November 13, 2017

How to Calculate the True Cost and ROI of Retail Training

Retail training ROI and its true cost


Price tags are one of the most ubiquitous things in all of retail. While they’re great at telling about how much we will have to pay for something, they’re less effective at communicating the total value someone can hope to gain from an item.  Understanding true cost is how we decide whether something is a liability or an investment, worth pursuing or better left alone.

For retailers, calculating the true cost of retail training is relatively simple: you add up all the money you spend on your training team in terms of salary, benefits, hardware, software, travel for training, etc, combine that with the hourly costs of paying your store associates and managers to be there, then add in the costs of any resources you have to create or buy to conduct the training.

There are some peripherals you could throw into the mix, but that mostly covers the costs of delivering the training to your team.  But you can’t quit there. To determine the actual true cost, you need to first figure out what benefits the training brings to your organization.  So the full equation would look something like this:

equation 1

Calculating the Upside

How does this calculation shake out?  I’ll explain.  First, studies show that a well trained front-line sell more merchandise.  The numbers range anywhere from 23% to more than 40% – but I don’t think you’d find any reputable retail person who would argue with the basic premise.

The better trained your staff are, the better they know your products and pitches, the more likely they are to make more sales every shift, and the more likely they are to sell more products to each customer.  That means a higher Average Transaction Value (ATV) and more actual sales each shift. That’s opportunity number one.

Opportunity number two is even simpler: better trained associates deliver better customer experiences.  Again, no serious retail professional is going to dispute this.  Staff that have had the proper training are more understanding of customer needs, ask better questions and generally take better care of the customers they are talking to because they’ve been taught how.

The return on that training is equally simple.  Better customer service leads to higher customer-brand loyalty, which leads to more return trips, which leads to more sales.  You can see how this is all coming together.

But there’s still a missing factor.  You also have to take into account the negatives you avoided by training your staff properly. 

A front-line team that hasn’t received the right training is going to become disengaged, their morale is going to suffer, their effort is going to lag and they’re going to quit – leaving you with higher turnover than your competitors. 

All of these outcomes cost you sales, cost you customers and severely hurt your brand reputation.

So a more accurate way to calculate the true cost of retail training would look something like this:

equation 2

Investing in the future


In a nutshell, retail training should be approached as an investment an investment in today’s customer experience and tomorrow’s bottom line- not an expense.  

By training your staff properly, you stand to gain a lot in terms of additional sales and happier customers, and you will also avoid turning your staff into bitter, lackadaisical drains on your bottom line.  By training your team you are increasing the value of your assets and improving your long-term outlook.

Principles are helpful, but we believe in numbers. Check out our ROI Calculator to get a real sense of what return on investment you can expect by training your retail front-line with NewKnow.

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