real-Time Environment in the Store

Retailer’s Customer Service Model

Build the Optimized Schedule

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Sales Conversion Measures how many Visitors converted to Buyers

And Service Intensity Monitors and Predicts

when and where to position associates in order to maximize the sales opportunities

by Connecting

between the Regular Schedule to Actual Demand

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What is an Optimized Schedule?

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Silicon Waves LLC

Service Intensity Answers

How Many Sales Associates per Period of Time

our local Store requires

in order to comply

with the Corporate Customer Service Policy

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So…..

Service Intensity is a

Customers to Staff Ratio?

Not quite

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Service Intensity

is a Holistic Metric

with Computation and Operational

and Strategic Models

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1. Calculate the

Service Intensity

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What is Service Intensity?

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For Example

Service Intensity (15 Minutes) = 5 Means

each Sales Associate On Average ‘Serviced’

5 Customers During 15 Minutes

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To calculate the

Service Intensity We must define

Customers and

Associates and

Period of Time

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Define the Customers

Average SI = 6.8

Average SI = 5.5

Average SI = 7.3

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Define the Customers

Arrivals: defines ‘service’ from the beginning

of the sales cycle, as a customer enters the store

Occupancy: defines ‘service’ during a period

of time; for Big Box or ‘Browse and Buy’ models

Exiting: defines ‘service’ to the last touch point

with the customer, at the checkout. Concurrent

with Sales Conversion as a percentage of Exiting

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Define the Associates

What are the Associate’s

Tasks?

What does it mean ‘Customer

Service’?

When a Manager operates as an

Associate?

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Define the Associates

On the Floor: all associates on the sales floor; for

small destination and luxury goods stores

Managers: defined as a sales associate per job

description and/or the store’s environment

Support Services: defined by the job function, retail

market, and compensation plans

Frontline Cashiers: Monitored and managed with

Queue Management & Predictive Scheduling techniques

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As workforce systems proliferate and the forecasting moves away from spreadsheets into

sophisticated systems that deploy bottom-up data, the schedule is now done in 15 minute increments.

This opens the door for innovations

Define the Period of Time

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Define the Period of Time

1st Hour

2nd Hour

If we calculate the metrics based on hourly data, the Service Intensity is 12 (48/4=12) for 1st hour

and 16 (72/4.5=16) for 2nd hour Silicon Waves LLC 17 3/21/2014

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Define the Period of Time

We also calculate the Service Intensity for every 15 minutes. For example, between 11am and 11:15am,

with 12 arrivals and 4 associates the ratio is 3 (12/4=3) Silicon Waves LLC 18 3/21/2014

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Define the Period of Time

1st Hour

2st Hour

Next, we calculated hourly ratios by averaging each 15 minute period. The Average Service Intensity between

11am to 12pm is 3; between 12pm to 1pm is 3.9. Silicon Waves LLC 19 3/21/2014

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Which Method is more Accurate?

Average Service Intensity calculated in 15 minute segments, and averaged per the period of time - 3 for 1st Hour 3.9 for 2nd Hour

Service Intensity calculated per Hour - 12 for 1st hour

(48/4=12) 16 for 2nd hour

(72/4.5=16)

Using the Average Service Intensity method , each associate, on average, ‘serviced’ 3 customers during the first hour and

almost 4 customers in the second hour

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Define the Period of Time

1st Hour

2st Hour

At 12:30pm, the store adapted to the increase in traffic during lunchtime, and increased the number of

associates on the floor from 4 to 5

Lunch Crowd Traffic

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Calculating the

Service Intensity in

15 minute segments and using these values as

a basis for any period of time, such as daily analytics

paints a more authentic picture of how the store works

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Calculate Service Intensity

With Exiting as the Customers

Sales-Floor Employees as Associates And

15 Minute Segments for

Average Service Intensity Per Period of time

Best Practices for Specialty Retailers

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2. Identify the

Optimized Service Intensity

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What is Optimized Service Intensity?

Optimization answers what is the level of customer service that will maximize the store’s

performance?

Sales Conversion is the Key Performance Indicator for maximizing opportunities

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To link the schedule to service policies, we have to learn the relationships between demand,

service and store performance.

Since the ratio of Sales Conversion displays the link between demand and transactions, and

Service Intensity measures demand and service, finding the correlation between these

two metrics points to optimal values.

Optimize Service to Performance

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Sales Conversion is calculated as Transactions divided by Visitors, and Service Intensity is

Visitors divided by Associates. If we take out Visitors, we end up with Transactions divided by Employees.

We don’t need traffic! Silicon Waves LLC 27 3/21/2014

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Before you jump… You do need Traffic

The traditional method of scheduling to transactions creates a self-fulfilling prophecy. Using only buying behaviors, avoids monitoring all potential sales opportunities. We see the influence of actual demand in the calculation methodology. Sales Conversion is calculated for the full period, i.e. daily conversion is calculated for all transactions divided by all visitors, for that day. Service Intensity, meanwhile, is calculated per 15 minutes. The daily ratio is an average of all the 15 minute segments of the day. Optimizing Service Intensity against traffic or sales also works, however the metric that best captures both demand and performance behaviors is the Sales Conversion

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50 Stores Sample

Lower Service Intensity means longer Average Service Time. In other words, when each associate can serve fewer customers, giving more service time to one customer, we should see an increase in sales

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50 Stores – What’s the Common Behavior?

Average Sales

Conversion is 40%

Average Service

Intensity is 5.9

Minimum Baseline is

3 months of data

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Optimize with the Average Service Time

One way is to turn the formula around for the Average Service Time

If

Average Service Intensity [1 Hour] = 4 We can also say

60 Minutes / 4 Service Intensity = 15 Minutes

The Average Service Time is 15 minutes

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Search for your Average Service Time

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A specific value, such as the Average Service Intensity, is hard to pinpoint. It is better to work

with a range of success

Retailers can define successful performance as long as the store stays within a range, such as one standard deviation from the average, or

within a predefine range

The Target – Point or Range?

