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ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
ECR Europe Forum ‘08. Shopper-based assortment planning
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ECR Europe Forum ‘08. Shopper-based assortment planning

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Shopper-based assortment planning …

Shopper-based assortment planning

Intended for people responsible for translating category strategy into category assortment plans, this course will enable participants to describe the inputs, outputs and processes needed for a category that balances the requirements of retailers, suppliers and shoppers alike. It will cover:
• What are we trying to achieve with assortment plans and what needs to be in place?
• How can retailers and suppliers work together to build assortment?
• What information and research is needed to build a shopperbased assortment?
• What are the key steps to building a shopper-based assortment?
• What practical tools can be used in the process?

Facilitated by The Partnering Group

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  • 1. ‘Crash Course’ Shopper Based Assortment Planning Tuesday 27th May 2008 Chris Leach, Peter Lloyd – Partners, TPG Europe cleach@thepartneringgroup.com plloyd@thepartneringgroup.com 1 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 2. 1.Introduction & Objectives 1.1 The Partnering Group • Introductions • Peter Lloyd, Partner, The Partnering Group (TPG) • Chris Leach, Partner, The Partnering Group (TPG) • Who are The Partnering Group? • International strategy and general management consulting firm • Working with Retailer & Suppliers since the mid 1990s delivering consulting and skills development solutions • 50+ partners globally with broad cross functional ‘hands on’ industry experience • Intellectual capital that is regarded as Best Practice – Category Management – Brian Harris • Clients that span the globe in broad array of categories • Working with ECR since the mid 90’s 2 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 3. TPG Consulting Scope Manufacturer Retailer Best Practices Best Practices Strategy “Go to Market” Strategy Integrated Business Planning Consumer Partnerships Strategic Customer Management Category Management Brand Marketing Innovation Interface Process Improvement Consulting Category Management and Shopper Supplier Management Marketing Organisation Design Organisation Design Supply Chain Optimization Supply Chain Optimization Expert Training Expert Training 3 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 4. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment - Discussion Group Discussion: What are the key deliverables that your partners challenge you with when developing Assortment proposals? Retailers? Suppliers? What are the drivers of this? 4 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 5. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment Behaviour Changes: Strategies: • Changing • New Channels Consumption Needs • Store Expansion • Changing Shopping Shoppers Retailers • Increase in # Categories Patterns • Own Brand Development • Value & Promotion • Meet my Needs • Grow Share • Traditional Category Space Sensitivity • Make it Easy • Grow Sales Reduction • Environmental • Give me Value • Grow Profit • Supply Efficiency Drives concerns etc • Loyalty Schemes • Promotion Manufacturers • Grow Share • Grow Sales • Grow Profit Strategies: • Accelerated NPD cycle • Increased Promotion / Trade Spend • Fragmenting Media Plans • Supply Efficiency Drives 5 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 6. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment In this environment our Business Plans need to meet the needs of all three groups to have a chance of succeeding in the long term.. Supplier Retailer “TRIPLE WIN” Shopper/ User 6 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 7. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment Efficient and Effective Assortment Reduce Costs Meet Shopper Needs Retailer Operating Costs Trading Consumer Trends Distribution Variety Marketing In Stock Differentiation Supplier's Operating Costs Manufacturing Distribution Marketing 7 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 8. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment Assortment (SKUs) Drives Operating Costs.. Supplier's Costs Factory Supplier's Supplier's Supplier's Depots Shipping Order & Billing Retailer Costs Retailer’s Retailer’s Retailer’s In-Store Ordering Check- Receiving Depot Shipping & Stocking out 8 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 9. