RFM Grid-Based Clustering To Ensure The Growing Retail Business

The formation of product clusters is the main motive but unless these clusters are easily accessible for understanding; it can be a tiresome act. Enalito presents the product clusters in the simple and easily comprehensible Grid-form. The grid represents the two of the RFM values on the X & Y axis and demonstrates the relation between them. Based on the relationship between the two of the RFM values, each grid denotes a product cluster with a name that indicates the nature of products in a particular product cluster. Clicking on each grid leads to a cluster that shows detailed information about each product’s behavior, value, and contribution to the store.

The grid-based clustering reveals a number of clusters based upon the two of the RFM aspects, which are like:

1. The Recency-Frequency Grid

The Recency-Frequency Grid shows the relationship between how recently the products were sold against how many orders were placed for them. This relationship is the best way to determine the overall catalog and inventory mix for the store. A clear identification of which products are currently contributing the maximum and which ones indicate the maximum future potential. This is the best way to identify the shelf risk products and products which should be retired for maximizing ROI. Clicking on any item in the grid, a retailer can see the full list of products and find detailed business analysis and strategy to take for that cluster of products.

The various product clusters that come under the Recency-Frequency grid and what they showcase are as follows:

a. New Products

This product cluster shows the products which are most recently sold although their frequency (number of times it is sold) is not high. The cluster represents new products that should be aggressively promoted and sold a lot more. Campaigning these products to increase their sales count can promote these products into potential ones.

b. Potential Products

This product cluster represents products that are recently sold with an average number of buys. The products in the cluster reflect good potential. The retailer must focus and find a way to make them sell even more. Such products are good at generating revenue and if campaigned well, they can turn into the top and even best products. These products have a lot of potential and can become a regular contributor to the business.

c. Top Products

The product cluster includes recently selling products that are also selling most frequently. These are the store’s top products. The retailer must ensure to get many more products like these in the store. A store must also keep on doing what it has been doing to promote them. These products have the ability to affect the growth of a business, so such products should always keep selling to keep the business growth consistent.

d. Best Products

This product cluster presents the most frequently and very recently bought products. These are the products that include the top scorers for the business. The products of this cluster are the best performers of the RF Grid. A retailer should pay most focus on these maximum revenue generators of the store, ones which represent the bright future of the business.

e. Promising New Products

The products in this cluster have sold just a little while ago. These are recent selling products but so far haven’t generated much order count. The retailer is meant to focus on promoting them in order to sell more. These products have sold recently which reveals that they have the potential to sell. Just a little bit of effective campaigns can turn more sales from them.

f. Shelf Risk Products

The products of this cluster include infrequently selling products that have been on the shelf for some time now. Such products demand attention to check why aren’t they making any sales. A retailer should try to create their demand and campaign for them in order to build sales. As these products have sold in the past, so new buzz can be created around them to turn them alive for sales again.

g. Neutral Products

The products in this cluster are not recent sellers. These products have sold some average number of days ago and were sold an average number of times. Such products have turned neutral products in time. While filling new products in the inventory of the store, a retailer doesn’t want to stock too many products like these. For such purpose, Assorter should be used to know which products to stock up more.

h. Top Attention Products

This cluster shows the top-selling products which haven’t made any sales very recently. The products in this cluster have average recency but the above-average frequency. It is not too late to increase the demand and sales of these products. Paying attention to these with focused campaigning to identify likely buyers will give good results.

i. Retire Alert Products

The products of this cluster sold quite a while ago. They were sold quite a few times as they portray low to average frequency but their low recency represents that the investment on them is about to become dead. Retailers should focus on improving ROI and create campaigns to sell them even with a discount.

j. Top Alarm Products

The products of this cluster were top-selling products some time ago but are no longer selling. They reflect above-average frequency but their recency is trailing behind. A retailer must pay the highest attention to promote these products aggressively now. Special discount offers should be given for selling them as soon as possible, like campaigning as a “Special discount of 10% if purchased in the next 24 hours”.

h. Remove Products

This cluster shows the products which have not been sold for a long time and were also not selling enough in the past either. These products have the lowest recency and low to average frequency.  The store should initiate a Clearance Sale campaign. Enalito will identify the customers who want each of them and campaign to empty the shelves.

i. Historical Top Products

The products in this cluster are those highest order count products that are not selling anymore. A retailer needs to evaluate what made the sales of such products decline. Maybe the products went out of demand with time or whatever. The retailer needs to realize that these are just dead investment now and it’s time to retire them.

2. The Recency-Monetary Grid:

The Recency-Monetary Grid shows the relationship between the recency of the products and the overall monetary contribution by them to the revenue of the store. It helps the retailer to identify which bigger products (or maximum money contributors) are in danger of becoming obsolete and take corresponding corrective actions to not let it happen. RM grid provides insights into the timely monetary contributions made by the products to the store.

