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Kevin Hillstrom: MineThatData - 5 new articles

 

Given The Choice ...

... between selling a winning item at $14.99 or selling a winning item at $44.99, pick the winning item at $14.99.

Why?

On average, units = customers. A winning item at $14.99 sells 3x as many units (on average) as a winning item at $44.99. Therefore, the lower-priced winning item attracts more customers, who tend to deliver long-term value.

At least think about the concept, ok?

         
 
 

Look For Balance

It's common to see this in my project work.

Existing Items:

  • 2019 = $24 average price.
  • 2018 = $25 average price.
  • 2017 = $26 average price.
  • 2016 = $28 average price.
  • 2015 = $27 average price.
New Items:
  • 2019 = $33 average price.
  • 2018 = $31 average price.
  • 2017 = $30 average price.
  • 2016 = $29 average price.
  • 2015 = $28 average price.
This is a classic case of "divergence" ... the items the merchandising team carries over are increasingly cheaper over time ... while the new items introduced are more expensive over time.

No balance.

Just divergence.

Divergence is bad because of how we typically deal with the issue. It's common for customers to not respond to new items that have diverged from the prices of existing items carried over from last year. This causes the merchandising team to freak out ... the inventory managers in particular. They put pressure on the marketing team (or the CFO puts pressure on the marketing team), and in kind we see emails for 40% off of everything ... yes, everything. This causes existing items at $24 to be sold at a real price of about $14, even though those items were selling acceptably. Price deflation kills the brand.

So please, look for balance in pricing between new items and existing items that are being carried over.

         
 
 

We Need A Lot More New Items

Here's our forecast case from yesterday.


If I substitute in 2,250 new items per year instead of 1,577, and if I assume that the rate of these items becoming Winners / Contenders / Others remains constant (which is a risky assumption), then this price point band generates increased demand in the future.


This is the style of analysis that you want to apply at a category level, given that the relationships by category are likely different.





         
 
 

Printing Industry Profit

In case you missed this chart from the newsletter that Paul Stuit sends ... take a peek:


The red line is inflation-adjusted shipments ... and if you think there is a catalog revival, the overall data suggests otherwise. Print is in dire shape at a macro level, down 50% over nearly two decades.

The blue line is profit. If profit is flat and inflation-adjusted shipments are down, that means your friendly printer "might" be squeezing you. Only you can know for sure ... ask 'em, right?

You can see that the industry began to die in 2001, collapsed in 2008, and has been trending into oblivion ever since, save for a modest bump in recent months.

I'm sure printers will tell you that I'm interpreting the data wrong, and I'm confident that the industry will chime in with a "catalogs are making a revival" theme, pointing to one e-commerce brand that send a couple of catalogs without any discipline as proof that all is well.

Take care of your e-commerce business.

Take care of your merchandising strategy.

Take care of your pricing strategy.

Complement all of it with print if it is profitable to do so and if your customer is age 62+.

But do not listen to the pundits ... listen to your customers, ok?


P.S.: There's plenty of commentary on this print-centric website about the death of the PRINT conference (click here) ... the world changed 18 years ago and the changes are catching up with the industry.





         
 
 
 

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