Best Practices for Measuring Your Success on the Shelf

Transcription

1 Best Practices for Measuring Your Success on the Shelf

2 Want Retail Success? Here s How to Measure It. What are KPI s? For small business owners and entrepreneurs, the retail market can be a tough nut to crack. Established brands and fierce competition make market penetration difficult, but it is by no means out of reach. Although you may be eager to jump right into the market and show your product to the world, without setting clear goals, there will be no way to gauge your success. This is where KPIs (Key Performance Indicators) come into play. At their most basic, KPIs are a way to measure the most important variables in your business strategy. While it may be intuitive to collect all the retail sales data you can about your product, there are associated costs that should be taken into account. Not everything that can be counted counts, and not everything that counts can be counted. Albert Einstein Is your product selling better with one shelf facing or two? Are your promotions effective? Are distributors ordering more or less of your product? Questions like these, once answered, give a clearer and more complete picture of how your retail execution has fared. Although you should consider the particulars of your own product and situation before creating personalized KPIs, these five metrics are among the most valuable for use in the retail sector. 2

3 5 KPI s for Measuring Success on the Shelf 3

4 Where Are People Buying? Point of Purchase KPI Grocery stores are places of high-impulse buying, where a majority of the purchases taking place are unplanned by consumers. Looking at the Small Picture While many small business owners focus on the venue in which their product is sold, but on a micro level, a product s position in a store can tell a different story. When approaching retailers with a product, it is important for businesses to let them know exactly how they plan to promote product growth, and use that as a platform to get the shelf space that wanted. According to Dr. Paul Harrison of Deakin University, in the case of high decision products such as coffee, selling a product in the center of an aisle may be more 4

5 beneficial than on the edges, due to the high traffic which can interrupt decision making. Placement is not the only variable to keep in mind however. A 2014 study composed by Benedict Evans predicts that within four years, 70% of the world population will have a smartphone. This excellent article by Inc.com s Mark Suster touches on the finer points of the study. Integrating technology with purchasing methods can give new opportunities to advertise and promote a product. Businesses need to be able to recognize trends like these, and then adapt their strategy to capitalize on them to find success in whatever venue they choose. A 2012 study by the Point of Purchase Advertising International (POPAI), shows that nearly 76% of purchases in grocery stores in the United States are unplanned. The study goes on to say that this decade has seen the largest jump in brandswitching ever, meaning the market is wide open for competitors to entice new consumers. A great way to tie all of these variables together and gather quantifiable data is to use a Point of Sale KPI. The Retailer Economy. It s about the supply and demand for shelf space! Retailers own the shelf space that gives consumers access to your product! 5

6 $35,000 $30,000 $25,000 $20,000 $15,000 Sales at Drink Coolers Sales at Register $10,000 $5,000 $0 June July August September October An example demonstrating the Point of Sale KPI. In this case, sales at drink coolers are doing much better than at the register, even though it is the same product, at the same retailer. At a macro level, this KPI can be used to compare sales at each channel over a period of time. At a micro level it can be used to compare sales at the different placements within a store, as discussed above. Understanding where a product is performing well and where it is performing poorly is invaluable when making decisions about where to sell a product, and how to best promote it. Fitting in. Just because your product looks great doesn t mean that consumers will find it. Your product has to be well positioned in the store, and all your competitors will fight hard for the same space. 6

7 Sales by Promotion KPI Cognizant chart illustrating where consumers redeemed coupons over the last year. Finding a way to differentiate a business from its competitors sometimes requires thinking out of the box. Product Managers may be running any number of promotions for their products, and sales may be through the roof but are promotions running as efficiently as they could be? Measure every promotion that is run to determine how they impact sales. Don t simply look at which promotions are most successful; take into account other factors which influence sales of a product in these venues. IRI, one of the foremost providers of market and shopper data in the Consumer Goods space, says in this report on Promotional Effectiveness that a truly impactful analysis of a promotion will involve a variety of very different elements such as timing, media and messaging, the nature of the SKU or brand promoted, retailer incentives, levels of discount, target consumer audience etc. If one of a product s biggest competitors is running a similar promotion, and sales are lower than expected, it may not mean the promotion method is ineffective. Set variables by which to judge individual promotions and stick to them. 7

