Last month I attended the NEMOA (National eTailing and Mailing Organization of America) conference in Boston. They celebrated their 70th anniversary, which is quite an accomplishment for a conference these days. Like most marketing conferences today the sessions focused heavily on email, digital, and social marketing. The final session included panelists sharing their ideas on insights for the future and their companies’ plans for evolving in order to maintain their competitive edge. Naturally, most of the discussions highlighted digital, email, ecommerce, and social strategies. However, one of the panelists – a highly respected senior marketer from a multi-title company – noted that “it’s all about the merchandise” and then went on to say that as data-driven businesses, many of the younger and very talented direct marketers do not have a grasp on the necessary fundamentals for a successful business.
It’s All About the Product!
The statement highlighting the need for good product and basic performance measures warmed my heart as I am someone who has always attempted to work with businesses to push through the clutter and ensure they have a firm grasp on the basic tools and processes to drive growth and profitability. The fundamental notion of “It’s all about the product” is something we have all heard a hundred times as without the right product, at the right price, and consistent with our brand, all the best marketing in the world won’t be able to drive the sale. Having it in stock when needed doesn’t hurt either, but more on inventory later.
Due to today’s lead times, merchants plan their products almost a year in advance. When working with merchants to prepare basic plans, their usual response is, “I can’t tell you what I will place in the campaign a year from now!”However, my retort is always that they can identify more than they think and that with a solid planning process they can even allocate planned demand for items yet to be determined. Planning for any of us a year in advance is not an exact science, however having basic guidelines provides consistently greater accuracy than expected.
Let’s look at some of these merchandising basics starting at a category/sub-category level. Historical comparable sales data provides the reference point. With that data, we can assess future item counts (which helps drive page counts), item productivity, space productivity (for the catalog perspective), margin performance, average price offered, and average price sold. That is a wealth of information! We can identify categories where productivity is below average and if item counts should be reduced or even increased. We can determine average target demand a new item must achieve to make the selection criteria for next year. Knowing this metric alone allows the merchants to select better product. Based on the price point analysis (at category level), we can determine the sweet spot of where customers are purchasing to ensure our highest margin items in the future are in that range. It also identifies categories where customers may not be seeing the value of our offering. Knowing estimated space and ad costs, we can easily identify if an item or even the campaign is being “planned” profitably. Planning over a horizon of time, versus one campaign or offer, can guide inventory decisions for deliveries, which in turn can optimize in-stock levels, warehouse efficiencies, inventory turns, and cash flow to name a few basic impacts to the organization.
These basics don’t require rocket science, but they do require a disciplined approach to planning and a coordinated effort with marketing, finance, etc. (Yes, even a year in advance while also recognizing that estimates will change closer to the actual campaign date). This also requires a defined process across departments and the ability to cut through the clutter to focus on the key performance metrics that have the largest positive and profitable impact to the business.
We will explain and provide more of these examples in our merchandise session that I am co-hosting with Kathleen Schultz, a fellow merchant at the CohereOne Integrated Marketing Summit, May 17-19 in San Rafael, CA. If you are a marketer, the conference is FREE. We look forward to seeing you.