Expanding The Assortment

You have a line of widgets, and they sell really well. A million dollars last year.

So you decide to expand ... you offer a cousin of widgets ... bidgets!

• Widget Sales drop from $1,000,000 to $800,000.
• Bidget Sales are $500,000.
• Total Sales = $1,300,000.

You're frustrated a bit that widgets seem to be "dying", so you introduce quidgets!

• Widget Sales drop from $800,000 to $700,000.
• Bidget Sales drop from $500,000 to $400,000.
• Quidget Sales are $400,000.
• Total Sales = $1,500,000.

Here's another fun way to look at the dynamic.

• 0 Product Lines = $0.
• 1 Product Line = $1,000,000.
• 2 Product Lines = $1,300,000.
• 3 Product Lines = $1,500,000.

Transformed into an index gets us to this:

• 0.000 , 0.000.
• 0.333 , 0.667.
• 0.667 , 0.867.
• 1.000 , 1.000.

Guess what? That's another situation where a*(x^b) comes into play!!

• a = 1.009.
• b = 0.387.

And just like that, we have a forecasting tool to help us figure out how big or small our merchandising assortment needs to be!