A perfect store is one that provides a seamless shopping experience to the consumers. It can be implemented easily with the help of retailers and sales reps to help build a positive brand image which in turn results in profitability for the CPG manufacturer. This concept was born in the world of CPG companies and is termed officially as “ Perfect Store” by Unilever, “Golden Store” by P&G , “RED - Right Execution Daily” by Coca- Cola and “Flawless Execution” by PepsiCo.
Its implementation requires a carefully crafted strategy. So we present to you a series of articles where we discuss the relevant questions that we need to ask ourselves when thinking of building a perfect store programme (PSP). The goal is to boost sales, collect intel and drive growth all the while correctly reading and interpreting shopper sentiments -
Part A – Key questions a CPG manufacturer must consider before starting a PSP.
Part B – A framework we suggest for building effective PSPs
Part C – How to measure effectiveness and ensure perfect store execution.
In this post, we discuss measures that are an integral part of designing perfect store programmes.
CORRECTLY IDENTIFYING THE SHOPPER MINDSET:
You went to the store to buy custard powder. You come back home with custard powder and cocoa powder and chocolate syrup. You had those items at home, but they were on sale so you purchased them. It seems simple enough. It isn’t though.
The Consumer Goods’ (CG) companies pay millions of dollars to study the purchase trajectory of their shoppers and impact their purchasing decisions in their favour. It is intensely driven by data collection from sources such as shelves, e-pos (e- point of sale ) data, data collected from third party auditors, shopper panels or directly collected from retailers.
It gives them better insights into customer behaviour like : composition of baskets, repeat purchases and impulse purchases. It helps manufacturers’ understand how they can make their products more visible, give competitive pricing and fine-tune their point of sale material (POSM) to obtain maximum impact.
MAKING USE OF THE 5 P’s OF MARKETING:
The main action is where the “shelf” is. According to a report by Nielsen, A planogram will generate a “SMART” shelf only if it has the right balance of art and science. A SMART shelf is – Shopper friendly, Maximizes sales and profits, Avoids out-of stocks, Reduces operational inefficiencies and Triggers experimentation. Thus, a SMART shelf will help shoppers, manufacturers and retailers.
To implement this, a right team for data collection is required. Data collection and subsequent research helps CG companies to identify what drives sales in a particular category and how to optimize the parameters involved for their benefit.
Think of retail stores as a marketing avenue for your brands and perfect store programmes as something that makes your brand stand out. The framework most widely used is the 4Ps of Marketing pioneers by Jerome McCarthy, a leading thinker of modern marketing. Since then, many practitioners have expanded the 4Ps to 6Ps.
We are going to use 5Ps employed by Unilever. If you think from a consumer’s point of view, this is what a consumer’s engagement with brands' involve -
- Am I getting the PRODUCT I want?
- Am I able to locate it easily? PLACE
- Is it available in my budget? PRICE
- Is there any special PROMOTION available?
- Is the product’s USP clear to me? PROPOSITION
Let us understand the value of these parameters methodically and the Key Performance Indicators (KPIs) it involves:
1. THE PRODUCT:
The product that is placed in a store is exceedingly important. Not all stores see similar traffic or similar types of shoppers. This fact greatly drives product placement in a region. It also depends on the store’s location.
So it makes sense to display such products that are useful to the community living in the vicinity of that store. A luxury perfume may find a place in a metro city convenience store, but not in the local grocery store. Such targeted approach can help create a loyal shopper base in a category.
On shelf availability (OSA) is an important KPI to consider when it comes to products. It refers to the fact that the consumer is able to find the product on the shelf they expect it to be , and at the time they want to buy it. OSA is directly associated with the ‘ out of sight, out of mind’ principle. If the consumer does not find the product on the shelf, they will look for a different brand or maybe even a substitute. It directly leads to loss in sales. Which is why the hero SKUs for that area should be in the “must-stock” list. OSA is often impacted by other KPIs like Phantom Inventory (PI) and Product Voids (PV).
New Product Launches (NPL) should be kept at places of high - visibility. If the new product is a part of an associate category, then arranging a combo pack with the hero product might not only enhance sales, but also be an innovative attempt at establishing the new product. For example Reckitt Benckiser’s hero product the Harpic Toilet Cleaner was sold in combination with its new product, Harpic Bathroom Cleaner in India.
2. THE PLACE:
The place where products are situated in the shop floor plan determines sales.
There are KPIs to help us better create sales zones. This usually works on the principle of product placement. The product placement typically includes:
- Arrangement - refers to eye-level placement, the sequence of products and planogram.
- Share of Shelf - includes Linear SoS, facings and others
The product arrangement is enacted through proper presentation of the product and the brand. The focus here is visibility that makes sense. Keeping the SKUs at eye-level is the most fundamental aspect of it. 'Eye level is buy level'
Then there’s the sequence of products and planograms.
