In RSR’s benchmarks on retailers’ merchandising strategies, we’ve seen a lot of back and forth around the idea that customer should be a dimension within the merchandise planning process. It seems that on the one hand, there are a lot of potential benefits (like making sure you have an assortment that covers the needs of, say, a key customer segment) and yet retailers can’t seem to pull the trigger on incorporating customer data as part of the planning process.

I suspect there are complex reasons for this – multiple issues that have interdependencies, like their merchandising systems are so version-locked from customization that the idea of adding the customer dimension to planning considerations is so difficult as to be laughable. Like their customer data is not clean enough or packaged in a way that is useful to merchandise planners. Or they simply don’t have strong processes or training in place for how to effectively use customer data.

But last week I was talking with a solution provider about merchandise buying and whether retailers buy too much inventory. They floated an idea that I wanted to share. Let me give you a little bit of context first.

I’ve been talking about planning by customer not in terms of assortment, like the example I gave above, but more in terms of being able to more efficiently place inventory. If you plan by customer – raw demand, if you will – and then decide what is the probability that a consumer is going to buy something online vs. in-store, you turn the way most people plan today on its head – instead of looking to the store as a unit of aggregation of demand, you are looking at demand, and then doing basic math to allocate inventory to the right places, whether stores or eCom DC’s or someplace else.

But if you plan by customer, then you are also inherently making an assumption about how much you can sell. Every retailer has had to deal with the conversations that start with “Our growth target is 5% this year, so we need to sell 5% more in order to hit that. Everybody figure out where your 5% is going to come from. ” A game of top down, bottoms up and back and forth ensues as everyone tries to figure out how to negotiate some kind of expected growth across selling categories that totals the expected growth rate.

But how will this extra 5% be sold? By acquiring 5% more customers? By selling 5% more to your existing customers? Well, that’s not really Merchandising’s problem is it? That’s up to Marketing to make happen.

And underlying even that issue is the fact that some things have an upper limit in terms of market size. The solution provider’s example was maternity swim suits. Absolutely you can sell one swimsuit to an expectant mother. But two? More? She is going to wear it for 5-6 months tops, and then probably never wear it again. The maternity swimwear market is not going to grow 5% just because you put that number in a spreadsheet. And even if you think you can grow the category against other trends in the industry, you kind of have to take a realistic look at your customer base to figure out how many existing customers may find themselves looking for a maternity swimsuit in the next year or season, and whether that number supports your increase, or whether that number must come from taking share away from someone else.

This is no-brainer stuff, and I have to think that at a macro level, a lot of retailers are doing the basics of life stages planning against their strategic customer segments. But then again, I’m an optimist who has to learn things the hard way. I’ve certainly seen enough places where retailers are NOT doing anything basic related to life stages, let alone anything more sophisticated like life STYLE planning.

But the whole conversation just underscored to me that there are many, many untapped benefits of using customer data as part of the planning process. When it comes to planning, the fact that a retailer can do it at all with any sophistication used to be a differentiator. But those days of easy pickings within planning are done. Retailers need to get more granular. But granularity can come from more than just location or product – it can come from customer too.

Retailers are starting to understand there is value in understanding the likelihood that a product will be purchased online vs. in store and planning their assortments accordingly. They’re starting to understand that key customer segments need an assortment that covers their needs, so the assortment strategy should be viewed in that light.

But even more important, they should be understanding where the growth opportunities are for each of their customer segments and how they might capture that growth. Unfortunately, that means merchandising and marketing working together to commit to how growth might happen – two organizations that don’t often get along (if they even know each other).

It comes down to this: no matter how hard it may be, customer as a dimension of merchandising seems to be getting more and more important. And the retailers who crack that code early have an opportunity to do something competitors can’t – for however long that advantage might last.