We present to you a series of articles on the perfect store programmes (PSP) -
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 our previous blogs, we touched upon the vital questions one has to answer before acting on the idea of a Perfect Store Programme. After which, we helped create a framework for building and executing a perfect store.
With the big picture in place, we draw upon our experience to highlight some finer details and best practices that increase the chances of your Perfect Store Programme becoming successful. This blog revolves around measuring the execution of your Perfect Store Programme, the feedback loop created as a result and how to use this feedback loop to your advantage.
MEASURING YOUR PERFECT STORE EXECUTION
Why measure your Perfect Store Programme?
Creating a perfect store for retail execution is indeed a good practice and would yield results. This is the expectation.
But measuring this execution is of paramount importance. More than 80% of Perfect Store Programmes who don’t measure their set Key Performance Indicators (KPIs) regularly, find that their execution of the programme on ground level is lacking. This is a big gap that should be addressed.
The fact remains that the entire operation of placing your products in a retail store and its purchase by customers, includes a plethora of variables.
There are many product categories and each has their Stock Keeping Units (SKUs). The SKUs are kept at various kinds of retail stores like a hyper-market or a convenience store. They can be further divided into retail accounts like Target, Walmart, 7-Eleven. The people involved are merchandisers and retail partners, field reps’ and the CPG manufacturer’s company management.
As we can see, there are too many moving parts here, which makes it easy to miss the bus on certain parameters.
How to measure your Perfect Store Programme?
It involves three key steps:
1. Build a scoring criteria:
The principle used here is prioritising by adding weightage to the parameters that are important. The parameters are Unilever's 5Ps to measure retail visibility of your products. Below is a sample scoring criteria for the same.
Apart from product categories, scoring mechanisms can be made for retail stores. On their basis retailer/merchandiser benefits can be decided. Scoring systems can also be used to evaluate field rep performance based on which their incentives are calculated.
The importance of a scoring mechanism is that it quickly identifies the region, area, sales reps, stores, category, products that are deviating from the compliance. This helps in initiating remedial measures to plug the sales leak.
2. Create a mechanism for measuring perfect store execution:
Building this mechanism can be carried out by CPGs own field representatives. During their store visits they measure KPIs for different SKUs. The results help in determining whether or not the perfect store guidelines are being followed. Third party auditors may also be hired by the CPGs.
The CPG can also request their retail partners to be involved in the store auditing exercise and maintain a digitized database for compliances attributed to SKUs.
3. Using tools for measurement:
Manual estimation of KPIs by collecting raw data is subject to errors and human bias. To avoid that, CPGs are now leveraging Industry 4.0 tools. They use Artificial Intelligence (AI) enabled Image Recognition software.
The field reps, while auditing the stores, capture images of shelves which are uploaded to the server. An AI layer then processes it and provides actionable intel.
VIRTUOUS FEEDBACK LOOP FOR A SUCCESSFUL PERFECT STORE PROGRAMME
The results of the measurement are incorporated to create a feedback mechanism for constant improvement. There are three such loops that operate simultaneously in this scenario:
The instant feedback loop for the field rep from the app:
This is the instant feedback loop that aids in retail execution while the field rep is in-store. The images of retail shelves are captured using the app and uploaded to the servers. The AI engine then stitches (or processes) these images to calculate KPIs which then get reflected on the App. The field rep takes cognizance of the KPI measurements and arranges the shelves as per his Perfect Store guidelines.
The feedback loop for the retail store from the dashboard:
The AI sends a broader feedback of the retail store performance (based on KPIs calculated) to the dashboard which is under the supervision of the CPG HQ management. On seeing the scoring of the retail store, the CPG HQ intervenes to improve retail compliance levels.
The feedback loop for the CPG HQ from the dashboard:
The AI sends a broader feedback of the field rep performance. This is calculated by determining the performance of retail stores under them, and scoring the field rep accordingly. The CPG HQ then, gives timely feedback to the field rep on their performance.
The complete big picture feed-back loop:
The big picture here is to ensure retail compliance of Perfect Store guidelines and to identify the gaps and redress them. AI Image Recognition Solution creates a constant feedback mechanism by delivering the SKU images clicked in the retail store to the HQ and field reps. Field rep acts in real time to address the issue on the shelf and HQ in turn , evaluates performances of field reps and stores.
It's a challenging exercise, with its learning curve. Companies rarely get it right the first time. In our experience, a client can see a good 30% improvement in compliance rates within the first three months of image recognition deployment through ShelfWatch. Ongoing measurement is important to maintain 85% - 90% compliance levels given that the market is ever changing.
Initially, clients may start with a base-line rate of 50% compliance. Over-time they get closer to 85% to 90% retail compliance levels.
INCENTIVES FOR RETAIL PARTNERS AND SALES REPS
The feedback loop becomes more effective if retail partners and field reps' incentives are linked to the scores they achieve from executing the Perfect Store Programme.
If a retail store manager scores high for their particular areas, they get a good ranking. This ranking may be associated with incentives like discounts to the retail partner. It results in investment of the retailer in brand health.
It can also be implemented with the sales team of the CPG. For instance, ranking the different Regional Sales Managers in the country for the product they manage. Better the performance, better is their rank. Consequently . better bonus is achieved. This fosters a competitive spirit. The managers leverage the dashboard at hand to scrutinize their field reps’ performances and act accordingly to better their rankings.
However it's important to fix reasonable targets. Too easy targets would cause loss in sales and company revenue. It could also create a slack attitude among the employees and retailers. Too lofty targets would cause employee burn-out and friction in relationship with retail partners. Keeping realistic goals is the key to a positive brand perception.
The goal of a perfect store programme is to drive sales by creating a SMART shelf. 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.
When the Perfect Store programme is well thought out, accurately implemented and diligently monitored, it sets in motion a feedback mechanism. The sales team is able to monitor sales behaviours of customers. The marketing team uses this information to spearhead targeted campaigns. The management allocates resources to different departments based on the results of different campaigns. This in turn, drives the future of the CPG brand.
Thus, the decision - makers and stakeholders are brought together on a platform via the AI solution that is employed. In fact as per Gartner report, Image recognition technology can increase sales force productivity, improve shelf condition insights and help drive incremental sales. This results in quicker identification and subsequent rectification of errors.
Liked the blog? Check out our other blogs to see how image recognition technology can help brands improve their execution strategies in retail.
Want to see how your own brand is performing on the shelves? Click here to schedule a free demo for ShelfWatch.