 The various product clusters that come under the Recency-Monetary grid are as follows:

a. Recent Penny Products

The products in this cluster have sold recently and are currently in demand but they haven’t yet grossed a lot of money. Such products have a good probability of building good money with time. A retailer must stock up these products and send a campaign to drive more sales as they have a fair chance to sell much more.

b. Recent Bread Products

The products of this cluster are currently hot selling products that have generated good revenue. These products have sold recently in addition to contributing a good amount of money to the store. Such products are meant to be promoted more. Aggressive and effective campaigning can convert them into big whales.

c. Money Makers Products

With the above-average recency and monetary value, the products in this cluster are the moneymakers who have just sold some time ago. The retailer must keep up the campaigning strategy and existing promotions for them. As these products are already performing good, it’s recommended to do not stop their marketing.

d. Recent Whales Products

The products in the cluster have the best recency and best monetary values, making them the best products and highest money-grossing products. Due to the best recency value, these are the best products at the present time. The retailer must maintain the successful strategy applied to them to continue grossing the best sales.

e. Old Penny Products

The products in this cluster are the lowest money makers which were sold some time back. These products reflect the average recency but poor monetary value. As these products were sold some time ago, there’s a lesser possibility of them contributing good money in the future. The store must evaluate this cluster with care to figure if they should remain in the catalog.

f. Old Bread Products

The products in this cluster have average recency and little below than average monetary value. These products used to be medium money makers but they haven’t sold recently. The retailer must know why it is happening because these products are capable to raise good money. Marketing efforts and campaigns should be made to promote them and make them sell again now.

g. Old Money Products

The products of this cluster have average recency but they used to gross good money before some time. These are the average moneymaker products which have not made any sales recently. Such products can sell again by properly evaluating the reason for the sales decline. The retailer should promote them to activate their sales again.

h. Old Whales Products

The big money-making whales are not swimming in recent times. The products of this cluster have the best of the monetary contribution but they haven’t made any sales recently. These products have made a huge effect on the revenue in the past. So, they can’t be taken lightly and the retailer must boost them by aggressive promotions.

i. Throwaway Penny Products

The lowest moneymakers of historical times are part of the Throwaway Penny product cluster. These products show the least monetary contribution and that also a long time back. These products are typically dead investment and should be taken off the inventory by clearance sale. Focusing regular campaigns is a waste of time and efforts on this cluster.

j. Spoiled Bread Products

This cluster includes those medium moneymaker products which aren’t sold for a long time. The products of this cluster managed to raise average money but the recency of the sales was quite a long time ago. Chances are that these products are out of demand totally and should be cleared off as soon as possible.

k. Save That Money Products

The products in this cluster used to contribute a good amount of money but made sales in quite some time. As these products were quite in demand before some time, the money invested in them should be saved by promoting them now. The retailer shouldn’t let them turn into historical money makers and reactivate them through campaigns to support sales.

l. Save That Whale Products

The products of this cluster are the biggest and most important moneymaker whales for the store but due to their trailing recency they are in danger of going dead. These products can’t be afforded to lose. They must be brought back somehow and implementing aggressive promotion NOW is a must to keep them alive.

m. Historical Money Products

The products of this cluster used to contribute too good money to the store but these good moneymakers of the past are no longer selling. The tough question is to ask why they were not paid attention before until now. As they now have the worst recency, it is better now to remove them from inventory by Clearance Sale.

n. Dead Whale Products

Whales are important for planet earth. The products of this cluster are the Whales who contributed the best of the revenue. The biggest moneymaker whales of the past are now dead. It shouldn’t happen and this should never be allowed to happen in the future. The store must pay attention to such products and sell them best when they are whales and building a large part of revenue.

3. The Frequency-Monetary Grid:

The Frequency-Monetary Grid shows the relationship between the frequency and the monetary attributes of products in the store. It simply means that FM Grid shows how much the products are grossing in terms of monetary value versus how many orders are placed for them. This grid shows the product clusters made from the combination of frequency and monetary values; which clarify the stand of the two most important entities: order count and monetary contribution.

The various product clusters that come under the Frequency-Monetary grid are as follows:

a. Checkout Candy Products

The products in this cluster are selling a lot but aren’t contributing much to revenue. The order count of these products is quite impressive but the monetary contribution is too low. Attractive checkout candy products are the necessity of the store and they maintain good engagement and better sales flow.

b. Fast Medium Products

Fast medium products are the highest frequency sellers and also make average money for the store. The products in this cluster are good products that sell fast and also provide an average contribution to the revenue. Such products are quite useful to back stable sales flow and also raise consistent average money.

c. Fast Premium Products

These products are the best in this grid. The products in Fast Premium are the highest sellers in the count as well as they are making the highest money. In simple words, these products are the best products of current times. The store should keep on promoting them and let them continue performing the way they’ve been doing. These products provide a large chunk of profits.

d. Low Seller Products

The products of this cluster are making the lowest money but giving average order count. These products sell averagely and give an eligible order frequency but their monetary contribution is lowest. Such products provide sales, so they should be sold likewise to keep the sales flow rolling.

e. Average Products

The products of this cluster show the average selling frequency as well as the average monetary contribution. These products are the average sellers of the store and are necessary for it. Such products have good demand and keep the sales consistent. The retailer must maintain these products as they provide a stable base for the store. 

f. Average Premium Products

The products of this cluster reflect an averagely good frequency of sales but they are also making the maximum money for the store. These are the products which are selling quite frequently and contributing a lot to the store. The store can and should go more aggressive to increase their order count.

g. Cold Products

The products of this cluster are making the lowest money with the lowest order count. These products show a below-average frequency of sales and the least monetary contributions. Such products are not worth spending too much time on and if possible, should be cleared by Clearance Sale or heavy discounts.

h. Slow Low Value Products

The products in this cluster are more important than they may seem. These products are the lowest frequency sellers but they are good at making average money for the store. Although the frequency is low, these products manage to produce average monetary value for the store. The retailer must not neglect this cluster and promote them once in a while.

i. Slow High Value Products

The products of this cluster are the maximum moneymaker for the store. Although these products are not selling a lot but are making the best and too good money for the store. A retailer must promote them aggressively for big growth in the revenue and also campaign to increase their order count.

j. Sleeping Giants Products

The products of this cluster are the Monetary Giants which are sleeping. These high ticket items are selling very infrequently but they are big contributors to the revenue. It is crucial for a store to bring them back in sales flow. The retailer should check if anything can be done to sell them more than they’ve sold.

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