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Before implementing a new system or process, most retailers are required to evaluate the cost and benefits. This evaluation typically takes place during a proof of concept (POC) or pilot during which one or more stores are used to trial the new system. Following are some tips for determining the return on investment of a queue management system. While this example is specific to implementing a queue management system, the guidelines can be applied to other projects.
Calculate the financial return
Ideally, the new system will provide a return on investment within a reasonable period of time. A financial return is likely to come from one of three areas – labor savings, sales increase or cost avoidance.
For those retailers whose registers are overstaffed or have been staffed inefficiently, the queue management system provides guidance on proper staffing. During the POC we have seen retailers significantly reduce cashier labor on the front end by utilizing the system. If the labor savings exceeds the cost of the equipment and installation and the retailer is able to eliminate the labor, the ROI can be easily calculated.
For retailers whose registers are understaffed and need to add labor to meet their goal, using the system helps them add only that labor that is required by helping them determine when labor is needed and improving the efficiency of their labor schedules.
It is reasonable to assume that an increase in Customer Service will drive an increase in Customer Satisfaction scores thereby increasing the Customer Lifetime Value (CLV). We can easily measure the level of customer service delivered and the retailer can track Customer Satisfaction scores throughout the POC. The challenge in moving from an increase in Customer Service to a sales increase is that Customer Satisfaction scores are often slow to change.
While it follows that shorter queues and wait times will lead to happier customers, it is difficult to prove within the 12-16 week term of the POC. We do have evidence from our customers that sales do increase a year or more after the system is installed, and that this increase has been directly related to customers’ satisfaction with a faster and more consistent check-out experience.
Because the sales increase comes after the project has ended, we typically can’t use this data to calculate the benefit needed for the implementation decision. However, we can discuss and set the expectation for an increased CLV based on our experience with other customers. It should be noted that the retailers that promote their new commitment to service or service promise – thereby drawing their customers’ attention to the change on the front end – typically see a quicker increase in Customer Satisfaction scores and Sales.
When the cost of the queue management system eliminates the need for and is less than other planned costs, an ROI can be easily calculated. Some of our smaller retail customers utilize Irisys’ Lane Scheduler tool instead of a full-blown workforce management system (WFMS). While the Lane Scheduler is no replacement for a WFMS, the cost is significantly less and gets the retailer much closer to an efficient schedule than does a manually-produced schedule.
Before investing in the Irisys system, one of our customers calculated the labor dollars they would need to invest to meet their new service objective. Using the system enabled them to meet their objective with significantly fewer labor dollars than they had planned thus providing them with a quick return on investment.
Identify and measure non-financial benefits
Some retailers are looking for a way to differentiate themselves in the market by improving customer service and aren’t as concerned about the immediate – within the span of the POC – financial return. They are willing to make an upfront investment in the queue management system, and as long as they see an improvement in service, are willing to assume that the financial benefits will come later.
Retailers experience many non-financial benefits when using the Irisys Queue Intelligence™ management. These benefits should be documented, measured and considered when making an implementation decision. They include increased customer satisfaction, improved associate satisfaction, 24-hour measurement of customer wait times and queue lengths, more efficient/accurate labor schedules, improved cashier utilization, less reliance on cashiers from perimeter departments, and reduced training for front-end associates.
A particularly impactful benefit of the system is that when cashiers are utilized properly on the front end, there is less reliance on relief cashiers from other departments. This allows associates in the other departments to complete their work without frequent interruptions from the front end.
When evaluating the benefits of a queue management or any other system, it is important to consider both tangible and intangible benefits. To help ensure that all relevant measures are considered and that the evaluation is thorough, be sure to create a Data Collection Plan and a ROI Analysis Plan at the beginning of the project. For more information on this topic, please contact Irisys at email@example.com.
 CLV is calculated by multiplying the customer lifespan (# of years a customer remains active in your store) by their annual contribution ($’s they spend in your store)