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment But changing tastes and Innovation have exploded what is available to shoppers.. 1970 2008 “Shall I have Coca Cola in a can “Do I want Coke or Pepsi or Own or a bottle?” Brand in 330ml or 500ml or 750ml or 1 litre or 2 litre in Diet or Regular and which flavour” 9 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 10. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment Shoppers are looking for choice - not duplication “Choice” “Duplication” Unique attributes Same attributes Flavour, size, package, etc. Undifferentiated products meeting Meeting each genuine separate the same shopper needs shopper need Penalty for unnecessary duplicated Payoff/reward if limited products Assortment Higher costs Lower retail price Out of stocks Consistently available Confusion at point of sale Clarity at point of sale Source: TPG Research 10 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 11. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment 1. Maximise Shopper 2. Scorecard 3. Scorecard Number of Based Win for Win for Shopper Assortment Retailers Suppliers Needs Met Opportunity 1. Maximise the number genuinely different shopper needs met with Resources Available 2. Minimise the amount of Duplication (meeting the same shopper needs twice) 3. Make Assortment choices that support Retailer and Supplier Scorecards 11 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 12. Introduction to Shopper Based Assortment The Opportunity for Shopper Based Assortment – Summary 1. Shopper Based Assortment combines improving operational Efficiency with better meeting Consumer/Shopper needs 2. Inefficient Assortment drives cost, particularly poorly positioned NPD 3. The last 3 decades have seen an explosion in Assortment for Shoppers which can drive duplication as well as choice 4. The Opportunity for Shopper Based Assortment is therefore to 1. Maximise the number genuinely different shopper needs met with Resources Available 2. Minimise the amount of Duplication 3. Make Assortment choices that support Retailer and Supplier Scorecards 12 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 13. Overview of the Shopper Based Assortment Process Definition The process is collaborative & retailer specific.. ..has a category management background A Retailer- Supplier process to determine the optimal product offer, within a category, that achieves target shopper fulfillment and enhanced business results, including lower costs and improved sales. ..with a focus on the shopper ..to both reduce costs and increase sales by better meeting shopper needs 13 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 14. Overview of the Shopper Based Assortment Process Shopper Based Assortment is part of Category Management Assortment Process Category Management Business Process Objectives & Context 1. Category Definition 2. Category Role 1. Market Coverage 8. Category Review 3. Category Assessment 2. Assortment Assessment 4. Category Scorecard Assortment 3. Assortment 5. Category Strategies Finalisation Merchandising 6. Category Tactics 4. Assortment Price Quantification 7. Implementation Promotion Implement 14 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 15. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key We will Assessment measures run through this process 3. Assortment Do we have the right representation of attributes in our new Assortment? step by step Finalisation 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 15 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 16. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Step 1: Market Coverage − For each Sub Category - setting the percentage of total market sub-category sales we wish to ‘cover’ with our Assortment sub-category: XX % of % Market Family Desserts Cumulative Family Desserts € Turnover sub-category € € Turnover of Market: XX Turnover sub-category PRODUCT 1 €18,000 29.4% 29.4% PRODUCT 2 €15,600 25.5% 54.9% PRODUCT 3 €11,600 18.9% 73.8% Narrow Assortment? PRODUCT 4 €7,000 11.4% 85.2% PRODUCT 5 €2,315 3.8% 89.0% PRODUCT 6 €2,300 3.8% 92.9% ‘Average’ Assortment? PRODUCT 7 €2,000 3.2% 96.0% PRODUCT 8 €1,600 2.6% 98.6% PRODUCT 9 €500 0.9% 99.5% Broad Assortment? PRODUCT 10 €250 0.5% 100% TOTAL €61,165 100% 100% 16 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 17. