Marketing, 7e by Dhruv Grewal Michael Levy

Author:Dhruv Grewal, Michael Levy
Language: eng
Format: epub

Marketing Analytics 11.1

How Macy’s Defines Its Assortment through Analyticsii

In the current marketing landscape, it is critical that retailers have a well-developed understanding of their customers. Macy’s uses predictive analytics to gain more insight into its customers and improve the buying experience across all channels. Predictive analytics is the use of statistics on data to determine patterns and predict future outcomes and trends. Macy’s has been collecting data to create a customer-centric in-store experience for years. Specifically, Macy’s uses predictive analytics to create its assortment. The retailer collects data on details such as out-of-stock rates, price promotions, and sell-through rates, then combines those data with stock-keeping unit (SKU) information from each location to segment customers and create personalized store assortments.

As sales continue to shift to digital platforms, Macy’s also uses predictive analytics to create an engaging online experience through Macys.com. The company analyzes visit frequency, style preferences, and shopping motivations in its website data, then seeks to apply the insights to ensure that every customer has an enjoyable, effortless shopping experience. Macys.com does more than just use predictive analytics to create personalized purchase suggestions, though. It calculates the likelihood that each customer will spend a specific amount in a particular product category, then uses that information to present the customer with personalized offers on the checkout page. Furthermore, analytics enable Macy’s to send registered users of Macys.com even more personalized e-mail offers. For example, it can send up to 500,000 unique versions of the same mailing.

Macys.com analyzes visit frequency, style preferences, and shopping motivations in its website data to develop promotions like the one pictured here. Source: Macy’s

Macy’s already has enjoyed significant success as a result of its implementation of advanced predictive analytics. It has continued to experience increases in store sales and online sales, at least partially due to its targeted e-mails. Looking to the future, Macy’s plans to improve its online and mobile shopping experiences even further while enhancing the integration of these various shopping platforms to create a seamless experience with just the right product mix.

So why do firms change their product mix’s breadth or depth?4

Increase Depth Firms might add items to address changing consumer preferences or to preempt competitors while boosting sales (see the addition of product A4 in Exhibit 11.3). For Häagen-Dazs brand ice cream, adding new flavors such as Banana Peanut Butter Chip, Honey Salted Caramel Almond, and Midnight Cookies & Cream enables it to appeal to its variety-seeking customers. The product is still essentially the same (ice cream), but the availability of over 45 different flavors significantly increases the product line’s depth.5

EXHIBIT 11.3 Changes to a Product Mix

Page 340 Decrease Depth From time to time, it is also necessary to delete products within a product line to realign the firm’s resources (see the deletion of products B5 and B6 in Exhibit 11.3). The decision is never taken lightly. Generally, substantial investments have been made to develop and manufacture the products. Yet firms often must prune their product lines to eliminate unprofitable or low-margin items and refocus their marketing efforts on their more profitable items.

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