Contents
- Overview of Product Analysis Methods
- Types of Assortment Analysis
- Features of Product Analysis Methods
- Example of Assortment Analysis
- 5 Major Mistakes When Using Product Analysis Methods
Overview of Product Analysis Methods
Product analysis methods are formalized concepts designed to classify products according to specific criteria. The most common methods include ABC, XYZ, VED/VEN, FSN/FMR/FNS, SDE, and HML. Marketers use these methods to optimize product assortments, develop purchasing and advertising policies, as well as for planning and forecasting. They assist in building strategies for supplier interaction and inventory management.
Product assortment analysis methods often rely on the Pareto principle, which states that 20% of factors account for 80% of results. This allows identifying key product groups that deserve special attention. For instance, in ABC analysis, there is a profitable group A, while in XYZ analysis, there is a predictable group X. Group C in ABC analysis or Z in XYZ analysis represents the least significant products.
Types of Assortment Analysis
ABC Analysis
ABC analysis divides products into three groups based on their contribution to overall profit. This basic method serves as the foundation for other types of analysis, as profit is a key economic indicator. ABC analysis is often combined with other methods.
XYZ Analysis
XYZ analysis classifies products based on the predictability of their sales and can be executed in either monetary or physical units. It is particularly useful for forecasting sales volumes.
FMR/FSN/FNS Analysis
This method categorizes products by their consumption frequency into three categories: Fast, Medium, and Rare. It is widely used in inventory planning in both retail and industrial sectors.
VED/VEN Analysis
VED/VEN analysis divides products into groups: Vital, Essential, and Non-essential. This method is applied for inventory planning and assessing product assortments.
HML Analysis
HML analysis categorizes products into High Cost, Medium Cost, and Low Cost groups. This is particularly important for companies with a large assortment, which need to control products during storage and transportation.
SDE Analysis
SDE analysis classifies products as Scarce, Difficult, and Easy. This method aids in managing supplier relationships and prioritizing within logistics chains.
Features of Product Analysis Methods
Product analysis methods have several unique characteristics that make them versatile and useful in various marketing fields:
- Versatility: Methods can be applied to develop pricing policies, manage supplier relationships, and for merchandising.
- Simplicity: Based on simple principles that are easy to compute in Excel, making them accessible to most marketers.
- Tactical Focus: Allow for quick analysis of assortments based on specific parameters, facilitating prompt conclusions.
- Regularity: It is necessary to periodically review product groups, as market conditions and demand may change.
- Contextuality: Methods require an understanding of the broader market situation and the impact of external factors on the analysis.
Example of Assortment Analysis
Let’s consider an example where a marketer conducts an assortment analysis for a medium-sized retail company. Their tasks may include:
- Ranking suppliers by importance.
- Analyzing stock in the warehouse.
- Allocating resources for storage and transportation of goods.
- Evaluating product placement in the sales area.
- Analyzing the product assortment.
To assess the importance of suppliers, a combination of SDE and VED/VEN analysis may be used. Next follows the analysis of warehouse usage through FSN/FMR/FNS analysis. It is also important to consider sales predictability through XYZ analysis.
5 Major Mistakes When Using Product Analysis Methods
- Ignoring the need to update data.
- Using methods separately instead of a comprehensive approach.
- Combining more than two or three methods simultaneously, complicating the analysis.
- Insufficient attention to collecting quality data.
- Applying rigid criteria for product grouping that do not consider industry specifics.