One low-margin item accounts for a lot of first-time customer purchases. On its own it barely earns anything once packaging and staff time are counted. But people who buy it sometimes return for higher-margin products, so discontinuing it could be shortsighted. I'm thinking of tracking baskets and repeat purchases for a few weeks rather than judging the product in isolation. How have you measured whether a ‘door opener’ item actually brings profitable customers instead of just bargain hunters?
Deciding whether to keep a low-margin product that brings people in
- small-business
- keep
- margin
- product
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5 replies
I’d measure it by cohort, not by the item alone. If people who buy the low-margin item come back and spend more within a short window, it ea...
I’d measure it by cohort, not by the item alone. If people who buy the low-margin item come back and spend more within a short window, it earns its shelf space.
Exactly. I’d look at basket size and repeat rate after the first purchase, because a cheap item can still be useful if it’s a traffic magnet.
I’ve been fooled by this before. A product can bring in a lot of people who never buy anything else, and then it’s just eating attention.
That’s why I’d compare the repeat customers against a similar group who came in for something else. Otherwise the bargain hunters can make t...