At 10,000 Feet?

We established that there are four categories that the Merchandising Team believes in ... and seven categories that are being purposely contracted.

Does a contracted category impact customer response?

Yes.

Let's look at how many customers bought from the four primary categories and all other categories (both) in the past four years.

• 3 Years Ago:  180,286.
• 2 Years Ago:  171,306.
• 1 Year Ago:  169,072.
• Today:  110,850.

Yeah, that's a problem.

How many customers purchased just from the four primary categories?

• 3 Years Ago:  168,952.
• 2 Years Ago:  156,288.
• 1 Year Ago:  174,994.
• Today:  184,286.

Counts are holding mostly steady.

How many customers purchased just from the other seven categories?

• 3 Years Ago:  217,656.
• 2 Years Ago:  243,028.
• 1 Year Ago:  218,436.
• Today:  130,866.

Yeah, counts are crumbling.

Which customer do you want? Here is the amount of spend each customer segment generated in the past year based on how the customer was segmented a year prior.

• Both Groups = $11.46.
• Primary Categories Only = $6.44.
• Secondary Categories Only = $4.60.

In other words, when you lose customers from Secondary Categories, you aren't losing highly productive customers. When you lose customers from Secondary Categories who also buy from the four Primary Categories, you lose $11.46 per customer, which is too much.

Worse, when a Primary+Secondary customer becomes a Primary-Only customer, value drops from $11.46 to $6.44. That's a stunning drop.

As the Merchandising Team at "Beans: The Internet's Only Variety Store" contracts the majority of categories, the Merchandising Team weakens the customer file - shifting customers from high-value segments to low-value segments. No Bueno! They are weakening the customer file, which lowers demand in all categories next year, which requires more of a marketing investment in new customers, which harms the p&l (in the short term).

So yes, before you start messing around with your merchandise assortment, think about what you are messing with! If you are lowering the value of customers for no good reason, well, that means you are harming the business.