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Step 2: Assortment Assessment For each sub category looking carefully at all of the ‘Question Mark’ SKUs following the setting of a Target Coverage level.. sub-category: XX % of % Family Desserts Market Family Desserts Cumulative Currently € Turnover sub-category € € Turnover of Listed? Decisions to Market: XX Turnover sub-category make: PRODUCT 1 €18,000 29.4% 29.4% Yes Add? PRODUCT 2 €15,600 25.5% 54.9% No PRODUCT 3 €11,600 18.9% 73.8% Yes PRODUCT 4 €7,000 11.4% 85.2% Yes PRODUCT 5 €2,315 3.8% 89.0% Yes Retain? PRODUCT 6 €2,300 3.8% 92.9% Yes Selected Market PRODUCT 7 €2,000 3.2% 96.0% Yes Coverage Line PRODUCT 8 €1,600 2.6% 98.6% No PRODUCT 9 €500 0.9% 99.5% No Delete? PRODUCT 10 €250 0.5% 100% Yes TOTAL €61,165 100% 100% 17 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 18. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Step 3: Assortment Finalisation Referring to the Shopper Purchase Decision Process Does the new working Assortment adequately meet shopper needs? Are there gaps or areas of duplication? What adjustments do we need to make to align with our selected strategies? ? ? ? Assortment Attribute Matrix Tool 18 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 19. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Step 4: Assortment Quantification What is the estimated € impact on the scorecard from the proposed Assortment changes? - What is the turnover and profit contribution of the deleted SKUs? Will we net 100% of the projected turnover and profit losses from the product deletions? Will the we net + What is the projected turnover 100% of the projected and profit contribution turnover or of the added SKUs? profit gains from product additions in the segment or category? 19 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 20. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Shopper Based Assortment combines three different data sets to ensure informed, fact based Assortment decisions.. Consumer HH Retailer Data Market Data Panel Data The majority of ranging decisions are made with publicly available data.. 20 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 21. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Key Principle #1: Valid Shopper based Definition & Structure.. • Shopper Purchase Decision Hierarchy drives structure • The proper structure helps us determine where switching is more/less likely Wine 1st Decision Level Red White - Switching unlikely 2nd Decision Level French Italian Spanish New World - Switching more likely Appellation O/B 3rd Decision Level – Switching highly likely Brand Size What are the implications of incorrect Definition or Structure? 21 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 22. Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process Key Principle #2: Assortment Decisions are made at sub-category level i.e. for groups of SKUs that meet similar needs Chilled Desserts Healthy Kids Family Special Desserts Desserts Desserts Desserts Functional Low Fat Organic Speciality Organic Regular Pots Other For One Sharing Benefit Brand Pack size Pack size Format Format Brand Brand Flavour Type 22 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 23. Overview of the Shopper Based Assortment Process Summary 1. The Assortment process is Retailer specific and part of the broader Category Management process 2. At its heart the process aims to optimise the offering to the shopper whilst maximising sales and minimising costs 3. The Shopper Based Assortment process relies on access to Market Data, Household panel data and Retailer specific productivity data Most of the decisions can be made without Retailer specific data 4. Each stage of the Assortment Process involves making decisions based on multiple Category Inputs 23 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 24. Understanding the Process The Objectives & Context Stage Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key Assessment measures 3. Assortment Do we have the right representation of Finalisation attributes in our new Assortment? 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 24 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 25. The Objectives & Context Stage Complete the Objectives & Context Check List Five Questions to Answer: 1. What is our most robust view of the Category Definition and Structure? 2. What are the category role & scorecard measures for this category & how does this impact on Assortment? 3. What Category strategies should direct the Assortment? 4. What is the scope of our project? 