Tag Archives: assortment

La maldición del perro

Una amplia gama de colores para cada prenda. Prestaciones y diseños combinables en cada producto tecnológico. Mil y un tipos de yogures o de panes… Comprar es elegir. El estudio del comportamiento humano lleva a entender por qué no se deben creer ciegamente las teorías del márquetin cuando se trata de definir el número de variantes de los productos que se ofrecen al público

Alejandro Serrano – Heraldo de Aragón, Nov 9, 2012| Spain

«Cuanto más, mejor». Esta parece ser la idea dominante cuando se trata de definir el número de variantes de un producto que se ponen a la venta.

El razonamiento habitual del márquetin parece impecable: cuantas más opciones tenga el cliente para elegir, mayor es la probabilidad de que se produzca una venta y más satisfecho quedará. Sin embargo, según Barry Schwartz, autor del libro ‘The paradox of choice’ (’La paradoja de la elección’), esto no es siempre cierto: no siempre es deseable ofrecer más variedad de productos a los clientes.

En una interesante charla TED, Schwartz expone que ofrecer al cliente demasiadas variantes es  incluso contraproducente.

Hay cinco razones principales para esto, que por cierto forman el acrónimo PERRO. Son las siguientes:

PARÁLISIS La existencia de demasiadas variantes pueden llevar al cliente a realizar un estudio exhaustivo sobre cuál le conviene más. Este análisis  puede hacerse tan complejo que le lleve a posponer su decisión o incluso a abandonar la compra al verse desbordado por tanta complejidad. Nos podemos referir a este fenómeno como ‘la parálisis por el análisis’.

EXPECTATIVAS A mayor número de variantes, mayor es la expectativa de encontrar el producto que se ajuste exactamente a las necesidades del cliente. Si este no es el caso, el producto elegido puede crear frustración, incluso si es mejor que el que habríamos comprado si no hubiera habido variantes.

REMORDIMIENTO Si la variante adquirida no satisface completamente al cliente, éste puede pensar que dejó en la tienda aquélla que era mejor que la adquirida. Este sentimiento de remordimiento será mayor cuanto mayor sea el número de variantes.

RESPONSABILIDAD Si el cliente compra la única variante existente y después comprueba que no le satisface plenamente, se justificará pensando que, al fin y al cabo, era la única opción disponible. Sin embargo, en el caso de disponer de muchas variantes, puede que se sienta culpable por haber elegido mal, ya que ha sido él el responsable de la elección, lo que aumentará su frustración.

OPORTUNIDAD El valor de una compra depende de que el comprador perciba el ‘gap’ existente entre lo que se lleva a casa y la mejor alternativa no comprada. Si el número de variantes es grande, es fácil imaginar las buenas características de aquellas variantes que no compramos, haciendo al cliente sentirse menos satisfecho con la elección realizada.

Así las cosas, puede ser que, para algunas empresas, haya llegado el momento de plantearse una reducción en el número de variantes de los productos ofrecidos a los clientes.

Quizá sea esta la razón por la que Herbert Heiner, el consejero delegado de Adidas, anunció el pasado abril que iba a eliminar el 25 por ciento de los casi 50.000 artículos ofrecidos por la compañía.

Quizá también por esto, por citar un ejemplo más cercano, Mercadona ofrece en su lineal ‘sólo’ unos pocos miles de artículos, un orden de magnitud por debajo de lo ofrecido por muchos de sus homólogos americanos.

Desde el mundo de la gestión de la cadena de suministro se viene haciendo hincapié desde hace tiempo en la importancia de reducir el número de artículos para contener los costes de mantenimiento del inventario, no sólo por el coste financiero inherente a las necesidades operativas de fondos, sino también por los costes no financieros como la obsolescencia, los seguros, los robos o el coste de almacenamiento.

Ahora se suma el no poner en riesgo la satisfacción del cliente. Un argumento de peso.

Alejandro Serrano Valenzuela Profesor del Zaragoza Logistics Center

To know more about supply chain follow the link www.zlc.edu.es

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The Dog Curse – When More is Less

Why you should not blindly trust the Marketing wisdom when it comes to defining assortment

Alejandro Serrano – Sep 27, 2012| Spain

Last week I watched a very interesting talk TED talk by Barry Schwartz based on his book “The paradox of choice” . He argued that having more options to choose from does not necessarily imply having more freedom. This is despite the usual approach from Marketing, which claims that “more is better” when it comes to definition of assortment. His argument stems from some findings which show that having many SKUs to choose from may actually be counterproductive, as it could lower the customer’s utility.

