## November 18, 2015

### Now Imagine If Your Merchandising Team Kicked-In Some Assistance

• D6 = 0.700.
• D7 = 0.250.
• D8 = 0.100.
• D9 = 0.100.
• D10 = 0.100.
• D11 = 0.450.
• D12 = 0.300.
• D13 = 0.300.
• D14 = 0.200.
• D15 = 0.100.
• D17 = 2.000.
Now, I want you to do one more homework assignment for me. Here's what we are going to do. Please change cells G19 - P19 from 1.00 to 1.10. This simulates a 10% increase in merchandise productivity. Look at what happens to top-line demand, marketing dollars, and profit.

Optimized Case (Year 10) = \$124,495 demand (in thousands) ... \$22,708 marketing spend ... \$27,090 variable operating profit.

10% Merch Productivity Gain (Year 10) = \$156,466 demand ... \$25,805 marketing spend ... \$36,782 variable operating profit.

#OhMyGoodness!

This is why I CONTINUALLY HARP ON MERCHANDISE PRODUCTIVITY!!!!!!1

The 10% increase, over time, compounds ... yielding a 25% increase in demand, increased marketing spend (because there are more customers to market to), and another 33% increase in profitability.

Here's the fun part.

We're not done, yet. Now, as a marketer, it is your job to optimize spend once again. Better merchandise productivity yields increased marketing spend.

Your homework assignment:  Go back to cells D6-D15, and D17, and enter new spending estimates until you optimize the business.

We'll go over the results tomorrow.