May 09, 2023

Merchandise Productivity Impact on CLV

It's just so darn important to put what the customer wants to buy in front of the customer.

I mean, it's more important to develop outstanding merchandise and to develop great creative presentation of outstanding merchandise.

But most marketers have no control over that - they might have control over what the customer sees.

Between what the marketer does and what the merchants / creative folks do, productivity will improve, and when it improves, long-term customer value improves.

Think about it this way ... let's assume that you acquire a customer, and over the next five years you generate the following:

  • Future Demand = $60.00.
  • Profit Factor = 40%.
  • Future Ad Cost = $12.00.
  • Future Profit = $60.00*0.40 - $12.00 = $12.00.
Now, between you and your merchants and your creative team (and others, yes), you increase merchandise productivity by 10%. What does future profit look like?
  • Future Demand = $66.00.
  • Profit Factor = 40%.
  • Future Ad Cost = $12.00.
  • Future Profit = $66.00*0.40 - $12.00 = $14.40.
In this example, a 10% increase in merchandise productivity yields a 20% increase in future profit (CLV).

Better yet, it means you can spend more to acquire the customer, which causes you to generate more new customers, which causes future sales to increase as well.

There are good reasons I consistently encourage you to focus on merchandise ... your marketing performance depends upon it!!

No comments:

Post a Comment

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

Lone Wolf?

I just went to the Safeway website to look for Tempura batter. Odds are that most people don't go buy Tempura batter ... and that's ...