Beyond Net Promoter Scores (NPS). Is your Brand struggling? Check your Gross Margin.
Net Promoter Scores (NPS) have historically been a cornerstone of understanding your Brand strength. NPS should be used and measured but ultimately it measures your brand at the consumer user level. While this is important, you also have an early warning data point to your Brand Strength: understand your Gross Margin Over Time.
Off the top of your head, answer these basic questions:
What is your gross margin today?
How has your gross margin changed over the past 6 months? Year?
Why?
Most leaders can give reasonable answers to the first 2 questions but rarely truly know the answer to #3. If they do know, they point to purchase price problems, inflationary pressures, product costs, inbound transportation costs, etc. But there is a non-COGS side to Gross Margin: Revenue quality or Brand Strength.
Gross Margin= ((Sales (gross revenues less returns, allowances and discounts) - cost of goods sold (COGS)) / Sales (gross revenues less returns, allowances and discounts)
Great Brands do not discount. How did your average selling price (ASP) by part change over past 6 months? Who? Why? Where?
Great Brands sell-through at retailers. How are top doors selling through month to month? Increasing? What product?
Great Brands sell-through at retailers and retailers don’t drop the price of a fast-selling product. Have the retailers been discounting your product?
Great Brands are in the best locations inside the store. Has your product been moved?
Great Brands build new products that fit their consumer’s needs so new model products maintain or expand gross margin. Do your new products have feature sets that the consumer is willing to pay more for?
Great Brands have product feature sets that block competitor lower pricing pressure.
Great Brands have high quality products that the consumer does not return. Describe your returns and understand why.
Great Brands have great customer service processes that solve consumer problems before they are returned.
Great Brands do not need large retail allowances to sell through at retail or direct. How are you allowances being used?
So, how have your Gross Margins changed? Do you know why? It could be your Brand.
More info here: https://www.focusedprofitability.com/grossmargin
