The solution: the IT and catalog departments have to clearly spell out the return on investment (ROI) for these initiatives by determining how deploying a given technology will improve sales and profitability.
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"If you come away from an industry event, and you hear that you need to have your data in ACES, or that every part you sell should have three photos online, you have to be able to communicate that to upper management so they see the benefit to the company for sales, not just for the catalog department," says Jim Grubbs, director of product marketing at WHI Solutions (an eBay company).
According to Grubbs, who presented on the topic at the National Catalog Managers Association (NCMA) conference earlier this year, management wants to see a clear ROI, increased parts sales and minimized risk.
Fortunately, it's become much easier to show how deploying the ACES and PIES standards, along with high-resolution product images in the catalog, can boost sales. Most parts catalogs now use "best match" sorting, which means if your parts have data holes, lack product information or images, they will be sorted lower in the search results. You can't sell a part that doesn't display, which is another way of saying that your data issues can quickly become sales issues.
The communication challenge
To make the sales and technology link, it's a good idea for the catalog department to work closely with the sales department so that each knows what the other's priorities are. At O'Reilly Auto Parts, David P. Ortega, director of electronic catalog systems, says that the company sets up committees that look at various new technologies and evaluate how they can benefit the company. "We can translate that information into an ROI case, and then we can go to the executive team with information about how we could approach that technology in a way that could make us more profitable or efficient," Ortega says.
O'Reilly evaluates what its competitors are doing with technology, if there are industry mandates around the technology and any potential efficiency improvements enabled by the technology. The critical challenge, according to Grubbs, is communicating that information effectively from one department to the next.
"Catalog managers tend to be internally focused, while executives are looking externally at marketplace perception," Grubbs says.
"There are always intangibles that are difficult to quantify," Ortega says. "If you can't tie a specific ROI to something, there's an acquired skill set you need to communicate the value. We have team members here that are very good at extrapolating those intangibles into a more defined ROI for the business side. That's very hard, though, and it's one of the biggest challenges we see."
During his NCMA presentation, Grubbs laid out some key steps in making that communication possible: Insert your data process into the sales and marketing process as a value-add; become part of the team that launches products and makes sales and marketing budget decisions; and build an ROI for your ACES and PIES production.
For catalog and IT managers, the discussion should be framed around the person you are pitching the project to. Find out what your competitors are doing and see how your products look against others on Amazon or other websites. "Do some research and set up an argument around why you're at a competitive disadvantage onscreen against your competitors," Grubbs says.
Spell out the ROI
Luckily, there's good data available that can support your case for standards adoption and other catalog initiatives. WHI analyzed eBay sales by units sold from 2 million live part listings that distributors listed using Nexpart eBay. They compared the top 10,000 selling parts to the bottom 10,000 selling parts, and found that the bottom selling parts are two times more likely to have no images; parts that sold had three times more images than the competitors.
Using that information, Grubbs outlined a simple ROI for catalog images. To justify an investment of $100,000 for providing pictures of 10,000 parts, Grubbs suggested calculating the sales dollars and number of part numbers that represent the top 20 percent of sales for the top selling part type.
In Grubbs' example, that included 900 part numbers accounting for $16 million in sales, against total sales of $180 million. By spending $9,000 to photograph just those 900 parts in a pilot project, a company could potentially see a 6 percent increase in sales for those parts based on WHI's research.
To measure effectiveness, create a pre-90-day baseline sales number, make sure all receivers have the new ACES data and attributes/photographs and then monitor sales for another 90 days. Even if sales increased just 3 percent, that means every dollar spent on adding photographs could boost sales by $74 (or more).
"The thing that is selling more of your parts than anything is your electronic catalog," Grubbs says. "Be good stewards of that catalog, because it's the thing that makes or breaks whether you get those sales or not."
And that analysis has to continue, since product data continuously evolves and changes. "The data will always need to be refreshed," Grubbs says. "There's a maintenance aspect to it. You don't just do it once and it's done. You have to provide estimates for initial costs, and the cost over three years for maintenance."
According to Ortega, this process is getting easier. Industry executives are much more familiar with the industry standards and the value that technology can provide when it comes to sales.
"There's been a renaissance during the past five years," Ortega says. "We hear more people at many levels of different companies recognizing the fact that using a standardized format or methodology for delivering information is critical. All levels of the business are noticing that you have to be able to communicate across the entire channel. It drives sales. The cataloging side is the main marketing arm of what we do and how we present ourselves. If you can't, as a trading partner, consistently rely on a standard way of delivering data, you will have problems down the line."