Let's take the curious case of custard powder, cocoa and chocolate syrup purchase as mentioned above. As a customer, you are familiar with the store layout and go to the desserts section to get your custard powder. This could be called your destination zone.
But right next to it you encounter cocoa powder and decide to replenish your stock. You take a step further and come across chocolate syrup and decide to replenish that stock as well. This could be called your impulse zone since you made an impulse purchase here. The sequence in which different products are arranged induces impulse purchases.
Different shoppers have different destination and impulse zones. The key is to observe thoroughly and arrange complimentary items together to enhance sales and develop categories.
The planogram arrangement can be in the form of blocks. It should be attractive yet rational. For instance it makes sense to display biscuits horizontally to avoid them toppling over on disturbance and be prone to breakage.
Share of shelf (SoS) is the space allotted to your product on the shelf. It's a part of the agreement the brand negotiates with their retail partners. This includes Linear SoS. The brand has to buy enough shelf space so that their product is displayed practically and advantageously.
Another measurement criteria is facings, i.e. the number of product facings that is visible to your customer. More facings means enhanced visibility. Meaning there’s an opportunity here to increase sales probability. It's one of the reasons that brands shell money to buy spaces at the end of aisles.
SoS helps us to quantify how our product is working on the shelf vs. that of our competitors. The numbers obtained help us in the future for new product launches.
3. THE PRICE:
A CG may implement all the best practices of a perfect store and still not succeed if their product pricing is not competitive. They need to know if their brand is losing or gaining market share at the current price offered for the product. And also if the price is in equanimity with company standards and objectives while also maximizing sales margins. Both situations require data collection and its subsequent computation to gather actionable insights.
However, one basic approach that cannot be challenged is the KPI for price tag availability. The money spent on promotions, POSM , advertising amounts to nothing, if a customer encounters an absent/incorrect price tag. It's a lost sales opportunity. Moreover, this is an anomaly which is why it would be imprinted in the consumer’s brain for a really long time. We want to avoid that.
4. THE PROMOTION:
It is a big driver of sales. Going back, yet again to the case of custard powder, cocoa powder and chocolate syrup, let us not forget that these baking adjacencies were available at a discounted rate right next to the dessert section. Hence the impulse purchase regardless of having the products at home.
Promotions are mostly made for star products and new product launches. They are made more effective by impactful POSM and posters. This is where the marketing comes in.
A promotion can also include a discount, a special coupon or a cashback. While implementing promotions one should put up the discounted price tags to enhance product sell-out.
5. THE PROPOSITION:
Creating a proposition for a product is to emphasize the USP of that product. The idea is for the brands to create an imprint in shopper’s minds to the point that they think of the brand synonymously with the product. For instance, the association between Vaseline and the product as petrolatum. The USP could be product purity, product recommendations or awards associated with the product.
It could also involve creating a narrative around the product. Its aim could be to educate the shopper, to awaken an emotional response or a call to stand up for a cause.
Often CG companies focus such propositions on their star products. This way, the benefits of customer loyalty and sales could even extend to different, newer versions of the same product resulting in a sales boost of the overall product category.
Proposition is often carried out by putting shelf-talkers on the gondolas’ shelf. End-caps are used as well. Arranging products in blocks is a method used in planograms to create a visual impact. Putting sachets on hangers and keeping products at check-out counters is another way to augment brand visibility.
There needs to be a measurement in place, that is followed pan organization to measure the effectiveness brought about by implementing the 5P strategy.
HAVING STANDARDISED MEASUREMENT SYSTEMS FOR KPIs:
Above we have emphasized how the 5P's are made measurable by sing KPIs. They help measure in store execution and give a wholesome view incorporating value addition to the brand apart from sales driven gain.
But its benefits can be fully utilized when CGs ensure their KPI measuring units are standard across changing markets. A consistent system keeps customer insight analysis error free which helps in executing true perfect stores. In turn, it helps in fair comparisons of product sales , quick identification of potential problems and finding their solutions.
To help KPI calculation, CG companies empower their sales reps with cutting edge technologies like image recognition and sales force automation solutions. As per Gartner report, Image recognition technology can increase sales force productivity, improve shelf condition insights and help drive incremental sales. These tools can provide high accuracy in SKU recognition . Subsequently, KPIs are calculated and actionable intelligence is generated within minutes. The sales rep is able to identify gaps in product availability, planogram compliance and overall retail execution.
A balance between sales and brand value has to be struck. A brand has to keep in mind the shopping needs and behaviours of customers and accordingly make trade offs between retailer and manufacturer objectives. These trade-offs require KPI system that is aligned throughout the organization and a way to measure the said KPIs without bias through technology . This is the reason why a perfect store is a work in progress always. Its all about Clicks & Bricks : Developing a hybrid approach to shopping for the consumer. As and when changes are observed , the strategy is to be modified accordingly to face the reality of what an FMCG could achieve on the field.
Want to know how to execute and measure your Perfect Store Programme? Read our next blog to find out.
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