1. Space/ Assortment size (increasing/ decreasing)? 2. Store Formats? 5. What are the themes from the Retailer & Supplier goals & corporate strategies that must be reflected in Assortment? 25 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 26. The Objectives & Context Stage Complete the Objectives & Context Check List Q1: What is our most robust view of the Category Definition and Structure? (fictional example) Shopper Purchase Category Structure Decision Hierarchy Category Soft Drinks Drink Now Occasion Drink Later (Chilled) Refresh Me Functional Refresh Me Functional Need state Drinks Drinks Drinks Drinks Fizzy Still Energy Sport Healthy Fizzy Still Energy Sport Healthy Waters Waters Type Drinks Drinks Drinks Drinks Drinks Drinks Drinks Drinks Drinks Drinks Various 26 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 27. The Objectives & Context Stage Complete the Objectives & Context Check List Q2: What are the category role & scorecard measures for this category & how does this impact on Assortment? Role Name Typical (names may vary by % Portfolio Description Scorecard Impact on Assortment retailer) • Drive footfall • Above Fair Share Category breadth & depth to • Be the primary provider Growth appeal to highest # of “Destination” 5-10% • Help define the image of the • Reduced Profit due Customers retailer to investment Invest in new items “Core” • To be the preferred provider of these products • Fair Share Growth Category breadth vs. “Routine” competitive Assortment 50-70% to shoppers • Fair Share Profit “Preferred” • Consistent, competitive Focus on new items value to the target shopper • Reinforce the image of the • Fair Share Growth “Convenience” retailer for one-stop or below “Distress” 10-20% shopping • Higher than Fair Limited Assortment • Good, everyday value Share Profit • Help reinforce the shopper’s • Varies depending image of the retailer on Seasonal Category breadth & depth “Seasonal” 5-15% • To deliver timely, Destination or during peak season competitive value Seasonal Limited Assortment off season Convenience 27 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 28. The Objectives & Context Stage Complete the Objectives & Context Check List Q3: What Category strategies should direct the Assortment? Category Strategy Types – Simplified summary 1. Get New a. Increase Penetration Shoppers b. Increase Conversion a. Increase AWOP (Average Weight of 2. Get Existing Purchase) What Shoppers to i. Increase Frequency of Demand Spend More Purchase Strategies Strategies ii. Increase Spend per Visit does our Category 3. Get Shoppers to Work Buy More Suggest? a. Trade into a more profitable product Profitable Products Supply 4. Make the Category More a. Improve availability Strategies Efficient & b. Reduce resources used Effective 28 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 29. The Objectives & Context Stage Complete the Objectives & Context Check List Q4: What is the scope of our project? Understand the practical ‘Givens & Guidelines’ from the Business: • “This Assortment exercise must reduce SKU count by 10%” • “There will be a merchandising space increase of 1 bay across all stores for the category” • “This Assortment exercise must ensure that we exclude all but essential SKUs without SRP” and • “This exercise must deliver solutions for all store formats” • “This exercise is purely for C-stores in the business” 29 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 30. The Objectives & Context Stage Complete the Objectives & Context Check List Q5: What are the themes from the Retailer & Supplier goals & corporate strategies that must be reflected in Assortment? Understand the big ideas from corporate strategy that are so big they could be missed! • “..we want to build the everyday loyalty of our family shoppers” • “..we want to surprise and delight our shoppers with new ideas” • “..we will ensure the products shoppers want are always available” 30 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 31. The Objectives & Context Stage Complete the Objectives & Context Check List Objectives & Context Check-list - EXAMPLE Business Assortment Source Answers Questions Implication 1. What is our most robust 1. Supplier 1. Yes – our view on structure has been view of the Category Consumer & 1. Need to prepare assortment updated to include ‘Healthy’ as a Definition and Shopper for new category structure separate sub category Structure? Research 2. What are the category 1. Retailer role & scorecard 1. Role is core Corporate 1. Ensure focus on productivity measures for this Strategy / 2. Main aim of Scorecard is to increase measures in the largest sub- category & how does Category Cash Profit categories this impact on Scorecard Assortment? 