February 22, 2024

Lots of Choices!

I updated my product offering (click on the image below or click here to visit my Hire Me page).



There are several updates here.

  • I re-introduced my CATALOG MODELING project, given how popular it was over the winter when I wasn't even offering it. Many (MANY) catalog brands are going through a dramatic transformation, forced upon them by rising paper/printing/postage costs. In these projects, I calculate the exact number of catalogs to mail a customer annually. You'll save a significant amount of ad cost, you'll increase profit in the process.
  • MERCHANDISE DYNAMICS:  This is going to be a project that I roll out over the next few weeks. There is a significant shift among e-commerce brands to fully understand the interaction between customers and what the brand sells. You've seen some of my work over the past 1-2 weeks. Lots more to follow.
  • HILLSTROM'S CHECK-UP:  You asked for this. You want a quick-and-tidy evaluation of your business that can be executed within 1-3 days. That's what this project is. I'll combine a few aspects of Merchandise Dynamics with a full Elite Program Run, helping you understand within a few days some high-level issues that are holding your brand back.

Next week? More on Merchandise Dynamics.



February 21, 2024

MRV (Merchandise Residual Value): A Jewelry Example

Yesterday I showed you how Home merchandise negatively impacted how the customer behaved in the future.

Here's Jewelry for the same brand. Tell me what you observe:


Jewelry is generally purchased by customers in the middle of the life stage of the customer. Notice that 35 winners negatively impact customer spend in the future, while 64 winners positively impact customer spend in the future.

For this brand, Jewelry is a positive (on average) on future customer spend.



February 20, 2024

MRV: An Example With Home Merchandise

Home is one of those categories that Executives love, customers allegedly love, and analysts don't love.

Why?

Because buying Home product stalls customer evolution.

Here's a grid for Home products within this brand.


This table is just plain scrumptious.

Who buys Home Merchandise? In this case, it's generally customers in the middle of their life stage with the brand, but mostly among loyal customers.

So, our best customers are generally buying Home merchandise.

Do winning Home items help/hurt future customer spend?

  • Winning Home Items HURT future customer spend.

I see this happen a lot - have been watching this for more than three decades. Once that customer buys sheets or furniture, the customer doesn't need to buy again for awhile - even though you offer other products that the customer could purchase regularly.

As a marketer, you have to be very careful WHO you offer Home products to. You might think you are helping the customer cross-shop your entire brand. If you cause your customer to spend $50 less next year because of it, you've accomplished little and likely hurt the customer relationship.



February 19, 2024

MRV (Merchandise Residual Value): Placing All Those Dots In A Grid

You saw the graph yesterday.


 
The average business professional will glaze over when seeing the data presented in that manner.

Simply the presentation to a 3x3 grid, and you have something.


In total, yes, the counts should be reasonably equal.

Look at a merchandise category, and the story changes. Let's evaluate one such story tomorrow, ok?

February 18, 2024

MRV (Merchandise Residual Value): The Residual Plot

Remember, MRV (Merchandise Residual Value) is the amount of customer spend in the next year caused by each winning item, after controlling for where the customer is in the life stage of the customer when buying the item.

If an item adds value to the customer, you want to feature the item.

If an item causes a customer to purchase less often in the future, you want to de-emphasize the item, right?

Are you calculating this metric?

Here's a residual plot for a brand with more than 70,000 items sold per year and more than 2,000 winners per year.



Items purchased by a customer early in the life stage (i.e. a 2nd or 3rd purchase) don't have a lot of MRV variability ... customer spend in the future is changed by +/- $20, which isn't nothing, but it isn't what we see later.

When an item is purchased by customers buying for the 8th time, on average, future customer spend is impacted by +/- $50. In other words, if a customer is expected to spend $300 in the future and the customer buys an item that harms MRV, the customer trajectory is changed by the item and the customer now spends $250 in the future instead of $300.

The items we sell help dictate how the customer will behave in the future. Why are we repeatedly featuring items that cause customers to spend less in the future?



February 15, 2024

MRV Yields "Some" Bad Items and "Some" Good Items

This is the way MRV (Merchandise Residual Value) looked for the Winning Items at one brand:



Most items act "normally" ... but there are 20+ items that perform terribly (i.e. they deliver customers that, after controlling for the quality of the customer, deliver customers with reduced future value). Conversely, there are 20+ items that perform really well ... the customers who purchase those items are worth more in the future BECAUSE they purchased those items.

It's really, really important to know which items deliver customers that BECAUSE they bought the item are now worth MORE than they would have been previously.

This knowledge changes how the marketer does every aspect of his/her job.

It's that important.

Are you performing this analysis?

If not, contact me immediately (kevinh@minethatdata.com) and we'll get busy.



February 14, 2024

MRV: Merchandise Residual Value

"MRV" is what I call "Merchandise Residual Value". It's the amount of incremental value the item generates on an annual basis, per customer purchasing the item, above-and-beyond expectations.

We control for the LIFESTAGE of the customer buying the item. Here's a sample dataset of six items. For each item, I calculated the LIFESTAGE of the customers buying the item, and I calculated the FUTURE spend customers who purchased the item in 2022 spent in 2023.

  • Winner #1:  Lifestage = 3.00.  Future = $200.00.
  • Winner #2:  Lifestage = 3.50.  Future = $235.00.
  • Winner #3:  Lifestage = 4.00.  Future = $180.00.
  • Winner #4:  Lifestage = 4.50.  Future = $305.00.
  • Winner #5:  Lifestage = 5.00.  Future = $285.00.
  • Winner #6.  Lifestage = 7.00.  Future = $400.00.
Let's graph the relationship.


There's a clear relationship - if items are purchased by customers later in the LIFECYCLE, those items produce better Merchandise Value.

That's not what we are looking for.

We went Merchandise Residual Value (MRV) ... the difference between the points on the graph and the orange line.

The equation is a straight linear Ordinary Least Squares Regression equation.
  • $34.63 + $51.75*(LIFESTAGE).

For each item, we know the FUTURE spend of customers buying the item, we know the predicted amount of future spend, so the residual is FUTURE - PREDICTION.

  • Winner #1:  Lifestage = 3.00.  Future = $200.00. Pred = $189.99. MRV =  $10.12.
  • Winner #2:  Lifestage = 3.50.  Future = $235.00. Pred = $215.76. MRV =  $19.25.
  • Winner #3:  Lifestage = 4.00.  Future = $180.00. Pred = $241.63. MRV = ($61.63).
  • Winner #4:  Lifestage = 4.50.  Future = $305.00. Pred = $267.51. MRV =  $37.50.
  • Winner #5:  Lifestage = 5.00.  Future = $285.00. Pred = $293.38. MRV =  ($8.38).
  • Winner #6.  Lifestage = 7.00.  Future = $400.00. Pred = $396.88. MRV =   $3.12.


Which item has a poor MRV?  Winner #3 does. At an average LIFESTAGE of 4.00 orders, the item should produce customers worth $241.63 ... instead it produced customers worth $180.00. MRV is negative ... -$61.63.

This is so ... darn ... neat!!

So ... darn ... neat!!

If you are going to feature merchandise in social or email or print, you might de-emphasize Winner #3 because it produces customers who spend less in the future, with an MRV of ($61.63).

Think about all the ways you'll use MRV in your business?

Now get busy using MRV!!

Lots of Choices!

I updated my product offering (click on the image below or click here to visit my Hire Me page ). There are several updates here. I re-intro...