September 25, 2013

Business Is Bad - Blame Marketing?

This table, from the Merchandise Forensics booklet, illustrates A/B/C items for an actual business.

Remember, I categorize A/B/C/D/F items in the following manner ... "A" = Top 5% in Demand volume and Top 5% in Unit volume ... "B" = Top 5% in Demand volume, Bottom 95% in Unit volume ... "C" = Bottom 95% in Demand volume, Top 5% in Unit Volume ... "D" = Top 45% in Demand Volume, Not In A/B/C Category ... "F" = All Other Items.

Ok, back to the business being analyzed in the booklet.

In total, A/B/C items dropped from 120 in 2011 to 105 in 2012 to 94 in 2013. In other words, the number of highly successful items (which comprise 6-9% of items and 50% of annual demand) is on the decline.

Look at the middle portion of the table. This is where we depict the number of existing items. This business reasonably maintains high demand items (A/B), but has cut way back on the number of low demand / high unit volume items. In other words, this business is de-emphasizing low price point items.

Look at the bottom portion of the table. Here we observe a complete meltdown. The merchandising team sold 29 A/B/C new items two years ago - and only sells 18 A/B/C new items today. Notice that new "B" items remain relatively flat - suggesting that the merchandising team continues to churn out new, expensive items. Notice that both "A" and "C" new items are in free fall - these have lower price points.

This is a case where the merchandising team is fully accountable for the meltdown of the business. They are not offering enough new items, and they are de-emphasizing low price points.

I've been in a lot of meetings in my career. Of course, merchants are under a tremendous amount of pressure, and for good reason. But at some point in a meeting, especially when business is below plan, the merchandising team turns on the marketing team. It's "their" fault. If it is a catalog business, then the wrong customers are being mailed. If it is an e-commerce business, then email and search programs are not targeting the "right" customer.

The marketer must have this data at their disposal. Must. Have. This. Data. The marketer has all the metrics in the world to prove that catalogs, or email campaigns, or paid search, or social, or mobile works. None of it, and I mean none of it, matters when the merchandising team is making glaring mistakes.

This example, which I see happen all the time, has nothing to do with the marketing team. The merchandising team is hurting this business.



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2 comments:

  1. Kevin,

    What are 3-5 metrics you recommend tracking on a weekly or monthly basis to measure the effectiveness of our company's merchandising effort?

    Thanks!

    ReplyDelete
    Replies
    1. I am not a fan of tracking information on a weekly or monthly basis - there is plenty of standard merchandise reporting that does just that.

      But if you want to do that, I would pay close attention to the number of new items that perform well each week, or each month. I would give those items the best real estate on your home page, on landing pages, and in email campaigns - I would want to give those items every opportunity possible to become winning items.

      That, to me, is what is most important. If you're going to measure performance weekly, identify the best selling new items, and quickly give them the best real estate available, helping them become winning items.

      Delete

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