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Catalog Leader Supercharges Merchandising Strategy with Assortment Optimization

man and woman reviewing assortment case study
  • Merchandising

Catalog Leader Supercharges Merchandising Strategy with Assortment Optimization

The Challenge

The Challenge

Colony Brands, a leading direct marketing company, was determined to revamp the way it approached its product assortment strategy. They needed a smarter, faster, more consistent process to decide which items to keep, tweak, or drop from their catalogs. Their experienced product leaders were bogged down in spreadsheets, spending too much time crunching data for thousands of items. This sluggish process was holding back strategic assortment decision-making. They sought a solution to speed up and enhance their merchandising strategy throughout the organization. And, they wanted to empower their product development experts to focus on their superpowers: developing new products that boost revenue.

Our Insights

Our Insights

Drawing from decades of expertise in direct marketing and data analysis, IMS introduced AssortmentGuru, a cutting-edge assortment optimization tool. This smart tool uses machine learning to simplify a bunch of data points for each product into one easy-to-understand score each season. Recognizing the power of a tool that generates standardized scores for products, Colony Brands anticipated quicker, more strategic decision-making for their merchandising pros. It promised to make their catalog product strategy more effective and generate better business outcomes.

Our Approach

Our Approach

IMS was confident in AssortmentGuru, but convincing the merchandising team to embrace this new approach required solid proof.

To validate AssortmentGuru, we conducted a controlled simulation called “swap set” analysis. This rigorous assessment compared AssortmentGuru results with decisions made by product managers without the tool. Where they disagreed, we formed a control group and swapped those decisions. We also considered factors like advertising budget, product performance or decay over time, and inventory limits.

Our main goal was to prove that AssortmentGuru could speed up and improve product decisions compared to traditional manual data analysis methods. We aimed to demonstrate how better decisions could lead to better business results.

In nearly 12% of product decisions made by merchandising leaders, AssortmentGuru suggested the opposite. When a product leader thought about dropping an item, AssortmentGuru advised keeping it, and vice versa. In the controlled simulation, we ran a “what if” scenario, allocating advertising spend based on AssortmentGuru product scoring and comparing it to a control group. This allowed us to estimate the impact of following the “optimal” product assortment and supporting it with advertising resources.

Results

Results

The controlled swap set simulation showed impressive results. In simple terms, if they had followed AssortmentGuru’s advice consistently, about 12% of their keep-cut-adjust decisions would have changed. This could have led to a remarkable 2-2.5 point profit margin improvement. Colony Brands estimated a multi-million-dollar increase in both sales and profit every year.

This significant improvement underscores the value of enhancing human decisions with a machine-powered assortment optimization tool. It simplifies complex data into a single score, making decision-making faster and more efficient.

Even when product leaders supplement the product score with additional data analysis, it acts as a precision tool, pointing out products deserving of attention while guiding leaders toward quick and informed keep-cut decisions.

~12% of product decisions would have been different

+2 – 2.5% profit gain

Annual multimillion-dollar profit increase across multiple catalog titles

Conclusion

Conclusion

AssortmentGuru empowers Colony Brands’ product leaders to make quicker decisions with less reliance on spreadsheets. It ensures consistency across product categories and brands. With AssortmentGuru, data analysis is streamlined through the power of data analytics and machine learning, freeing up creative product managers to drive business growth.

This case study underscores the vital role of data-driven methods in refining product assortment strategy. It illustrates how assortment optimization tools, like product scores, can lead to superior financial outcomes. Even minor adjustments in decision-making processes can have a substantial and lasting impact. In this case, a 12% shift in decisions could result in an annual profit increase of millions of dollars. The simulation also reveals that using product scores leads to more profitable products in the catalog, providing valuable insights to propel Colony Brands’ profitable growth.

If results like these could benefit your merchandising team, Book a Demo to learn more.

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