December 06, 2022

Category Analysis

Our past-lockdown inflationary period has illustrated to me the importance of analyzing merchandise categories.

Thirty years ago, your direct marketing team carefully studied the performance of key items, of spreads of items (in paper catalogs), seeking to understand why marketing activities performed well (or performed poorly). Turns out that big gains (or big challenges) were seldom the responsibility of the marketing department. Instead, the business thrived or failed because of what was being sold, at the price it was being sold at.

A decade ago I took a shot at understanding the role merchandise played in the health of a business (I called this "merchandise forensics").

Today I need to revisit the topic, but come at it from a different angle. I receive so many questions about the impact of inflation on customer loyalty and customer acquisition. It is hard to measure the impact of price changes on your customer file when looking at the business as one big homogenous brand. But if you divide the business into pieces, into merchandise categories, you learn that each of these "mini-businesses" have their own dynamics. Some categories experience price increases, others do not. Some categories greatly expand new products, others focus on tried-and-true winners.

This diversity of "mini-businesses" helps us understand what is driving a business and what is holding a business back.

You undoubtedly have many merchandise categories, and if you optimize category performance, you have a diversity of behavior worthy of analysis.

So, tomorrow, we begin our study of merchandise categories. Email me if you would like your business analyzed (kevinh@minethatdata.com).

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