3. What Category 1. Need to ensure that we bias 1. Existing Category strategies should direct 1. ‘Trade up to something Healthy’ towards Healthy products Strategy work the Assortment? identified by the strategy 4. What is the scope of our 1. Build standard Assortment for project? 1. Retailer & 1. Superstore Assortment 12m bay * Space/ Assortment Supplier Direction 2. Prepare overlay for ‘affluent’ store 2. Develop affluent overlay based size (increasing/ decreasing)? 2. Judgement profiles upon brand shopper Store Formats? demographics * 5. What are the themes 1. Retailer & from the Retailer & Supplier 1. Ensure Children & Everyday Supplier goals & Corporate 1. Focus is on everyday family value sub-categories reflect the joint corporate strategies that Strategy target areas must be reflected in Assortment? 2. Judgement 31 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 32. Overview of the Objectives and Context Stage Summary 1. The Objectives & Context stage is all about understanding how high level strategy impacts on the Assortment exercise and building an appropriate project plan 2. The Objectives & Context check list is the tool used to summarise the implications of Category Definition Role Category Strategy work Pre-determined issues and guidelines (Scope) Corporate Strategies of Supplier & Retailer 32 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 33. Understanding the Process Stage 1 – Market Coverage Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key Assessment measures 3. Assortment Do we have the right representation of Finalisation attributes in our new Assortment? 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 33 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 34. Stage 1: Market Coverage Why use Market Coverage? Discussion It’s all about strategic direction.. • Some sub categories are more important than others, why? • What are the challenges with this concept? 34 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 35. Stage 1: Market Coverage Understand Market Coverage Key Question: What is the appropriate market coverage for the Family Desserts sub-category? sub-category: XX % of % Market Family Desserts Cumulative Family Desserts € Turnover sub-category € € Turnover of Market: XX Turnover sub-category PRODUCT 1 €18,000 29.4% 29.4% PRODUCT 2 €15,600 25.5% 54.9% PRODUCT 3 €11,600 18.9% 73.8% Narrow Assortment? PRODUCT 4 €7,000 11.4% 85.2% PRODUCT 5 €2,315 3.8% 89.0% PRODUCT 6 €2,300 3.8% 92.9% ‘Average’ Assortment? PRODUCT 7 €2,000 3.2% 96.0% PRODUCT 8 €1,600 2.6% 98.6% PRODUCT 9 €500 0.9% 99.5% Broad Assortment? PRODUCT 10 €250 0.5% 100% TOTAL €61,165 100% 100% 35 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 36. Stage 1: Market Coverage Understand Market Coverage Put another way - where do we draw the coverage ‘cut off’ line? % of Category Turnover (Coverage) In 100% 80% Market 60% 40% 20% 0% 10 20 30 40 60 70 80 90 100 50 % of SKUs Available in Market 36 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 37. Stage 1: Market Coverage Understand Market Coverage Market Coverage is a Strategic Decision A High Coverage = A Broad Assortment A Medium Coverage = A competitive Assortment A Low Coverage = A Narrow Assortment ‘High’ ‘Medium’ ‘Low’ is retailer specific and dictated by store sizes & formats. Typically for Grocery categories: High Market Coverage = 90% + Medium Market Coverage = c.75% Low Market Coverage = <60% When building Category plans we typically talk in terms of ‘High’, Medium’ & ‘Low’ until setting retailer specific coverage levels 37 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 38. Stage 1: Market Coverage Determine the right Market Coverage There are 7 key questions that will help us determine what level of market coverage we should choose for a sub-category. Impact on Market Coverage (High / Medium / Low) Area Question Source Sub Sub Sub Sub Category #1 Category #2 Category #3 Category #4 1.What is the Category role and what Category coverage does this suggest? Plan Category 2.What coverage do the selected Category Category Plan Strategies suggest for this sub-category? Plan Direction 3.How important to the target shopper is the Category sub-category & what does this imply for Plan coverage? 