Buying & Merchandising: Importance of Understanding Finance

Is there anything else that you would advise students should understand about the mass channel?

Yes. We really don't have a masstige channel. We call that ‘specialty’ because masstige is a category that fits within a retail channel. Masstige should be in drug, masstige should be an Ulta, masstige should be in mass, because it's the price point, not a separate retailer. For your students there's a couple of things that I would encourage, which would be, understand how each of these channels make money. The economic model in which they get to their operating income is really important to understand while they're in college, while they're at university.

That's the gross to net and all the spend and promotion that goes from gross to net, right?

All the way down to operating income. Every marketing student should be just as great at finance in my opinion. To be able to talk about what changes we need to make. What minimum impact changes do we need to make, in order to get a better business for both of us? In order to get a better business for both of us, you need to understand how they make money in the first place. Each of these would be, how do they make money? What's been the last six quarters of trends, and then how could we foresee and predict what the next three quarters are going to be? That's a great mental exercise for them. Then to track it; were they close? Were they within range? Did they find a way to predict what happens if things don't change? What changes need to happen in order to get a different outcome? Can they find what inputs need to change, in order to get to a better outcome? That would be a great financial exercise for them, because their job is to make money for the company and for themselves and for the retailer. At the end of the day, that's how they survive.

The other part is, what's the best way to utilize social and digital as your main platform of conversation, going forward? How can you use these mechanisms and these platforms and which is the right one to utilize for what type of story? Understanding social inside and out, not as a user but someone who serves a consumer. That's different. They know social because they've been born into it, and they know digital because they're born into it, but they know it as a user. How do you serve a consumer in that and get credit for it? I would actually run them through an exercise, if they were in a marketing class, where they had to come up with a campaign, and they need to test it digitally.

Do a survey, put it out to market, do rapid response, like how quickly can you get a good idea to market that you get credit for it. That would be a project I would put onto a team, each of these teams inside the class, on getting it out there and actually doing something, because they need that experience. The theories are important and they'll get that. However, application and execution is how you get paid. It just is. For them to have that real-life experience of getting their ideas out to real people who can consume them and measure their thesis and what the KPIs were like. Do that while they're in school, and they'll be much more marketable as people, to get jobs as soon as they get out of school.

What is a simple way for students to understand that economic model in the mass channel? Is it just the gross to net?

Yes. For me, I would take them through a simple P&L to start out with. Here's our growth and here's our net and here are the activities that affect gross to net, with the in-between part.