February 06, 2022

Why Do I Always Mention It?

I've been talking about Merchandise Productivity for the past decade. Over and over again. Written booklets about it.

A typical question received sounds like this:  "I'm a marketer, merchandise shouldn't matter to me, should it?"

It should.

Let's pretend you spend $1,000 on marketing, and your profit factor is 35%. You generate $3,700 in sales. How much profit do you generate?  $3,700*0.35 - $1,000 = $295.

Now let's pretend that merchandise productivity decreases by 10%. What happens to profit?  $3,700*(1-0.10)*0.35 - $1,000 = $165. Oh oh.

Let's pretend that merchandise productivity decreases by 25%. What happens to profit? $3,700*(1-0.25)*0.35 - $1,000 = ($29).

So in a situation where your merchandising team does a lousy job, are you accountable for seeing a profit of $295 turn into a loss of $29? Is that on you? Or is that on your merchandising team?

You know the correct answer.

So why do you go to work every day and get barked at by Management for failing to achieve the goals set out for you at the start of the year?

I always mention Merchandise Productivity because you (most of you reading this are in Marketing or Management) should not be held accountable for product challenges. You should be held accountable for generating enough new customers to fuel the success of your brand (after accounting for Merchandise Productivity).

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Speaking of That Community You've Grown ... Known As Your Email List

I'm analyzing a business, and here's what I see. 27% of the sales come from items selling below the historical average price point o...