4.How fragmented is the sub-category and Range what does suggest for coverage? Analysis – Mkt Data 5.How productive is the sub-category and Range what does this suggest for coverage? Analysis – Assortment Mkt Data Analysis 6.What are coverage positions of the Retailers Own competition and what does this suggest for Analysis coverage? 7.What is the sub-category's past and Range predicted performance and how does this Analysis – impact coverage? Mkt Data Implied Market Coverage Level: Do we need to answer all of these questions to proceed? 38 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 39. Stage 1: Market Coverage Summary & Key Learning 1. Setting Coverage is a balance of Science and Art 2. Category Management Strategy work is critical to make sustainable decisions 3. Market Coverage decisions can be made in a minimal data situation by answering Business Questions 4. Coverage should vary by sub-category But could also vary by market, profile or store/outlet 39 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 40. Understanding the Process The Assortment Assessment Stage Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key Assessment measures 3. Assortment Do we have the right representation of Finalisation attributes in our new Assortment? 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 40 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 41. Stage 2: Assortment Assessment Understand Assortment Assessment Key Question: Which SKU's should be deleted, retained or added to the Retailer's Assortment? sub-category: XX % of % Family Desserts Market Family Desserts Cumulative Currently € Turnover sub-category € € Turnover of Listed? Decisions to Market: XX Turnover sub-category make: PRODUCT 1 €18,000 29.4% 29.4% Yes Add? PRODUCT 2 €15,600 25.5% 54.9% No PRODUCT 3 €11,600 18.9% 73.8% Yes PRODUCT 4 €7,000 11.4% 85.2% Yes PRODUCT 5 €2,315 3.8% 89.0% Yes Retain? PRODUCT 6 €2,300 3.8% 92.9% Yes Selected Market PRODUCT 7 €2,000 3.2% 96.0% Yes Coverage Line PRODUCT 8 €1,600 2.6% 98.6% No PRODUCT 9 €500 0.9% 99.5% No Delete? PRODUCT 10 €250 0.5% 100% Yes TOTAL €61,165 100% 100% 41 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 42. Stage 2: Assortment Assessment Understand Assortment Assessment Discussion How and Why would you make decisions around: 1. Should all of the SKUs below the cut-off line in the existing Assortment be DELETED? 2. Should the SKUs just above the cut–off line be RETAINED? 3. Should all of the missing SKUs above the line be ADDED? 42 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 43. Stage 2: Assortment Assessment Undertaking Assortment Assessment for each SKU There are 6 key questions that will help us decide on the SKUs to include or exclude from the Assortment. Area Question – asked for each SKU being Assessed Source 1. What is the (National) Loyalty level for this SKU (brand) as Panel Data Analysis an index of average loyalty in this sub-category? Market 2. What is the (National) Shopper Worth for this SKU (Brand) Panel Data Analysis Data as an index of average worth in this sub-category? Questions 3. What is the (National) €WROS for this SKU as an index of Audit Data via coverage average SKU €WROS in this sub-category? tables 4. What is the Turnover (€) for this SKU in this Retailer as an Retailer Data Retailer index of average SKU turnover in this sub-category? Data Questions 5. What is the Profitability for this SKU in this Retailer as an Retailer Data if available index of average SKU Profitability in this sub-category? (could be H/M/L) 6. Are there Competitive Reasons or any other unique Distribution Data & Other reasons why the SKU should be included/excluded in this Judgement Questions Retailers Assortment? Do we need to answer all of these questions to proceed? 43 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 44. Stage 2: Assortment Assessment Make addition, deletion and retention decisions 1. Assortment Assessment is where we look at the SKUs ‘in question’ in more detail, following the Market Coverage stage 2. We are looking to for evidence to confirm if we should 1. ADD SKUs above the coverage line that are currently not stocked 2. DELETE SKUs below the coverage line currently stocked 3. RETAIN SKUs currently stocked that sit just above the coverage line 3. We use a mixture of Shopper, Productivity and Competitive data to help make our decisions 4. There are some practical watch outs: 1. Limited distribution is a “watch-out” 2. Annualise new items (or make them exempt from deletion) 5. At this stage we are only addressing what exists today 44 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 45. Understanding the Process The Assortment Finalisation Stage Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key Assessment measures 3. Assortment Do we have the right representation of Finalisation attributes in our new Assortment? 