Category Archives: Pilot programs

Making the most of product assortments

It’s common knowledge that product assortments need to be tailored to individual locations. What’s strange to me is how few retailers do this well. Obviously there is a cost associated with doing this, as well as a need for analysis to understand when to make changes to an assortment. It’s very easy to find a product, test it for a limited time, and then roll it out to most or all of the locations in a company. Too often, there is little or no follow-up to see if the product truly performs in all these locations. The result is often outdated assortments, stranded inventory, returns and markdowns, and discontinued product sitting on the shelves.

In my experience a large part of the answer here is in a rigorous product life cycle program. As very few products are truly permanent, it pays to know when to get out of an old product – even if it is performing adequately – in favor of a newer product that better serves your customers. There needs to be a plan for getting into a new product, as well as a strategy for getting out of it at the right time. I know of several companies that won’t allow new products to be set up until there is a life cycle plan in place that includes the product’s initial rollout dates and plan, as well as a date and plan for when the item will be phased out.

This kind of planning requires product knowledge, demographic data and product performance data. It also requires a commitment to ongoing monitoring of products and programs throughout the company, together with a willingess to make the hard decisions required to get out of a product before it is dead. This is particularly true with perishable products.

In my experience most of the profit from selling a specific product comes from having it in the correct assortment where the demographics and other skus in the assortment work together to satisfy customer needs. Spreading product evenly around the company rarely produces the kind of results we want.

Evaluate products and programs in your low-volume stores

It’s really tempting to test a new product or program in a flagship store. What we often don’t realize is that even a poor product or program can be successful in a high-volume or high-performing location. Putting products in stores that are already great performers can be very misleading, as the store environment and customer base can distort performance and mislead you as to the real potential of the program or product.

Instead, try out your programs and products in a variety of stores, making sure to include some low-performing stores in the mix. You want to know how the product does when it isn’t always displayed well, when it spends some time being out of stock, and when the foot traffic isn’t high. A product that does well in this environment will probably do very well in better-performing locations. In the end, you may discover that the product or program only does well in locations with a certain minimum level of sales or in specific markets with the right demographics.

The bottom line is to make sure the programs and products are tested in a sample of stores that truly represent the range of volume and sales for the entire company. Setting up pilot programs that are guaranteed to succeed can lead you to choose to put product in stores where there is very little chance of success. This can strand inventory in these stores and cost you the opportunity to use the inventory dollars spent there to build your business in other, potentially more successful locations.

When in doubt, pilot

In today’s business environment there is a tendency to want to make decision in a hurry, to execute them and then move on. In many cases this is a valid strategy, particularly with new products where the market is wide open and the first player on the field has an enormous competitive advantage.

But for the majority of ongoing tactical and strategic decisions it’s often better to take a more graduated approach.

Rolling out a product or program without first putting in place the proper controls, measurement tools and change management policies is asking for trouble. That’s why I recommend using pilot programs wherever possible. These programs may delay the rollout or expansion, but they almost always provide for better information for making the program a success in later phases.

As an example I frequently get requests to order product in the same quantity for every store in the chain. We know that the product won’t sell equally well in every location, but we order as if this is the case. It would be much better to roll out product to a few locations – especially those that historically don’t perform well – to see how the product performs. We would learn a lot about how to manage the product at the store level, how to price and display it, before we expand the program to more locations.

It takes time to do this, but I have never had a case where we did this and did not learn how to improve the program going forward. It’s not an easy habit to establish, but I believe that, in the long run, it will save more than it costs. And what is learned from each pilot program can be shared with other teams to improve processes in these other areas.

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