New Merchandise Development (#NMD) draws many parallels to sports.
Take my Milwaukee Brewers, for instance. They trade away veterans, and in exchange, they get prospects, prospects that may help the team win a World Series in 2022.
Now, what happens when the Milwaukee Brewers acquire a prospect? Do they hide the prospect? Or do they have a system in place to give the prospect playing experience?
They give the prospect playing experience! From Rookie Ball to Low-A to High-A to AA to AAA to the Major Leagues, there is a process in place to develop talent.
New Merchandise is to our business what Prospects are to the Milwaukee Brewers.
What process do we have in place to develop our talent (i.e. New Merchandise)?
For 85% of us, we don't have a process.
- The cataloger hides new merchandise online and buries new merchandise on page 77 of a catalog, then boldly dots the cover of the catalog with a OVER 145 NEW ITEMS message. That's not a Process, that's a Best Practice. A Process is far more important.
- The e-commerce brand promotes winning items in an effort to "optimize conversion" #optimize, then laments when conversion struggles occur three years later and there aren't any winning items left.
I work with companies that employ elements of a good New Merchandise Development Process (#NMDP). Let me give you a blended example of what good companies do.
This company launches 1,000 new products per year. It knows the following:
- 200 of the items will achieve "Contending" status ... they will appear in the top 45% of annual item sales.
- 15 of the items will achieve "Winning" status ... they will appear in the top 5% of annual demand or annual items sold.
- Among items that achieve "Contending" status, the items average $3,000 in sales in the first three months after launch.
- Therefore, all new items that generate at least $1,500 in sales in the first two months after launch are immediately promoted on landing pages, the home page, and most importantly, are featured in email campaigns.
- This pushes more new items into "Contending" status ... instead of 200 per year, 300 new items per year become "Contenders".
- 20% of Contenders become Winners next year.
- Instead of 200*0.20 = 40 new Winning Items in two years, the process this company employs allows 300*0.20 = 60 new Winning Items to exist in two years.
New Items benefit from low-cost digital channels.
Winning Items explode by being promoted in high-cost offline/print/digital channels.
But by having a Merchandising / Marketing partnership, and by having a New Merchandise Development Process, the company has more winning items in two years. And by having more winning items two years from now, the company grows faster and is more profitable. Best of all - the company can prove that "x" winning items are generated because of a good New Merchandise Development Process.