Watch Out for the “Average”

Here’s something to think about. Let’s say you’re a huge national chain. You have thousands of stores. How do you decide what items to put on your
shelves. Obviously you’re going to look
at your “average” customer. The law of
large numbers means you have to target that average or you’ll never get the
turns you need to be profitable.

But, what exactly is “average”. We’ve all heard the joke about the average
family having 2.5 kids. It may be
average, but I’ve never seen a half of a child and you haven’t either. That’s where the average breaks down.

Here’s a hypothetical example. It’s very simplistic, but I
think it makes the point. Let’s say you’re in the shoe business.  A national marketing company surveys your market area and announces that the average woman’s shoe size in your area is seven. 

The women’s shoe buyer for a national chain, who’s responsible for thousands of stores in
hundreds of different markets sees these results and decides to add more size
sevens to the mix for your area. After
all, that’s the average size. But the reality is that the surveyors found that 1/2 the women in your area wear size six and half wear size eight, making the average a size seven.  The end result will be a lot of
missed sales and a lot of leftover shoes for the local chain store location.

Now, let’s say you’re the owner of a local shoe store. You see the same survey results, but you know
your market. You know that last year ½ of
your sales were size six and ½ were size eight. You also know that, for whatever reason, none of your customers wear
size seven. You buy accordingly and
seldom disappoint a customer or have any major markdowns (except for those
purple pumps you bought last year, but that’s another story).

The point of this very simple illustration is this. You know your market. You know your customers. You’re an expert at marketing to your
niche. That’s your advantage over the
chains. You’ll often hear so-called “experts”
talk about the chain stores’ volume purchasing. Since they’re big, they must be able to buy better. What the “experts” overlook is that when you
buy big, you make big mistakes. Big
mistakes mean big markdowns that eat up a lot of that volume advantage.

The best way to maintain your edge is to focus on what you
do best. Don’t try to be all things to
all people. Concentrate on the customers
that you know and understand and be the best possible source for that
group. It’s tempting to branch out into
new markets but the best way to group your business is almost always to find
better ways to serve your current customers. And you know that there’s nothing “average” about them.

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