February 10, 2016

Winners / Contenders / Others

If you are a marketer, you are probably exasperated with your merchandising team. They beat you over the head for contacting the wrong customers at the wrong time in the wrong way. They look at your email marketing performance and think that one customer purchasing for every seven hundred deliveries is an apocalyptic catastrophe. If you are a cataloger, then it is common for the merchandising team to blame the performance of 160 pages of merchandise on the marketer. I've been in the meetings. I've witnessed the carnage.

As a marketer, you can hold your merchandising team accountable for performance. It's not rocket science. And no, you won't hold them accountable for performance with a square inch analysis. That style of analysis helps you figure out how to merchandise/paginate a catalog, and that is of the utmost importance if your organic percentage is under 30% and you care deeply about catalog response. For everybody else (which is almost all of you now), you care about a merchandise assortment that works the whole year 'round, and works in email and affiliates and paid search and SEM and comparison shopping engines and via direct load traffic. You care about an assortment that attracts new prospects.

I recommend that you start simple.

I will also say, right up front, that there are plenty of consultants out there who will do a great job for you and will disavow my style of analytics. Please, work with those folks. They will help you improve response/conversion.

I use a concept called "Winners / Contenders / Others".

Step 1 = For the desired period of time, count how many customers purchased during that time frame.

Step 2 = Now, sum total demand per item, and total units per item for that same time frame. Do this for each item.

Step 3 = Divide demand by customers. Divide items by customers.

Step 4 = If an item is in the top 5% of all items for demand/customer or it is in the top 5% of all items for items/customer, the item/style is deemed a "Winner".

Step 5 = If an item is not a "Winner", but is in the top 45% of item performance in terms of demand/customer, then the item is deemed to be a "Contender".

Step 6 = All items not classified as a "Winner" or a "Contender" are segmented as "Other".

Using this simple framework, you'll see that +/- 40% of annual demand comes from a handful of "Winners". Another +/- 50% of demand comes from "Contenders". And then you have 55% of the assortment that contribute +/- 10% of annual demand, and are generally not worth measuring.

Perform a simple longitudinal study of Winners / Contenders / Others by Category. This simple analysis is going to tell you if you have a merchandising problem. Count Winners over time. In almost all merchandising challenges, you'll see a reduction in Winners, a reduction that is often sourced from poor new item performance from 1-3 years earlier.