April 03, 2018

Killing Items

Your job is to ferret-out information that "really" describes why your business is struggling.

Here's one of the ways you do that. You listen to co-workers. For instance, a merchant might say something like this:

  • "We've got a lot of new product and we need the company to get behind us and support what we're doing."

There's nothing wrong with new merchandise.

But you have to analyze what happens to the merchandise you used to sell.

Merchandise has a natural "decay" ... the older merchandise gets, the less of it you sell, until one day you discontinue selling VCRs and Palm Pilots and you move on.

When your merchandising team purposely kills off existing items "too soon", well, that's when you have problems.

Here's an example. This is the typical "decay" relationship for items introduced five years ago.
  • Year 1 = $30,000,000.
  • Year 2 = $18,000,000.
  • Year 3 = $12,000,000.
  • Year 4 =   $7,000,000.
  • Year 5 =   $4,000,000.
The problem happens when a new merchandising regime decides that the prior merchandising regime was "stupid". They'll kill off items in Year 2, and that creates a whole set of issues.
  • Year 1 = $30,000,000.
  • Year 2 = $11,000,000.
You just lost $7,000,000 because the new merchandising team hated what the old merchandising team introduced a year prior. How are you going to make that demand up?

Most of the time, new merchandise doesn't make up for this problem ... you're always introducing new merchandise. So the merchandising team just cost you $7,000,000. Congrats!!

But it gets worse.

What do you think happens in Year 3, Year 4, and Year 5? We can project the shortfall.

  • Year 1 = $30,000,000.
  • Year 2 = $11,000,000.
  • Year 3 =   $7,000,000.
  • Year 4 =   $4,300,000.
  • Year 5 =   $2.400,000.
Yup - you lost $7,000,000 in Year 2, but you also lose $5,000,000 in Year 3 and $2,700,000 in Year 4 and $1,600,000 in Year 5.

If your merchandising team does this two years in a row, well, you know what happens, don't you?

Marketers get blamed for this nonsense. When this happens, online conversion rates fall, and when online conversion rates fall marketers take the blame. It's wrong, of course, but it is the way that business works.

As a marketer, you MUST measure the living daylights out of this stuff. Stop getting blamed for the sins of your merchandising team. And when your merchandising team succeeds, GIVE THEM CREDIT, PUBLICLY. Shout it out!

P.S.: If you're really bored by this stuff, then read about how Slack enables your boss to read your DMs (click here). I'm increasingly confident that all of this digital stuff is going to turn out just fine.

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