Marketing Data

How Marketing Data can Right-Size Your Product Catalog

For most Ecommerce brands, the majority of revenue may come from only 10-20% of the top SKUs.  But shifting customer demand and the pressure to keep a catalog fresh inevitably lead to brands carrying more SKUs than necessary and thus have high expense on products that aren’t contributing revenue.  

Right-sizing your catalog helps to eliminate excess inventory faster, increasing inventory turn, and improving cash flow. 

A popular way to right-size product catalog is ABC analysis - using sales data to categorize products as high priority (A), medium priority (B), and lowest priority (C) helps inventory managers organize their buys.

You would focus on A-grade products that drive 80% of the revenue, nurture B-grade products that have potential to grow, and discontinue C-grade floppy products to free up cash.

There is a better way to enhance ABC analysis with marketing data. By combining sales data with marketing metrics like conversion rate, product views, plus key factors like price, margin, we would have a better, more accurate understanding of each product category to review and optimize our product catalog.

How Marketing Data can Enhance ABC Classification

Best Sellers (A): This is the aforementioned 10-20% of SKUs that drive 80% of the sales. You can also look at:

  • Return rate: A high return rate can help to identify and remove fake winners.  
  • Conversion rate: High conversion rate indicates the product is selling well with the eyeballs it has. Product Views and Conversion Rate for engagement, as well as price point and margin for profitability.  

Replenish these more frequently and efficiently through focused planning and coordination with manufacturers

Potential Products (B)

For the middle-of-the pack, we need to determine the products’ potential to make more money and move to A, or downgrade them to C and save your budget.  High Engagement (Clicks, Views, Social Media trends) + High Conversion Rate = Sales Potential, even if it hasn’t been realized yet. 

More stock in these products gives marketing more ammo to generate visibility and revenue, and monitoring these campaigns can validate assumptions - if they sell, they stay, if they don’t, they go.

Slow Movers (C)

If a product has low net sales, engagement, and conversions, this might be their final resting place.

Order a touch of safety stock as a cushion in case sales pick up, then discontinue.  Getting a clearer picture of what’s not working will pay dividends in both cost and time.

Because marketing is constantly generating this data, you can refresh this Enhanced ABC process more frequently than with historical look-backs and phase out products more regularly to reduce costs, and focus the catalog on what matters.

Inventory and Marketing ABCs to Right-Size Your Catalog 

A better classification process also gives marketing better ways to manage their campaigns and plan their calendar.  There are clear buckets for evergreen prospecting campaigns, tests for increasing exposure, and a library for markdowns, mystery boxes, or other quick promotions.

As sales momentum increases, this feedback loop between marketing and inventory helps by separating the wheat from the chaff more quickly and aligning the product catalog with customer demand.  Reducing the number of SKUs also reduces overstock cost, and better planning cuts down on expensive rush orders.

New launches also benefit from additional warehouse space and online real-estate, and you can utilize the same enhanced ABC process to determine where they’ll go in the future with better accuracy.

Enhanced ABC for a Leaner, Better Catalog

Utilizing marketing data to improve your understanding of your catalog benefit’s not only inventory management, but the brand as a whole.  When you know what’s working and what’s not, you can cut dead weight from your catalog and leverage the savings on improving sales and operations.

The challenge is that the majority of brands are still spending too much time using siloed spreadsheets. Conative AI gives you the ability to view and track this data in real time, allowing you to make faster, easier decisions backed by AI recommendations.  It’s already helped brands right-size their inventory and improve marketing performance, schedule a demo and see what Conative AI can do for you.

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