Many catalogers use square-inch analysis and sales volume to determine which products to continue selling and which ones to drop. But The Vermont Country Store uses a scoring process that takes into consideration the value of the other items that customers order along with a given product – the theory being that if the cataloger drops product A, it would lose not only the sales from that item, but perhaps all sales from customers who buy that item.
For the past year, the $60 million general merchandise cataloger has used its product scoring process “as a tie breaker,” says vice president of marketing Larry Shaw, for determining which marginally selling items it will keep in the catalog.
Take a $10 bottle of hand cream: The cataloger identifies the customers who’ve bought the cream from a given issue of the catalog and calculates how much those buyers spent overall with the company over the past 12 months.
Then it multiplies the average annual sales from those customers by the number of customers who bought the product over the past year, giving Vermont Country Store an estimate of the product’s future value. Thus, if 500 customers bought the product and spent $30 on average over the prior 12 months, the item is pegged with a $15,000 future value, even though sales of the hand cream itself tallied only $5,000 (500 customers x $10 a bottle) for the year. The mailer then compares the future value to that of other marginal sellers when selecting products for future issues.
“It’s a way to tie our marketing and merchandising departments together,” Shaw says. “It also helps attract higher-value customers.”
The strategy “makes a lot of sense” to database marketing consultant Deirdre Girard, principal/cofounder of Concord, MA-based PreVision Marketing. “It enables you to work several years ahead by tying your merchandising strategy to your long-term audience growth strategy.”
One drawback to scoring product performance the way Vermont Country Store does is that “you have to track products over a series of three, four, or five catalog mailings,” Girard says. “Unfortunately, it seems very few catalogers are willing to make that kind of commitment.”
For his part, Shaw says that sales have hit projections for the holiday season; for the year that Vermont Country Store has used the system, “we’ve done very well,” he says.