It’s obvious that customers will prefer to deal with sales associates who know what they’re talking about when it comes to the products they’re hawking. But what has been less obvious is just how much of a difference knowledgeability makes to the bottom line.
To find that answer, Marshall L. Fisher, professor of operations, information and decisions at Wharton, and his colleagues, INSEAD professor Serguei Netessine and then-Wharton doctoral candidate Santiago Galino (who is now a professor at Dartmouth’s Tuck School of Business), studied data from 63,500 salespeople at 330 stores. The resulting report, titled “Do Online Training Work in Retail? Improving Store Execution through Online Learning,” quantifies the answer by the metric that matters most in retail: sales. In this interview with Knowledge at Wharton, Fisher explains what they learned, and what the implications are for businesses across the board.
An edited transcript of the interview appears below.
What Makes Customers Happy — and What Makes Them Buy
This research goes back 10 years, to when I was working with Serguei Netessine, who was then a faculty member at Wharton. And Serguei and I were in touch with some retailers who collected customer satisfaction survey data. When you left the store, you were given the opportunity to fill out a survey. They had millions of responses on these surveys, and were wondering what to do with that information.
What we proposed — and they liked — was that we would correlate how well stores did, compared to how customers rated the retailer on a 10-point scale. If a retail store in a month was getting 10s, versus another store that was getting 6s, did you see a difference in revenue? Did doing good by your customers mean you did well on the sales line?
What that correlation showed was that there were four factors that stood out as important for these retailers. They might not apply to all retailers, but think about what matters to you when you shop. No. 1, most important: Could you find somebody to help you? No. 2: If you found someone, were they knowledgeable? No. 3: Could you find what you came for? And then No. 4: When you wanted to pay for something, was the line at checkout a reasonable length?
On three of those four factors, if we wanted to tell a retailer how to do better, there was lots of research available. So, a lot of theory about inventory [would point to avoiding] stockouts, meaning people found what they came for. Queuing theory could keep line lengths reasonable. But on employee knowledge, there’s nothing really that we could tell you. There’s nothing we knew about the theory of employee knowledge, or how to develop it.
Then, two years ago, I was actually visiting INSEAD, working with Serguei. I was contacted by a company called Experticity, which develops training modules for brands that are taken by retail associates. Their first customer, I think, was The North Face, and they had other outdoor product brands that put tons of energy into developing great products, and felt a lot of that energy was negated by store associates who couldn’t explain the features of these great new products they had developed.
“If you have an associate who is dealing with one of your customers, you want that person to be talented and engaging. And you want that customer to have a good experience.”
At the point we talked with Experticity, they were working with hundreds of brands, thousands of retail stores and hundreds of thousands of store associates who were taking their modules. And they had happy customers. They felt like they were doing well. But they couldn’t prove it. They couldn’t prove that if a store associate trained on their system, that the associate was more effective. More effective would mean the associate closed more deals with customers, sold more products, than the people who didn’t train.
So Serguei and I teamed up with Santiago Galino, who was at the time in the Ph.D. program at Wharton, working with me and some other faculty. And we said to Experticity, “OK, we’ll work with you. We can measure the benefit of your training. We don’t know if it’s going to be positive or not. And it may well be that you’re doing lots of good, but we can’t prove it. There are lots of instances in life where — like an MBA degree — you think it is worth a lot — maybe it gets you a particular job. But there’s no proof that you perform better on that job.
Experticity arranged for us to gather data from a large department store with something like 300,000 sales associates, over a three year period, week by week, what were the sales were for each sales associate, and how much training were they doing. Approximately half of the sales associates did some training, and you could see they might start that the second year in our data set and train for a while. Some trained a lot, some trained a little. So you had data on sales, and you had data on level of training.
What that showed was that those sales associates who did any training at all were 46% more productive — [they had] 46% more sales per hour than those who didn’t train. Now, does that prove that Experticity is adding 46% value? Not quite. Because these people were not randomly assigned to train. They volunteered. And so the act of volunteering means they’re different from the people who didn’t volunteer. Among other things, they’re probably a little more zealous.
So then we looked at how much of that 46% was due to the individual themselves. How much was due to training? And we could do that because we could compare individuals after they trained with before they trained. And we could compare the individual who eventually trained, but before he or she had any training, to those who never trained. We found about half of the 46% was due to the individuals themselves, and the other half was due to the training. So would the other half, if they were encouraged to train and began to do so, increase their sales by 46%? We don’t know. But 23% is still a big improvement.
“I think customers often times don’t intend to showroom, but end up shopping online because they get better information online than they’re getting in the store.”
How Vital Are Knowledgeable Salespeople?
