January 22, 2015

Hippoman's Big And Tall: Price Points On New Items

Way, way back at the start of the case study, we learned that Hippoman's Big And Tall was selling much more expensive items in 2014.

I decided to analyze the average price point of new items, and of existing items, to see how Hippoman's Big And Tall got to this place.

Here is the average price point of new items, for the past four years.

  • 2011 = $21.31.
  • 2012 = $22.83.
  • 2013 = $21.93.
  • 2014 = $26.83.
Do you see a trend? What happened in 2014?

Here's the average price point for existing items, for the past four years.

  • 2011 = $22.00.
  • 2012 = $22.33.
  • 2013 = $24.83.
  • 2014 = $25.00.

Well, the trend between 2013 and 2014 is constant, isn't it? There was a modest increase from 2012 to 2013, no doubt about it. But the major increase in price points in 2014 came exclusively from new items, didn't it?

We saw what happened when prices increased. Repurchase rates slumped, comp segment productivity slumped, and items per order slumped.

Management decided to cut back on new items.

Management decided to introduce new items that were 20% more expensive than prior year introductions.

Customers, without the power of increased free shipping promotions, rebelled against Hippoman's Big And Tall.

And Hippoman's Big And Tall paid the price. A profitable business became an unprofitable business.

How would you craft your presentation for Mr. Hippoman? What would you tell him? What would be the tone of your message?

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