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 45 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 46. Stage 3: Assortment Finalisation Understand Principles of Assortment Finalisation Discussion We are only half way through the process – what else do we need to consider to ensure we deliver a ‘Triple Win’ Assortment? How do we do this? 46 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 47. Stage 3: Assortment Finalisation Understand Principles of Assortment Finalisation Key Question: Does our preliminary Assortment have the right representation of the product attributes important to our shoppers? Sizes? Forms? Flavours? Brands Prices? Performance? 47 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 48. Stage 3: Assortment Finalisation Understand Principles of Assortment Finalisation An Assortment Finalisation Matrix is constructed for each sub- category in the Category, based on the Shopper Purchase Decision Hierarchy • Purchase • Purchase • Purchase • Purchase Decision 1 Decision 1 Decision 1 Decision 1 PD 3 PD 3 PD 3 PD 3 PD 3 PD 3 PD 3 PD 3 • Purchase Decision 2 • Purchase Decision 2 • Purchase Decision 2 • Purchase Decision 2 Each box therefore represents a Shopper need 48 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 49. Stage 3: Assortment Finalisation Understand Principles of Assortment Finalisation By plotting onto the matrix the SKUs identified from Steps 1, the gaps and duplication areas can be identified Sub Category: Drink Now • Refresh Me Drinks (1) • Functional Drinks (1) (Occasion) Drinks 330ml (3) 500ml (3) Pouch (3) Carton (3) 330ml (3) 500ml (3) Pouch (3) Carton (3) • SKU 15 1. Need state • SKU 2 • SKU 20 • SKU 1 • Waters (2) • SKU 16 • SKU 18 • SKU 8 • SKU 22 • SKU 13 • SKU 27 • SKU 10 • SKU 28 • SKU 21 • Fizzy Drinks • SKU 29 2. Type (2) • SKU 12 • SKU 9 • SKU 23 • SKU 31 • SKU 24 • Still Drinks • SKU 25 3. Flavour • SKU 4 • SKU 17 • SKU 33 • SKU 30 (2) This in turn suggests whether further adjustments to the Assortment are needed 49 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 50. Stage 3: Assortment Finalisation Understand Principles of Assortment Finalisation Where are there genuine gaps that, if closed, will increase choice? Sub Category: Drink Now • Refresh Me Drinks (1) • Functional Drinks (1) (Occasion) Drinks 330ml (3) 500ml (3) Pouch (3) Carton (3) 330ml (3) 500ml (3) Pouch (3) Carton (3) • SKU 15 1. Need state • SKU 2 • SKU 20 • • Waters (2) • SKU 1 SKU 16 • SKU 18 • • SKU 8 SKU 10 • • SKU SKU 22 28 • SKU 13 • SKU 27 ? ? • SKU 21 • Fizzy Drinks • 2. Type (2) • SKU 12 ? ? • SKU 9 • SKU 23 • SKU 29 SKU 31 ? ? • SKU 24 • Still Drinks • 3. Flavour (2) ? • SKU 4 ? • SKU 17 ? • SKU 33 SKU 25 • SKU 30 50 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 51. Stage 3: Assortment Finalisation Understand Principles of Assortment Finalisation Where is there potential duplication that needs examination? Sub Category: Drink Now • Refresh Me Drinks (1) • Functional Drinks (1) (Occasion) Drinks 330ml (3) 500ml (3) Pouch (3) Carton (3) 330ml (3) 500ml (3) Pouch (3) Carton (3) 1. Need state • SKU 15 • SKU 2 • Fizzy Drinks • • (2) • SKU 1 SKU 16 • SKU SKU 20 22 • • SKU 8 SKU 10 • SKU 13 • SKU 27 ? ? • SKU 28 • SKU 21 • 2. Type • Waters (2) • SKU 12 • SKU 18 ? • SKU 9 • SKU 23 • SKU 29 SKU 31 ? ? • SKU 24 • Still Drinks • 3. Flavour (2) ? • SKU 4 ? • SKU 17 ? • SKU 33 SKU 25 • SKU 30 51 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 52. Stage 3: Assortment Finalisation Validate the changes Will filling the gaps and/or removing duplication deliver shopper and productivity benefits? Assortment Finalisation Validation Summary Gaps: Shopper/ Consumer Productivity Rationale Proposed SKU Action Rationale Functional Fizzy Pouch Unmet Need in the Functional drinks are NPD – ‘Boost Me’ Pouch – market currently the fastest growing aimed at teenagers segment Functional Pouch Water None – bottles fulfil the None – Bottles fulfil the No Action need need Duplication: Shopper/ Consumer Productivity Rationale Proposed SKU Action Rationale Refresh Me 500ml Fizzy High duplication and Poor productivity in this Delete SKU confusion for shoppers segment Refresh Me Pouch Fizzy Two duplicated sku’s Both have higher than Retain the SKU