8 A recent promotion run by social media advocates BiziTalk offers consumers professional twitter promotion for the price of a coffee. Being innovative in promotions will help a product to stand apart from its competitors and remain relevant. Tracking which promotions are bringing in extra sales or securing a larger share of the market is vital for making decisions about which form of media will be used to further promote a brand, and about where those promotions will be most effective. Make it Loud. In addition to great packaging, you will need additional tools to bring attention to your product. Shelf Talkers that hang into the aisle, door stickers for coolers, floor stickers, window posters 8

9 Sales by Demographic KPI Understanding the customer is the foundation of any successful retail strategy. Product Competitors will be looking at the same customers, trying to understand who buys their products and why. To gain the competitive edge, look deeper than the competition. Standard practice says to look at age, location, and income, among other things. To truly understand consumers, try to connect with them on a personal level. A 2014 study by Moosylvania.com gives great insight onto a demographic that many retailers have trouble managing Millenials. One telling piece of data from the study shows the different channels used by Millenials to promote brands they love. Telling statistics such as these can be used to the advantage of a business. If the product target demographic is Millenials, this data would give great support to the idea of a Facebook campaign, or an online catalog. Discovering common interests among customers and building a demographic profile with depth and personality allows businesses to effectively market towards those customers, and bring in new customers who have similar interests. 9

10 Sales per Facing / Sales per Square Foot KPI Shelf space is a valuable and highly-sought after commodity in the retail market. A science in itself, it may come as a surprise that there is still not a great deal of information regarding the effectiveness of multiple facings or shelf location. This study by Booz&Co does a good job of highlighting just what it is about shelf facings that are so important for entrepreneurs and business owners. From the Study: Regardless of how much effort went into promotion or product design, the shelf is the point where the consumer meets the retailer, the brand, and the product. The outcome of all those relationships and the buying decision depends entirely on what happens halfway down Aisle 2. 10

11 The Chart from the aforementioned study demonstrates well how different brands and product categories have different supply chain relationships which impact their point of optimal shelf-space. While the first instinct is probably to secure as much space, or as many facings as possible, it is more beneficial to weigh the costs of additional space against the additional profit those facings will bring in. Finding out how to optimize space in a retail location will help to bring in more profits, and will see businesses throwing away less money on under-utilized area. A thorough study on this exact subject conducted by Jared M. Hansen, Sumit Raut, and Sanjeev Swami titled Retail Shelf Allocation: A Comparative Analysis of Heuristic and Meta-Heuristic Approaches was published in the Journal of Retail in March of One conclusion made from the study was that multiple vertical facings had approximately double the effect on profits as compared to horizontal facings. When considering the logistics of in-store real-estate, considerations such as these can be used to maximize the effect on sales. 11

12 Shipment Changes KPI Another KPI which many businesses already use at a macro level, a Shipment Changes KPI tracks trends in order size and frequency for a product and can warn a business of things to come. Notice that a number of locations are lowering their order size every week? These distributors may be planning to phase out the product, or switch to a competitor. Understanding what distributors want is just as important as knowing what customers want, if not more. According to this case study from the International Journal of Production Economics, 47% of firms only focus on developing smooth internal processes. If the remainder of a product s journey to the consumer is not a smooth one, there will be difficulty building traction in the market. Keep in mind what end-users want as a buying experience, and try to work with suppliers who meet those criteria. 12

13 A recent ComScore study commissioned by UPS shows what the majority of shoppers want to see improved in their online shopping experiences, and improved shipping tops the list. For a small business or entrepreneur, knowing exactly which steps of the transaction are most important to the consumer is invaluable. In the example below, retailers may want to consider prioritizing different shipping options over including a carbon-neutral shipping option. Monitoring not only retail sales data and customer feedback, but also the behavior of resellers is a great way to manage the growth of a product. If the channels selling the product are not providing adequate customer service, that product may be missing out on sales that could be made elsewhere. 13

14 Your Personalized KPI Suite There is no one-size-fits-all KPI bundle that every business can adopt. Understanding the product and customer are the first steps in determining exactly which KPI s will be most useful. Knowing when it is cost-effective to research an aspect of the business is an invaluable skill for any entrepreneur or business owner who wants to optimize their effectiveness. Monitoring sales at different points of purchase, evaluating different advertising and promotional activities, consumer demographics, shelf location, and shipment history are all great KPI s which can be tailored to the specifics of a business. With the right metrics and direction, every success or mistake can be a helpful step in the right direction for businesses everywhere. 14

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