June 13, 2023

A Little Bit Means A LOT!

I harp on Merchandise Productivity, and for good reason.

Now, you can get customers (via marketing) to add items to orders, and that's always a good thing.

The best thing, of course, is to sell stuff that customers want to purchase. Easier said than done. Getting more customers to buy stuff is really important.

But the results are indisputable. Look at this Marketing Budget Experiment. Here, merchandise productivity increases rebuy rates and new buyer counts by 5% for just one year. Just one year.

In year one (the year merchandise productivity increased by 5%), profit increased from $35.6 million to $39.4 million. An additional 52,643 customers purchased.

Look what happens thereafter. Remember, merchandise productivity returns to normal for each of the next four years.

  • Profit is $1 million higher, then $0.9 million higher, then $1.0 million higher, then $0.9 million higher, then $0.8 million higher. That is "interest" being paid by having a good year!
  • Customer counts are still higher ... compound interest for having a good year ... 17,090 then 15,242 then 13,715 then 13,007. 
  • Sales increased by $11 million in the year with good productivity, then increased $19 million thereafter.
What you do today impacts tomorrow. You generated $19,000,000 in future sales and $3.5 million in future profit without having to do ANYTHING because you had a good year in year one.

Show of hands ... how many of you have had your analytics staff or your favorite vendor produce this information for you in a tangible fashion? As an industry, we need to start thinking more carefully about building businesses for long-term health. We can do that ... by fixing things today!

No comments:

Post a Comment

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

I Promise This Will Eventually Be A Business Post ... But First ...

On Monday night, a furious finish to the 76ers/Knicks game was captured by three announcing teams. On TBS, legendary Milwaukee Brewers annou...