Monday December 01, 2008
Lacks Tracks Its Best Ideas
QualPro's success with client Lacks Home Furnishings was featured in the Stores article, "Lacks Tracks Its Best Ideas," by Lauri Giesen.
When Melvin and Janey Lack, owners of Lacks Home Furnishings, a Victoria, Texas-based chain of 40 furniture stores, first heard of a program that tested business variables, they thought it sounded exciting. They also believed their business was too small for something so complex.
"I was fascinated by it," Janey Lack says, "but then I talked to some people who told me it was beyond the scope of most people."
While attending a global marketing seminar where retailers of all sizes were discussing the results they had gained from QualPro's multivariable testing program (MVT), the Lacks realized their business wasn't too small after all.
In the last two years, they've undertaken four MVT sessions and seen resulting sales increases as high as 48 percent at one store.
To implement multivariable testing, a business first compiles a long list of ideas that management and/or employees believe might improve efficiencies or increase sales. That list is then winnowed down to a more manageable figure (usually no more than 30); half are tested in one set number of stores, the remainder in a second group. QualPro uses a sophisticated mathematical formula to study the impact each change has on operations to determine which are worth rolling out to the entire chain.
"This allows us to study the impact of separate ideas as well as the impact of synergies," says David Cochran, vice president of Knoxville, Tenn.-based QualPro. "Sometimes, ideas that aren't good by themselves will work well when combined with other ideas. We can test them and see the results before incurring the cost of rolling out new programs throughout an organization."
Lacks begins each MVT session by requesting that all associates generate at least one cost-free, easy-to-implement idea that they believe would improve sales. It tests 15 ideas at 20 stores for four to six weeks; QualPro then analyzes the sales at the test stores to quantify how each idea affected sales. Lacks can then test the top ideas a second time, often at different stores, to verify its initial findings.
After its first test, Lacks found that sales at test stores had increased 14 percent overall compared with a 4 percent gain at stores that did not participate in the test. One store that tested all five "best" ideas saw sales increase 24 percent; a store that tested four of five ideas subsequently determined to be the "worst" saw sales decline 16 percent.
Just say hello
Some of the most successful ideas were the simplest. For example, the chain experienced an uptick by changing how employees answer the phone. Previously, they would read a script that contained a lot of information about store locations and so forth before they even said hello. By shortening the message, they found customers were more willing to stay on the line and discuss furniture needs.
Another big gain was adjusting stores' pick-up hours. "In Texas, a lot of our customers own pick-up trucks and they can pick up their own furniture," Melvin Lack says, "but they want to do it after they get off work or during the noon hour. By expanding our pick-up hours, we greatly increased our sales."
Some seemingly good ideas had little or no impact on sales. Lacks sent birthday cards with discount coupons to repeat customers, "but in our test period we found we got no response," Janey Lack says. The company also tried featuring "products of the week" from various departments in the front of the store. "We put a lot of work into the displays and they were wonderful," she says, but it turned out customers entering a furniture store already have an idea of the type of products they want to look at and buy.
"We learned not to pre-judge ideas," Melvin Lack says. "Some ideas may work in certain stores, while other ideas will have huge benefits throughout the whole organization."
Computing test results
QualPro has developed a complex mathematical formula to isolate the results for each idea being tested. While individual results vary, most retailers will see sales increases of 5 to 10 percent within 60 days of testing, Cochran says.
Overall, Cochran estimates that one-quarter of tested ideas improve sales, 53 percent have no impact and 22 percent have a negative impact. That is not to say they were necessarily bad ideas: Some may not improve sales, but they might be implemented if they are found to reduce costs or improve efficiencies without harming sales.
Using MVT may seem contrary to retailers that have relied on focus groups to tell them which ideas are good and which are bad. But Cochran says such results are only good for generating more ideas - not testing them.
"Consumers cannot predict their own behaviors," he says. "With testing, we measure actual behavior, not words."
Lacks still uses focus groups, Melvin Lack says, primarily to generate more ideas for the QualPro program to test.