## September 17, 2013

### Merchandise Forensics: Loyalty Killers

You know what Loyalty Killers are, right?

Loyalty Killers are items that are both popular, and cause customers to not repurchase at above-average rates in the future.

Pick every item sold during 2012. Select only the best-selling items ... I use a three-pronged approach.
• "A" Items = Top 5% in demand volume and Top 5% in unit volume.
• "B" Items = Top 5% in demand volume, not in Top 5% in unit volume.
• "C" Items = Not in Top 5% in demand volume, in Top 5% in unit volume.
This represents a small percentage of items sold, but represents the majority of demand you generate, each year.

These items are popular - featured on landing pages and email campaigns and on your home page. Or in the first twenty pages of your catalog. They're everywhere.

And some of them kill the long-term success of your business!

For the A/B/C items listed above, identify the customers that bought them in 2012. Then measure, in 2013, the rebuy rate ... how many of the customers repurchased in 2013? No, not repurchased that item - but repurchased in general.

You'll often notice that a third of these items generate repurchase rates in the 50%ish range, while a third generate repurchase rates in the 25%ish range. The latter third ... these items cause customers to not come back and buy again in the future.

If you knew that a third of your best selling items caused customers to purchase in the future at significantly reduced rates, would you feature them in your email campaigns, landing pages, catalogs, and on your home page?

Perform a Loyalty Killer analysis - it's pretty darn important, folks!

Choices:

#### 2 comments:

1. Anonymous7:41 AM

Can you clarify - "A" Items = Top 5% in demand volume and Top 5% in unit volume. - what do you mean by demand volume & unit volume?

Is it demand = \$ and unit = no of items?

2. Correct.

Say the 5% cutoff for demand is \$50,000 per item, and the 5% cutoff for items is 2,500. If an item sold \$57,000 and 2,700, it is an "A".

If an item sold \$57,000 and 1,500, it is a "B".

If an item sold \$27,000 and 2,500, it is a "C".

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