Even Merchandisers Must Be Customer-Centric

For no particular reason, I’ve been reading a lot of retail white papers recently. Most have to do with customer-centric marketing, and describe the usual plethora of clever things you can do to improve relationships with individuals. But one—it happened to be about business intelligence systems—highlighted the importance of merchandise managers. This isn’t news to me: merchandisers are the kings and queens in most retail organizations, for the excellent reason that nothing else matters if people don’t want to buy what a store is selling.

The question I asked myself (well, technically, I asked the cat because otherwise I’d be talking to myself and that would mean I’m crazy) was whether merchandise analysis is outside the scope of customer experience management. This matters because our premise at Client X Client is that everything should be analyzed through the prism of customer value. So it’s important to check out possible exceptions.

Traditional merchandise analysis is certainly not customer-based. It looks at sales by product, and then summarizes or subdivides the results by product group, region, season, and so on. This is an art in itself, so if adding a customer dimension doesn’t provide any more value, you wouldn’t want to do it.

But looking at products independently of customers can lead to some major mistakes. Grocery stores know this intuitively: they carry low-margin or even loss-creating items like milk to get customers into the doors and make their profits elsewhere. I suspect every category of retail has similar product relationships. These are generally uncovered through market basket analysis, which is really a form of customer-centric analysis if you think about it. Looking at the same customers’ market baskets over time would probably yield additional insights, and that’s exactly what true customer-level analysis does.

There are probably ways that merchandisers would benefit from a more direct appreciation of the importance of analyzing behavior at the customer level. This isn’t exactly a unique insight—see Paco Underhill’s Why We Buy: The Science of Shopping for an impassioned and entertaining review of the importance of studying customer behavior. Of course, Underhill’s point is that you have to actually watch consumers to understand them; just looking at purchase data isn’t enough. He’s absolutely correct. But purchase data is the place to start, and merchandisers who don’t analyze purchases by customer are missing something important.