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In a normal distribution, one standard deviation below and above the mean will include more than

68% of the cases

Target– Within 1 Standard Deviation

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Retailers can choose a Target Range based on the Actual Behavior of the Stores

Define the Range of Success

78% of Sample Stores have Service Intensity

between 4 and 7

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The Optimization Process

Once we defined the Target Service Intensity

And measured the Actual Behavior of the Stores

With Service Level Measurement We search for ways

to improve Customer Service without sacrificing Profitability

In order to increase Sales

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Optimization – Start with Why?

Same Service Intensity, why different Sales Conversion?

Same Service Intensity, why different Sales Conversion?

Same Service Intensity, why different Sales Conversion?

Same Sales Conversion, why different Service Intensity?

Is the Extra Staff worth the high

Conversion Rate?

Laggards Why?

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Optimization - Weighted Service Intensity

Retailers can assign different weights to per the employee

valued added to service -

Status: Full-Time Employees vs. Temporary Employees

Tasks: Fulfillment vs. Service Tasks

Position: Managers acting as salespeople

Goals: Customer Service vs. New Accounts

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50 Stores – Optimized Service Intensity

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With

Average Service Intensity Calculation Method

the Optimized

Service Intensity Range is typically between

3 to 7

Best Practices for Specialty Retailers

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3. Define the

Service Level Measurement

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Once Corporate identified the Optimized Service Intensity

the next step is Real-Time Monitoring

Of the Local Store With

A metric of success The

Service Level Measurement Silicon Waves LLC 42 3/21/2014

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Measure the Success Rate of the Store

If the Customer Service Model is 3 < Service Intensity < 4

The success rate is 5 out of 8 periods , or Service Level Measurement

is 63%

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Service Level Measurement

is the metric of the local store’s

Success Rate to comply with the

Customer Service Model

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Monitor the Store, Monitor the Chain

How the Local Store Compares?

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Metrics are also Tools of Communication

Are we giving the store the resources

to compete?

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Store managers are overwhelmed with data, and often

resent any top-down new system The secret

to a proper introduction is education and training

and allowing the stores to identify their natural trends

before including these metrics in the

compensation plan. Silicon Waves LLC 47 3/21/2014

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Too Many Associates?

Not enough Staff ?

Best Practices – Measure, Ask, Act

Optimized ?

Build the Baseline!

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93% days out of the year, the store performed with a Service Intensity

between 4 to 7

90% of Customers Wait less

than 3 Minutes

85% of Stores have

35% Plus Conversion

Measure the Actual Behaviors of the Store to the Corporate Policy

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4. Analyze the

Marginal Value of an Associate

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What is the Value of Adding 1 Salesperson?

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The Marginal Value of a Sales Associate answers

what is the value of adding, or taking off, a single

salesperson.

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Choose a Productivity ‘Success’ Metric

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We choose Sales per Hour as the productivity metric,

keeping other variables—i.e. traffic levels, period of time, geography and demographic parameters—the same, and

only changing how many associates are scheduled

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Adding one salesperson increases revenue but each revenue segment is less than the previous revenue slice.

This makes common sense. If demand stays at the

same level, there is still a natural buying behavior for that particular retailer, limiting how

much the associate can do to influence the sale.

For a profit-neutral retailer, the objective is to reach where the operating margin is zero.

Additional Revenue per Salesperson

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Playing ‘What If?’

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The Sample Store schedules 4 people between 11am and noon Arrivals: During the hour, 48 people visited the store. Sales: With 4 associates, the store sold $1,083 per Hour (Abby $248+ Bob $223+ Jane $321+ Rachel $291= $1,083 Sales Conversion is 25%.

What would be the impact on sales if we scheduled 5 associates?

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Playing ‘What If?’

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Using Service Productivity, we know that Mike’s baseline is $198 Sales Per Hour. Therefore, if we add Mike as the 5th associate, he will increase the store’s sales to $ 1,281 ($1,083+ $198 = $1,281). Assuming Mike will serve 3 customers, the sales conversion would increase to 31%.

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Schedule to Demand optimizes the schedule based on the behaviors

both the store and the employees

In other words, the performance of a sales associate depends on the store’s environment

and the individual ability

We forecast individual performance with Service Productivity. We measure the store’s ability to adapt

to actual traffic with Service Intensity

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Advanced Analytics – Service Productivity

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Service Productivity optimizes the schedule by

individual performance

Service Productivity is the probability that for a given level of traffic and service policy, the associate will repeat

past sales performance

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Service Intensity

is a Holistic metric in Schedule to Demand -

Driving the schedule by answering

How many Associates should be scheduled

in order to Optimize Store Profitability

and Maximize Sales

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Service Intensity is a holistic ratio of visitors to associates, per period of time. Optimized Service Intensity identifies the correlation between Service Intensity (schedule) and Sales Conversion (store performance). Service Level Measurement is a percentage of how often the local store performed, according to the corporate customer service model. Service Intensity & Service Productivity, together, define the Marginal Value of a Sales Associate

Schedule to Demand

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Our mission is to nurture, train, and educate a community of behavior analytics professionals

Ronny Max is the author of “Behavior Analytics in Retail” (October 2013), and the founder of Silicon Waves, a consultancy specializing in Behavior Analytics, including People Counting, Queue Management and Schedule to Demand. Website: BehaviorAnalyticsRetail.com

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This presentation can be redistributed, in commercial and non-commercial form, as long as it is passed along unchanged and in whole, with credit to Ronny Max