May 25, 2015

Marketers Influence Merchandise Ecosystems

Some marketers raise a champagne glass every time somebody engages with brand, or every time 55% off plus free shipping results in an incremental order.

Maybe we should celebrate when we cause positive downstream change.

Recall our example? Category 03 negatively influences the entire ecosystem, whereas other categories positively influence the entire ecosystem.

So let's run a simulation. In my simulation (won't get into the geeky math here in this post, there's no easier way to lose an audience than to focus on math), I increased annual demand in Category 03 by 20%. Here's how many of last year's customers are forecast to shop next year, based on this change to the ecosystem.
  • Category 00 = 62 fewer.
  • Category 01 = no change.
  • Category 02 = no change.
  • Category 03 = 1,522 more.
  • Category 04 = 168 more.
  • Category 05 = 220 fewer.
  • Category 06 = no change.
  • Category 07 = 29 fewer.
  • Category 08 = 58 fewer.
  • Category 09 = 221 fewer.
  • Category 10 = 45 fewer.
  • Category 11 = 97 fewer.
  • Category 12 = 71 fewer.
Essentially, half of the customer gains in Category 03 are wiped out by customers lost in Categories 00, 05, 07, 08, 10, 11, and 12.

Now, look at what happens if we increase Categories 04/05 by 20% (these categories, in total, are about the same size as Category 03).
  • Category 00 = 76 more.
  • Category 01 = 62 more.
  • Category 02 = 7 more.
  • Category 03 = 350 more.
  • Category 04 = 1,125 more.
  • Category 05 = 560 more.
  • Category 06 = no change.
  • Category 07 = 38 more.
  • Category 08 = 33 more.
  • Category 09 = 338 more.
  • Category 10 = 57 more.
  • Category 11 = 205 more.
  • Category 12 = 198 more.
Here, all other categories benefit as much as 04/05 did, downstream. Everybody wins.

Ok, you are a marketer, and you now know how your ecosystem works. What do you do about it?
  • Be willing to pay more to acquire customers outside of Category 03.
  • If you have a catalog, feature Categories 04/05 at the front of the catalog.
  • Feature Categories 04/05 more often on your home page and landing pages.
  • Feature Categories 04/05 more often in email campaigns.
  • If you must offer discounts via promotions, do so more often in Categories 04/05.
  • Pay Google more for Category 04/05 keywords.
  • Feature Categories 04/05 more often on Pinterest.
  • Try something!
Do you know understand why it is so important to gain knowledge of your merchandise ecosystem?