Where to Focus first? When to Focus? How long to Focus?
Focus. Where, When and How?
The truth is; we can only focus on one thing a time in our business. When we choose the one thing we wish to focus on, we must be discerning and choose wisely. Fortunately, the black box performance model narrows our focus options to three; inputs, conversion, and outputs. Only have three things to choose from! Sounds easy, right? But here’s the bad news, all three seem equally important. Which one should we choose?
Where to Focus first?
Perhaps the easiest analogy to make, is a car engine. If the engine is not tuned properly, it won’t matter how high grade the fuel that we use is, the engine will probably not run any better with it. If the air filter is dirty and clogged or if the motor is only running on three cylinders instead of four; no matter how high the Octane level of fuel is that we put into the motor, it cannot run any better. In fact, it might damage the engine instead. If we want to win the race, we must first tune the engine and input the best fuel so we can get the best performance and output.
The same goes for your retail store; there is no point in investing a ton of money into marketing to drive people (traffic) into the store, if the store is not tuned properly. We must first focus on the conversion component of the black box, tune it and only then, drive traffic (people) to the showroom through marketing.
So the answer to the question “Where to Focus first?”, is conversion. A retailer should tune the conversion component of the black box model, then forget about it and then focus on the inputs. (see Conversion Framework tuning details)
The objective when it comes to working with the input side of the black box performance model is, “To get the highest return on investment (ROI) for every marketing dollar put in” and measure it! “If you cannot measure it, then don’t do it.”
When to Focus?
When do we focus on the three different parts of the black box performance model? When is the best time to work on inputs, conversion or outputs? The short answer is, when it is needed. The only way to know when it is needed is to understand the black box performance for your business. Analyze your performance and focus on the area that is under performing. Below is an example of a typical black box performance model for a North American Car Audio Retailer.
This black box performance model is for an average car audio retailer. The foot traffic into the showroom is typically 30 people per day. If that retailer is open six days per week, then the annual inputs into that business are 9,288 people per year. If the annual revenue income of the business is $500,000 per year, then the conversion rate is $54 per person.
Below is a look at the same store on a daily performance level.
If we are monitoring the data daily and notice a change, it will inform us in understanding which area is of the model is underperforming and over performing.
Below are different examples;
In this example, the showroom traffic (people) for the day was down, however the conversion rate was normal. Although, the total sales for this day were down, we have learned two things; one, the conversion area of our business is working up to standards and two, our foot traffic is down. If this trend persists, then we may need to focus on the input side our business which would most likely be marketing.
In this example, the showroom traffic (people) for the day is normal. However, the conversion rate is not up to standard, therefore sales for the day is down. In this example we will need to focus on the conversion area of business management. (For more insight on this see Conversion Framework)
This example shows a big jump in the daily showroom traffic (people) and the conversion rate is normal. The positive growth on the input side, could be the result of a sale or marketing promotion. Figure out what the cause of the input spike is, and do more of it. It’s starting to work!
Example 4 shows a normal day for showroom traffic (people), however the conversion rate is much higher than normal, resulting in better than normal sales results. Find out why the conversion rate is higher than normal and do more of it.
How Long to Focus?
Since we can only focus on one thing at a time, we must choose the most important area that needs improvement before we can focus on a different one. Most companies will choose these focuses as quarterly themes. But, if the business is growing remarkably fast and has a lot of internal resources, then the focus can be as little as a month for each area. In North America, most specialty retailers under the $2.5M in annual revenue level will usually keep their focus set to quarterly objectives. Being more diligent than your competitors will keep you at the top of your game!