March 29, 2023

Catalog Brands: Applying QuickScores to Category Development

Let's assume you have five (5) Merchandise Categories ... we'll assume something simple.
  • Mens
  • Womens
  • Kids
  • Gifts
  • Accessories
Let's assume that the gross margin percentages for each category are predicted as follows:
  • 60% for Mens
  • 62% for Womens
  • 55% for Kids
  • 35% for Gifts
  • 50% for Accessories
Ok. For many of you, I create QuickScores for each merchandise category. The QuickScore tells us how much you'll spend in each category. Now let's assume you are a Catalog Brand, and you have the following percentages of merchandise being offered by catalog for your July catalog.
  • 20% Mens
  • 30% Womens
  • 10% Kids
  • 20% Gifts
  • 20% Accessories
Yeah, lots of percentages.

Pretend we have the following QuickScores for one customer ... one that loves Accessories:
  • $20.00 for Mens.
  • $30.00 for Womens.
  • $5.00 for Kids.
  • $5.00 for Gifts.
  • $60.00 for Accessories.
What is an appropriate QuickScore for this Catalog?
  • Mens = $20.00 * 20% Mens * 60% Gross Margin = $2.40 of Margin.
  • Womens = $30.00 * 30% Womens * 62% Gross Margin = $5.58 of Margin.
  • Kids = $5.00 * 10% Kids * 55% Gross Margin = $0.28 of Margin.
  • Gifts = $5.00 * 20% Gifts * 35% Gross Margin = $0.35 of Margin.
  • Accessories = $60.00 * 20% Accessories * 50% Gross Margin = $6.00.
  • Gross Margin Score = $2.40 + $5.58 + $0.28 + $0.35 + $6.00 = $14.61.
Now, pretend we have the following QuickScores for another customer ... one that loves Womens:
  • $10.00 for Mens.
  • $90.00 for Womens.
  • $10.00 for Kids.
  • $5.00 for Gifts.
  • $5.00 for Accessories.
What is an appropriate QuickScore for this Catalog?
  • Mens = $10.00 * 20% Mens * 60% Gross Margin = $1.20 of Margin.
  • Womens = $90.00 * 30% Womens * 62% Gross Margin = $16.74 of Margin.
  • Kids = $10.00 * 10% Kids * 55% Gross Margin = $0.55 of Margin.
  • Gifts = $5.00 * 20% Gifts * 35% Gross Margin = $0.35 of Margin.
  • Accessories = $5.00 * 20% Accessories * 50% Gross Margin = $0.50.
  • Gross Margin Score = $1.20 + $16.74 + $0.55 + $0.35 + $0.50 = $19.34.
These are two customers that have exactly equal future value ... but one customer skews to Women, and the upcoming catalog is also skewed to Women. Therefore, the latter customer is much more valuable.

When we develop categories, we make conscious choices. Sometimes we use models to determine who to send catalogs to. Sometimes those models have an "overall" score that does not take categories into account. If we align categories with gross margins per category and space allocated within the catalog, we obtain a different outcome.

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