We thought a lot about that. And I had an “Aha!” moment when I was in the local suburban single-store outdoor equipment chain buying a rain jacket for backpacking, which I do with my son as often as I can. It turns out there is a lot of attributes to a rain jacket. No. 1, how well does it repel water? That varies, in varying degrees. How breathable is it? What does it weigh? And something like Gore-Tex: Is that really better, or is that just a brand?
This retailer carried a broad assortment, so I could see all of the different versions of those attributes. They could explain each and every product to me — and the importance of the differences. And at the end of the day, I felt comfortable buying. Because I felt like I had gotten the very best rain jacket for me. On a hunch, I said, “Hey, have you ever heard of a company called Experticity?” And they said, “Oh, yeah, yeah. We do their training all the time.”
So the lightbulb kind of went off, that when a customer walks into a store, they want to get the right product. If the retailer carries a broad assortment and the store associate can explain the differences and the attributes of the various products so that you feel assured that you’re buying the right product for you, then they’re gonna close the deal and you’re gonna walk out having made a purchase. If not, you may well want to continue shopping, either online or at a different store.
There were two things that surprised us. No. 1 was that the magnitude was so big — 46%, and half of that was due to training. A sales associate who spent an hour on training saw a 5% gain. From the sales associate’s standpoint, being paid on commission, that’s hugely impactful. You take an hour out of your day and you’re getting 5% more commission. Do the numbers, and it’s tremendously beneficial to a sales associate, as well as the retailer.
The other interesting surprise was that since all this training is on particular brands, and maybe there are a couple dozen brands that the associates could train on, we also had sales by brand. So we could look at, if you trained on brand XYZ, what happened to sales of XYZ? We also looked in aggregate, i.e. what was your total training across all brands, and your total sales?
It turns out that training on a particular brand — you can think about what you would guess; I know what we would have guessed — but it had no greater impact on that brand than any other brand. Crazy, huh? We thought about, “Why is that?” Well, when you walk into a store, you want the associate to be able to compare across brands. So among other things, you’re trying to figure out what brand you want to get. If they trained on brand XYZ and they can tell you about it, that information also helps you learn about brand ABC. Apparently, just breadth of knowledge that would let an associate compare across brands was a rising tide that lifted all boats.
I think the big practical implication is that it pays to invest in your people. It pays to have the store adequately staffed, to hire talented people, pay them well, and train them well. Why doesn’t that happen? I think for most retailers, the benefit of higher staffing levels, more talented people that you pay more, too, and training, is hard to measure. And those benefits are often in the future, whereas the cost is often immediate. If I have more people, I wrote more checks for payroll. Or if I give people a raise and hire better people, I write more checks for payroll.
And I think it’s broader than just retailers. I think it applies to lots of service industries, that if you have an associate who is dealing with one of your customers, you want that person to be talented and engaging. And you want that customer to have a good experience.
You can think about call centers, and the experiences we’ve had — which are sometimes good, and sometimes not so good. It seems like the person on the other end of the line is trained to use your name four times in one sentence…. But they don’t know the answers to your questions. I think that’s one clear implication: that if you measure the value of investing in your people — in this case, training — it turns out to be much higher than people tend to believe.
It’s also interesting to me as a business school professor. You know, I’m not sure I could ever measure or prove the value that students have gotten out of the courses I teach. That’s a very hard thing to do. But in this fairly controlled context, you could prove that education had a very high positive value. I’d like to believe that also transfers to business schools.
“It pays to invest in your people. It pays to have the store adequately staffed, to hire talented people, pay them well, and train them well.”
A Path to Combat Showrooming:
It’s a little odd if you think about it, that someone has gotten in their car, driven to your store, walked through the door … they’re in your crosshairs, talking to a sales associate. They’ve invested in all of that. Why wouldn’t you have the best chance of anybody in the world of closing the deal with them?
I had a chance to reflect on this. I told my raincoat story, where I bought one, because they had what I wanted and could explain it. Afterward, I went off to buy shoes for backpacking at another retailer that I won’t name, fully intending to buy them there, because we were leaving in a couple days. I needed them right away. But they didn’t have my size. Or it wasn’t clear even what my size was. They couldn’t explain differences to me. So without intending to showroom them, I was more or less forced to go back home and shop online. I ended up buying from Zappos, because if I wasn’t sure about my size, I could buy two pairs and return one.
I think an implication for retailers is this: If your sales associates are well-trained and can answer customers’ questions knowledgeably, that’s one weapon in your arsenal against showrooming. I think customers often times don’t intend to showroom, but end up shopping online because they get better information online than they’re getting in the store. Retailers can defend against that through better training of their sales associates.