## September 25, 2022

### A Little Productivity Goes A Long Way

Let's use the world of Google as our window into the magic of merchandise productivity.

Ok, you spend \$15,000. You get 20,000 clicks. Congrats!  Of the 20,000 clicks, 400 customers convert and buy something, spending \$100 each. Your profit factor (you know what your profit factor is, correct?) is 30%.

Net Sales = 400 * \$100 = \$40,000.

Variable Profit = \$40,000 * 0.30 - \$15,000 = \$12,000 - \$15,000 = (\$3,000).

You lost \$3,000. You got 400 customers to buy something.

Profit (Loss) per Order = (\$3,000) / 400 = (\$7.50).

You lost \$7.50 per order.

Now, let's say that a year later your merchandising team increased productivity by 15%. That's a big deal! Does it matter when it comes to your marketing efforts?

Instead of 400 customers converting, you get 460 customers converting, spending \$100 each.

Net Sales = 460 * \$100 = \$46,000.

Variable Profit = \$46,000 * 0.30 - \$15,000 = (\$1,200).

You lost \$1,200. You got 460 customers to buy something.

Profit (Loss) per Order = (\$1,200) / 460 = (\$2.61).

You went from losing \$7.50 per order to losing \$2.61 per order.

All because merchandise productivity increased by 15%.

Now imagine what happens if you were originally losing \$2.61 per order? You'd be making money.

Marketers don't want to hear this fact ... but marketers are fully dependent upon their merchandising/product partners. When these people are successful, marketers are successful.

The smart marketer spends a lot of time figuring out which products work ... they spend more time on product than they spend on channels/keywords/conversions. By understanding the products that work, the smart marketer turns a loss into a profit. Everybody benefits. Because of a smart marketer.