How to analyse performance of different products & categories?
Performance analysis of different products and categories is a fundamental aspect of business strategy for internet companies, especially e-commerce platforms.
Understanding which products or categories are performing well and which are not can guide inventory decisions, marketing strategies, and product development.
Example:
An e-commerce company in India specializing in lifestyle and home products wants to optimize its inventory and marketing spend by analyzing the performance of its diverse product range.
The company has noticed varying sales patterns and wants to understand the factors driving these differences to allocate resources more effectively.
Using the RCA approach:
- 1. Identify Metric Hierarchy: The team identifies key performance indicators such as sales volume, revenue, return rates, and customer satisfaction scores for each product and category.
- 2. Conducting EDA: Trends indicate that while some categories like home furnishings show consistent growth, others like electronic accessories have fluctuating sales patterns. Detailed analysis shows that certain products within these categories have high return rates, affecting overall performance.
- 3. Formulating Hypotheses: Based on the trends and patterns identified during the EDA, the team formulates hypotheses about the reasons behind the varying sales patterns. Hypotheses might include factors like market trends influencing customer preferences, the impact of marketing campaigns on certain product categories, or quality issues leading to high return rates in specific products.
- 4. Identifying Analytical Techniques: The team decides to utilize segmentation analysis to understand which customer demographics prefer which products and why, correlation analysis to explore the relationship between marketing efforts and sales performance, and cluster analysis to group similar performing products for targeted strategies.
The analysis might reveal that high-performing products share certain characteristics such as price point, customer reviews, or specific features, while low-performing products may have issues with quality, relevance, or competitive pricing.
Understanding these patterns allows the company to adjust its product offerings, marketing strategies, and inventory levels accordingly.
Takeaway:
Performing a detailed analysis of product and category performance allows internet businesses to make informed decisions about where to invest resources.
By understanding the drivers of performance through a structured RCA approach, businesses can optimize their product portfolio, enhance customer satisfaction, and improve overall profitability.