February 26, 2013


What is in the center of this ecosystem?


In the past two years, my projects have taken a different direction.  You are asking me to understand customer behavior, no doubt, but you're increasingly asking me to illustrate the role that merchandise plays in driving channel behavior.

Not surprisingly, there's a unique relationship in merchandising that parallels the relationship observed in customer interaction with channels.  Not surprisingly, at least half of my projects identify a merchandise-related issue that is holding a business back.

It turns out that there are four key issues that tell me why a business is struggling.
  1. Sales performance of existing items.  When items tire, performance drops.  The ratio of this performance drop, over time, can tell us something about the future of a business.
  2. New items.  New items are comparable to new customers ... if your product development pipeline is failing, your business is failing.  This is the most common problem I see.
  3. New item performance vs. discontinued item performance.  When the ratio is decreasing (new items not performing well over time, discontinued items performing better over time), the business struggles.
  4. Disproportionate focus on a small number of high-performing items.  Think Apple, for a moment.  If the iPhone and iPad perform poorly, the whole thing craters.  It is common to see half of sales come from 5% of items.  This is risky, but it is reality.
Since merchandise trumps channels, it is important to analyze merchandise as vigorously as we analyze channels.

Can you even remember the last time you analyzed the four issues listed above?  If not, you have something to do tomorrow!