October 17, 2018

What Is The Problem, Exactly?


When I became Vice President of Direct Marketing at Nordstrom, I was fortunate. I was given a bunch of data in the week before I started working there - after signing an agreement of course. I was able to discern that Merchandise Productivity was down about 25%.

Have you ever tried to turn around a profit-and-loss statement ($300 million sales, $30 million loss) on flat productivity? That's hard work! Now try doing that when Merchandise Productivity is down 25%!!!!

By having access to the data before Day One, I was able to craft a plan to generate $9,000,000 in profit on Day One ... the first year would be about fixing lots of marketing problems while the merchandising team fixed their issues.

The problems were three-fold.
  • Merchandise Productivity.
  • Sloppy Marketing Profitability Analysis.
  • Incomplete View of Customer Behavior (Catalog, Online, Retail).
Knowing that Merchandise Productivity was a huge issue, my team and I authored an annual marketing plan that allowed us to keep the wheels on the bus and actually increase profitability on a reduction in Merchandise Productivity. The merchandising team did a fabulous job of digging out of a huge hole. The online team did a great job of transitioning customers from catalogs to online shopping. The inventory team didn't buy too much merchandise, and as a result, unprofitable liquidation activity evaporated. And a new customer database was installed twenty-one months later.

Our Executive Team fixed the problems.

It took two years to get to break-even, and nearly four years to post healthy profit.

But ten months into the turnaround, the Chief Merchant and I were struggling to keep our job(s). When business isn't great, the Marketer or the Merchant are on the chopping block.

I'm trying to prevent you from being on the chopping block.

I had a process, a process based on my experiences at Lands' End and Eddie Bauer. The process allowed my marketing team to know what was truly wrong with the business from Day One, and to make profitable changes that protected the Marketing Team.

There's a reason that Marketing Leaders frequently flame out after two years ... they don't know what, exactly, the true problem is.

In this booklet, I share analytics and a process. The combination of analytics/process allow the new Marketing Leader to know what the problem is, exactly, enabling the new Marketing Leader to get a head start on fixing the business while protecting his/her job.

Merchandise Lifetime Value - MLV - Depends On First-Year Performance

Let's say that a new item performs in the bottom 45% of the assortment. Five-Year Cumulative Demand = $348. Let's say that a n...