Intersection of price, product and availability

In eComm when you fulfill products, you have a few choices.  You can build to order, ship from inventory, or have partially built products that you finish and ship when ordered.  Depending on your products and customers, you may have a mix of these different models.

I’ve written a few posts about pricing and products, but our experience really extends to all aspects of the sales process. We have worked with several Fortune 100 companies and recognize that in a product company, you know your offering is more than simply a product. Your offering is the intersection of product, price, and availability. You interest your buyers with the product, price drives their decision process, and when they can get it finalizes the decision.

Availability and eComm.  By combining product customization, dynamic pricing and availability on a website, you will give customers the tools they need to make the trade-offs between a specific product configuration and speed of delivery.  Some customers want a specific model and others want it now.  The flexibility of having inventory coupled with build to order gives your customer this option.  From an eComm perspective, you need to provide this information in a way that is useful for your customers which will  help your sales effort.

Display availability prominently.  On the site, when the customer can get the product should be displayed prominently.  As they’re browsing, they should be able to see the product ships in 2-3 days or 3 weeks or whatever your lead time is.  As mentioned when customers are making decisions about products, availability can be a trade-off that the customer bases a decision on.  It isn’t always the guiding decision for all customers, but plays a part.

Guide customers to inventory.  In a previous post, I discussed how you could use good, better, best products to guide the customer into a starting point configuration.  The interesting thing about it is that when you provide these options, some segment of your consumers will simply buy these products outright.  This can help you plan inventory given that you know you will sell some percentage of these products.  You can pre-produce these products and put them in inventory for quick shipment.  One way to guide customers is to offer special discounts on inventory products that aren’t valid on configured systems.

Build to order.  The higher end products are more specialized and customers understand that it takes longer to get.  Once they get off a standard model and start customizing it, the changing lead time should be displayed.  These high end products are typically higher margin, too, so by providing quick ship lower end models coupled with build to order custom models helps you maximize your profit.  You might even want to minimize upgrades on lower end models and allow more upgrades on higher end products.

How do you help planning from eComm?  Displaying the data on an eComm site is the first step.  The second step is fulfilling the product.  This requires solid planning which is beyond the scope of this post.  There are some guiding principles you can use from the sales side, though to help the planners do their job more easily.

Quick ship.  For products you’re going to ship quickly, it’s really best to have local inventory.  This is easier said than done.  As mentioned before, when products are displayed prominently on the website, it is more likely that the customer will buy them.  So, some percentage of customers will buy those products and you need inventory for them.  Planning this requires a synchronization between analysis of what configurations people have bought in the past coupled with an educated guess on what your future inventory needs will be based on your promotion calendar.  There are lots of software products that can help plan this on the market and it needs to be right.  I used to work with car companies and they were notorious for forecasting black exterior / black interior cars and forcing dealers in Texas to buy them to get the trucks they wanted.  The cars didn’t sell and dealers would have to discount them steeply to get rid of them, then the forecasters would assume they sold well because people bought them.  It was a vicious cycle.

Configure to availability.  This was always the gold standard of customer satisfaction.  Give the customer ultimate flexibility in selecting your product options and then build it to order when they configure it.  Realistically, you can’t warehouse all the permutations of configurations you can build.  But you can direct the customer to common configurations with shorter lead times and offer more demanding customers the options they want at a longer lead time.  Years ago, we did a project with a construction equipment manufacturer where the customer could configure the product and in real-time the planning tool would slot the configurations in the factory to tell the customer how long it would take to get the product.  It was awesome!  But the simple truth was that, while technically feasible, when you’re talking about a lead time longer than a week then the customer doesn’t need an exact delivery date.  So, lead times on parts are really sufficient.  When you’re doing configure to availability, the simplest way to provide the data is to have lead time on each of the components then display the longest one to the customer.  If you can display the lead time per component next to the price in a configurator, that always helps a customer make decisions.

Simulating configure to availability.  Also known as re-configuration, this is also easier said than done and no one does it very well.  Car dealers do this all the time by offering locally installed options such as sunroofs or other packages, but the sales rep typically has to offer the option to the customer rather than an eComm site.  In the computer industry, you can re-configure a lot of options on desktops, but laptops are harder.  With laptops you can swap out memory easily and a larger hard drive can be installed then re-imaged, but other options are more difficult.  As mentioned in a previous post, upgrades help increase profit and if retailers or warehouses would figure out how to do this efficiently, they’d be able to increase their profit.  I bet Amazon will figure it out one day and then everyone else will follow their lead!

Notify your planners of promotions.  I know it sounds obvious, but we’ve seen many times when price discounts are not coordinated with fulfillment.  Fulfillment finds out when product suddenly starts running out of stock in the middle of what should be a big sale.

All of this assumes you have a decent handle on your inventory and planning process.  Without that, none of this will work.  Customers don’t appreciate being told they can get a product by a given date and then it doesn’t show up and there’s no notification.  On eBay in particular, if you violate your service level you get a lower seller rating which will definitely affect your sales!  As explained, your offering is the intersection between product, price and availability.  The balancing act of pre-configured machines to build to order is a challenge, but when you do it right you can really maximize your profit.

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