This is part two of a two-part article.
In part one of my article, in the March 21 edition of DM News, I covered the questions that can be answered by a thorough square-inch analysis. This month I deal with performing a campaign-level square-inch analysis and measuring winners.
If your creative is shared across more than one drop (or if large parts of it are), consider performing a campaign-level square-inch analysis, particularly if you plan to use the same printing strategy next season.
Measuring the book doesn’t have to be an exercise in the precise. The most important aspect is that the measuring is done the same way each time. Even if you draw 1-inch-by-1-inch blocks on a piece of tracing paper and use the template for measuring out product, that’s fine, as long as you do it that way each time you conduct a new analysis.
What to look for. Reading the square-inch analysis can be a case study for looking at the forest and the trees.
There’s a ton of information in the squinch, but fight the urge to evaluate each piece of data individually. Units speak to bringing in customers, sales mean cash, contribution is margin and contribution per square inch tells you where you’re getting the best bang for your space cost buck. The best approach is to look at relationships.
Here’s a good way to start: Ask the question, “What percent of my product mix is generating/represents what percent of my [blank],” and fill in the blank with “units,” “sales,” “contribution,” “contribution per square inch” or “selling space.” When you evaluate category performance and find that, for example, 15 percent of your offering is generating 30 percent of your units, but only 10 percent of sales, you may be inclined to cut the products from the category. However, if you find that the category has a high percentage of “winners” (winners are products that exceed your minimum requirement for success), you may not cut the count.
The data’s saying the category brings in a lot of customers and pays for itself. Take a holistic approach to the evaluation of the data and look to create balance within categories.
Measuring winners. Winners are items that exceed a minimum criterion for success that you defined based on the requirements of the business. If you require contribution to exceed 10 percent of sales to pay for overhead and profit, you would establish a winner criteria of 10 percent: Any item over the threshold would get a “1” and any below it would get a “0.” Add up the 1s and you have a total number of winners – winner pages, winner products, winner categories.
Then look at your winner percentages to decide about expansion and contraction. A quick reference is what I’ll call the 50/70 rule. If less than 50 percent of your pages are winners you should probably cut your page count. If between 50 percent and 70 percent of your pages are winners you should probably hold page count steady. If more than 70 percent are winners, consider increasing page count. The same guidelines can be applied to product count within categories.
By following this process you can use actual transactional data to determine how many pages you should have and which categories are best for filling the pages. You can determine which price points within a category are the strongest as well as which products should be used to build and support the brand (Hint: your top 10 items are generally your “iconic” items and work well for “telling your merchandise story” and supporting your overall brand).