Why Does MRV Matter?

I've told the story before, but 32 years ago at Lands' End I was invited to a Catalog Review meeting. On the walls of the room were each spread in the catalog, colored GOLD / GREEN / BLUE / RED based on the profitability of the spread (a spread is a two-page combination in the catalog ... like pages 14-15, for instance). 

The story of the catalog became apparent the moment you walked into the room ... you could see that the first twenty pages of the catalog STUNK and consequently the catalog didn't perform. You could see that somebody decided to put Home merchandise on pages 16-23, and woo-boy did that kill the momentum of the catalog (including killing the items on pages 24-25).

In other words, you learned why you business didn't perform to expectations. Yes, what you sold mattered. HOW you chose to present it to the customer also mattered ... a +/- 15% impact ... which is the difference between being profitable and not being profitable.

A great sadness of the rest of my career is the complete lack of attention to detail that followed by the companies I either worked with subsequently or observed. As the late Lori Liddle once said, "there's money just lying on the floor, waiting for somebody to pick it up, why aren't you picking it up?" Good question!

The emergence of e-commerce is largely responsible for the lack of attention to detail.

I know, here come the unsubs.

You know that 1,438 visits came from Pinterest. You know nothing else about those visits (oh, I get it, you know that the conversion rate was 1.33% and the AOV was $171). You generally don't know what those customers bought, and you most certainly don't know if those customers bought items that caused the customers to become more loyal in the future.

This is why MRV (Merchandise Residual Value) is so important. It's a modern day proxy for the value of an item. Would you rather have an item that generates $500,000 and causes customers to be 24% more loyal in the future or an item that generates $600,000 and causes customers to be 40% less loyal in the future? You'd prefer the former, not the latter.

Say you are Macy's and you feature this dress in an email campaign (as they did last week).

Do you think that Macy's has any idea whatsoever if that dress increases customer loyalty among the customers who purchase the dress?

You already know the answer.

Now, it's perfectly fine to advertise/feature items that don't have great MRV, especially if they generate sales today. Every item matters. But it is far smarter to give "more real estate" to items that cause customers to become more loyal, right? It just makes common sense.

Common sense.