February 27, 2024

How Can A Product Or Category "Cause" A Customer To Become More Valuable?

I'll go back to my time at Nordstrom ... two decades in the rear view mirror these days.

Our Accessories merchant was a force of nature. When hand bag price points were around $200 she pushed them up to $400, and did not care one tiny bit what people thought (people thought she was nuts).

She was not nuts.

She understood back then that customer wanted a handbag for $400 .... and four months later they wanted ANOTHER handbag for $400. Those additional handbags were purchases that wouldn't have otherwise happened, incremental to the customer and to the business. Perform a Merchandise Residual Value analysis on her handbags and you'd see that her handbags "caused" customers to become more valuable.

That doesn't mean you should keep selling the same handbag in perpetuity.

It means somebody with merchandising smarts works with somebody with marketing smarts to exaggerate the importance of handbags.

That's a solid use of Merchandise Residual Value.

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