This is the first in a three-part serie of articles which explores how Product Information Management (PIM) systems can generate a substantial return on investment (ROI).
Drivers of strong ROI include decreasing the amount of time your employees spend updating spreadsheets and streamlining your entire eCommerce operation. Implementing PIM helps you increase profits reducing costs and increasing revenue. This article discusses how PIM helps you save money by reducing product management overhead. Part II covers PIM’s ability to realize further savings through decreased returns and improved on-site conversions. Part III summarizes and goes into more detail on PIM ROI over a three-year period.
Overview: The Astonishing Volume of Detail in Product Management
Managing multiple product SKUs in an eCommerce business tends to be time-consuming and expensive, especially if the product management team relies on manual processes. To understand why this work is so laborious, think about the amount of detail in a product manager’s workload. Table 1 describes the level of detail tracking required in a company with 30,000 product SKUs in its first year of operation. Each SKU contains 70 attributes, e.g. size, color, prices, images and so forth. If the company has its eCommerce site translated into three languages, that means the product management team has to keep track of 2.7 million data values.
|YEAR 1||YEAR 2||YEAR 3|
|Number of SKUs||30,000||40,000||50,000|
|Attributes per SKU||70||80||90|
|Number of languages
|Number of channels
(e.g. website, catalogue, mobile app)
|Number of values to handle||2,700,000||6,200,000||13,500,000|
|% #values growth
Table 1 – the number of data values a company has to manage as its expands it product portfolio, channels and language localizations.
As the company grows, the data challenge expands with it. If, as Table 1 shows, the company adds 10,000 SKUs, a new language and an additional channel in its second year, the number of data points under management balloons to 6.2 million. In year three, with one more language and channel, they’ve got 13.5 million data points on their hands.
A data management load like this requires a lot of man-hours. Product enrichment is critical to conversion rates, low return rates, and overall profitability, so skimping in this area is not an option. Without the right automation tools, even the most efficient product management team is going to be quite expensive to maintain. And, the work will suffer from productivity and accuracy challenges.
Drivers of Product Management Inefficiency
It’s not an indictment to say that manual product management is inefficient. This is just a reality. You may have the most diligent product managers around. They will still be less efficient that a good PIM solution. Here’s why:
- When people do the work without the right tools, it takes a long time and is error-prone.
- Spending time manually emailing, importing and exporting product data.
- Relying on email and phone to communicate changes about products or get questions answered.
- Cutting and pasting product information from spreadsheet to spreadsheet.
- Manually updating nearly identical SKUs.
- Looking for and correcting product images and videos.
- Manually correcting product data in multiple locations.
- Looking for missing data.
- Repeating all of these tasks across multiple channels and localization efforts.
- Fixing all the inevitable mistakes from the manual processes.
- Without PIM, the team managing each channel probably has to oversee its own collection of product data. Or, the teams may circulate eternally out-of-date spreadsheets of product information and waste time correcting product listings.
- Localizations lead to complexity. More languages, differing units of measurement, and slight product changes from regional market to regional market mean more complexity.
- Multiple stakeholders in different groups (or even different companies) often have to collaborate on product management processes. The more contributors there are and the more separated they are organizationally, the more inefficient the product management process will become.
- Most eCommerce systems on their own are not well suited to implementing global strategies. Rather, they tend to be good for immediate merchandizing around specific events like Christmas or high-frequency sales. They are usually devoted to the single channel of eCommerce. Localization and multiple channels, such as print catalogs, are challenging to implement.
Savings from Product Management Productivity Via PIM
A PIM solution saves you money by reducing the amount of time employees must spend administering products for an eCommerce site. With PIM, there is one authoritative product data set. This leads to time savings across multiple channels and makes product managers more productive. It also helps eCommerce sites and print catalogs become more engaging and profitable.
A good PIM solution provides all the stakeholders in the product management process with a connected, intuitive tool to track and manage product details. PIM enables employees to avoid repetitive, dull and error-prone tasks. For instance, PIM will automate the process of making sure a shoe listed as “Blue, Size 11” on an American eCommerce site gets listed as “Blau, Größe 44“ on the German localization without any manual data entry steps. Multiply that process by 30,000; and you can start to see the advantage for the company described in Table 1.
Multi-channel businesses make the PIM advantage more pronounced. Businesses where multiple teams have to coordinate their product management efforts also benefit. The PIM tooling streamlines the process of getting the work done.
PIM provides a number of intangible benefits which can contribute to greater success and profitability. These include a reduction in frustration that stems from having to deal with millions of data points – often on a rushed schedule – as well as the stress of handling errors. Reduced errors on the eCommerce site and richer product detail will result in higher customer satisfaction. And, spending less time on a time-consuming task brings opportunities to spend more time on merchandizing.
Add Up Your Efficiency Gains
In our experience working with numerous multi-channel businesses, we have observed that our PIM solution enables product management efficiency gains of about 50% and can go up to 70% and even more. To understand what this means in terms of dollars, consider the example in Table 2. Modeled on a typical client of ours, this hypothetical company updates 33% of its 30,000 SKUs in the first year. At 5 minutes per update, using a manual process, it will cost the company $25,000 to update its eCommerce catalog in the first year – assuming a fully allocated labor rate of $30 per hour.
With PIM and a 50% bump in productivity, product updates will take just 2’30 minutes. This translates into a savings of $12,500 in year one, $27,917 in year two and $43,056 in year three as the product count grows along with the number of updates.
|Year 1||Year 2||Year 3|
|Catalog Size (# of SKUs)||30,000||40,000||50,000|
|Product updates (%)||33%||29%||23%|
|Number of values to update||900,000||2,010,000||3,100,000|
|Fully allocated cost of a product manager (per hour)||$30||$30||$30|
|Estimated time to update 90 values (Minutes)||5||5||5|
|Time required to update product values (hours)||833||1,861||2,870|
|Total cost of manual updates per month||$25,000||$55,833||$86,111|
|Estimated productivity gain from PIM||50%||50%||50%|
|Time required for product update with PIM (hours)||417||931||1,435|
|Total cost of PIM-based product updates per month||$12,500||$27,917||$43,056|
|Savings per year||$12,500||$27,917||$43,056|
Table 2 – Projection of savings from the implementation of PIM in product management.
As Table 2 shows, PIM helps save money by making product management more efficient. There are many other ways that PIM contributes to increased profits and ROI. These will be covered in the next articles in this series.
Want to talk to one of our experts to better understand how PIM could decrease costs while increasing revenue at your organization? Just want an idea of how much it would cost to setup Akeneo?
How Product Information Management Makes You Money, Part 2 >>