I have summarized the five main findings and packed them under the acronym “PERRO” (thus the title of this piece) for me to easily remember them. Here they are:

  • Paralysis. Too many SKUs force customers to try to analyze each option with respect to the others, pondering pros and cons, until a decision is made. The process can become so messy that customers simply postpone their decisions for later. Put differently, we could say that “too much analysis drives paralysis”.
  • Expectation. If assortment is large, customers usually significantly raise their expectations about the quality of the product they are going to buy. Since utility can be measured with respect to expectations, rising expectations leads to decreasing utility.
  • Regret. If a bought product does not completely satisfy a customer, she may ask herself, what if I had bought an alternative? Therefore, the higher the number of alternatives, the higher degree of regret she will have as she becomes more convinced that one of the others was better.
  • Responsibility. If there is just one variant, and that one does not satisfy the customer, he will think “What can I do?”, with no blame. However, if there are many alternatives and the one chosen does not satisfy the customer, he will blame himself, as he was the one who chose the “wrong” product.
  • Opportunity. As variety increases, the opportunity cost decreases, as the alternatives are closer in value (not necessarily in price) to the product considered. The more SKUs available, the lower the incremental value of the product chosen with respect to the second-best choice.

Given these, it is maybe time to reconsider your marketing strategy, and start reducing the number of variants so as to increase your customers’ utility (aka happiness).

The TED talk is here. The book “Paradox of choice” can be seen here.

To know more about supply chain follow the link www.zlc.edu.es

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Adidas to cut its assortment by 25%

How many SKUs should a firm offer?

Alejandro Serrano – . Apr 2012 | Spain

Herbert Hainer, CEO of Adidas AG, announced last Saturday* that the company has plans to cut 25% of its 46,897 SKUs. An argument used by Mr. Hainer to justify their decision is that 20% of the current assortment generates 80% of sales.

If this roughly is the case–which should not be surprising, according to Pareto’s law, it means that 80% of the assortment accounts for 20% of sales. And most likely, within the remaining 80% SKUs, Pareto’s law still holds, i.e., 80% of that 80% account for 20% of the remaining 20% of sales, and so on and so for. Working in this fashion we can prepare the following table for how much the SKUs with the least sales sell.

How much SKUs with the least seales sell according to Pareto's Law

As the last row shows, cutting SKUs by 25% means removing those items that contribute to 0.006% of sales, or $1.2m, since Adidas sells roughly $18b. Remarkably, those 12,294 items  only sell $83 (roughly 1 unit) on average worldwide! Therefore, it makes a lot of sense to remove them from the assortment.

The natural question to ask at this point is why pruning 25% of the items and not more. Should Adidas also remove the second-to-last row items (15,367 SKUs!), which sell $400 on average worldwide? What about the third-to-last row?

These question nicely illustrates the usual trade-off between Marketing and Supply Chain departments in the retailing industry. A marketing-driven organization, like Adidas, argues that adding an SKU to the assortment increases sales. The more variety offered, the higher the chances that the customer likes whatever is on the shelf thus the probability of making one additional sale. The penalty to pay is in the form of, mainly, inventory holding cost and ordering cost. In good times (Adidas increased sales by 10% last year) this penalty tends to be underestimated.

Indeed there is no clear answer to the question posed above, but we can have a look at other industries to shed some light on the issue. For instance, in the telecommunication telephone manufacturing industry,  Apple sells only 2 SKUs (i-phone 4, either black or white), whilst Nokia sells at least one model for each market segment (for instance, it sells 37 different models only in Germany). Other successful companies have followed the same trend of reducing the number of SKUs to focus on reducing supply chain costs. Good examples include Lidl in Germany or Mercadona in Spain.

A holistic view of the company is necessary to make sound decisions when answering the question of ow many SKUs in the assortment are needed. Supply chain costs should be carefully pondered before blindly following the advice of marketing experts.

(*) Frankfurter Allgemeine Zeitung. The link to the piece of news is here  (in German)

 To know more about Supply Chain www.zlc.edu.es

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