Does your organization have an addiction to growth?

In the January-February 2017 issue of the Harvard Business Review, the article “Curing the Addiction to Growth” presents a provocative idea: Companies in all industries eventually see their growth slow. The authors argue that too often, multi-location businesses focus on opening new stores to drive growth—even when doing so can destroy the profitability of their other businesses.

Instead of focusing on sales growth, the authors suggest that multi-location businesses should focus on Return on Invested Capital (ROIC). What opportunities does each location have to maximize its profits given the investment in the site? The authors make five suggestions for boosting sales from existing stores:

  1. Invest in analytics: Customers need to be able to find the products they want at an attractive value and get help from staff. The ability to have the right quantities, pricing, and staffing models depend on analytics, and the article calls out a great case study on how Kroger uses infrared technology to manage check-out lanes.
  2. Keep a keen eye on product development: Use highly disciplined methods to identify and test potential offerings, including considering private-label offerings. The right products and labels will drive loyalty and capture more market share.
  3. Staff at the right levels with the right team: Staff can make or break the results for a store, so hiring the right people, training them well, and deploying technology to help them be more effective is important.
  4. Use the omni-channel strategy: Customers who go online and then go to the store often pick up extras—thus increasing their intended basket size.
  5. Revise customer policies to maximize growth: Look at your store policies. Do you need to revise how you accept payment? Your store hours? The number of lanes for your drive-through? These three components helped drive sales for McDonald’s, a case study cited in the research.

This philosophy exactly matches the predictive modeling results found by Market Force for a number of our clients. Our modeling occurs at the location level, and the site characteristics matter a great deal. We’ve found that:

  • Sites in the honeymoon or opening phase have fast growth curves, and those that are mature may struggle against competitors. Sales growth is very different for these groups.
  • Training impacts key performance indicators, such as conversion rates—but the investment in training can degrade very quickly if continuous measurement against standards is not in place.
  • The right staff focused on creating a great customer experience will increase conversion rates and basket size. Our sales-efficacy model focuses on understanding how staff interactions drive increased revenue.

In sum—the data tells a clear story if you take time to mine the insights. If you’d like to discuss how predictive analytics can help you maximize the ROI for your existing locations, call us at 1-877-329-9621. We’d love to discuss how we can leverage your data to help you increase revenue and reduce costs.

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As Chief Strategy Officer, Cheryl aligns Market Force's strategic direction with our clients' strategic objectives. She oversees the North American client base, Analytics and Insights, Winnipeg Operations and Marketing. She has a Ph.D. in social psychology and broad business experience in both private and public companies.​

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