average ROS 52 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 53. Stage 3: Assortment Finalisation Key Learning 1. Assortment finalisation is where we overlay the needs of the Shopper onto the provisional Assortment We look for gaps to fill We look for Duplication to remove 2. The tool used is the Assortment Attribute Matrix – built at a sub category level using the shopper purchase decision hierarchy 3. Typically leads to some changes and often the catalyst for new product development 53 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 54. Understanding the Process The Assortment Quantification Stage Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key Assessment measures 3. Assortment Do we have the right representation of Finalisation attributes in our new Assortment? 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 54 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 55. Understanding the Process Stage 4 – Assortment Quantification Discussion We now have a proposed new Assortment How could we quantify the potential impact? Why would this be important? 55 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 56. Stage 4: Assortment Quantification Summarise Assortment Decisions Create a summary of the proposed changes for all sub categories and the category at a total level.. • What is the Coverage? • What are the SKU changes? –Old –Additions –New –NPD –Deletions –Retention Summary of Assortment Changes Market Coverage #SKUs Old New* Deleted Added/NPD Retained Sub Cat #1 82% 87% 8 4 27 Sub Cat #2 56% 65% 6 12 32 Total Category 14 16 59 *Calculated by evaluating the new proposed Assortment in the coverage tables 56 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 57. Stage 4: Assortment Quantification Determine Scorecard Impact of Decisions - What is the turnover and Will we net 100% profit of the projected contribution of the deleted turnover and profit losses SKUs? from the product deletions? Will the we net What is the projected + 100% of the projected turnover and profit turnover or contribution profit gains from of the added SKUs? product additions in the segment or category? 57 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 58. Stage 4: Assortment Quantification Determine Scorecard Impact of Decisions What is the projected Scorecard impact of a deletion decision? Factors in estimating turnover or profit loss: Current Turnover: A conservative estimate would be all turnover lost due to deletion A line with high loyalty would lose a greater % of Loyalty: turnover when deleted than a line with low loyalty 58 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 59. Stage 4: Assortment Quantification Determine Scorecard Impact of Decisions What is the projected Scorecard impact of an addition decision? Factors in estimating turnover or profit gains: Market Turnover: A conservative estimate based on achieving a fair share of market turnover or benchmark sales vs. competing retailer or brand A line with high loyalty would net the sub-category Loyalty: a greater % of projected turnover 59 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 60. Stage 4: Assortment Quantification Determine Scorecard Impact of Decisions What are the estimated other costs of the new Assortment? Are the Sku’s added or deleted: 1. Adding a completely new supplier to the Assortment for 1 or 2 sku’s? 2. Deleting a currently large supplier down to 1 or 2 sku’s? 3. Packaged in a costly way to handle for the retailer? These questions may make you think again about their inclusion in the Assortment 60 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 61. Stage 4: Assortment Quantification Key Learning Quantification Is used to make sense of and ‘sell’ the Assortment changes Requires some assumptions and won’t be perfect May drive additional Assortment changes Drives implementation Defends decision making Can be enhanced by Household data (to help estimate likely ‘Cannibalization’) Tends to help bring more category focus & objectivity 61 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 62. Understanding the Process The Implementation Stage Objectives & Identify the implications of Role & Strategy Context & Set Objectives 1. Market Determine broad vs. narrow Assortment Coverage driven by key Strategic inputs 2. Assortment Determine performance of SKUs against key Assessment measures 3. Assortment Do we have the right representation of Finalisation attributes in our new Assortment? 4. Assortment What are the benefits/costs of the new Quantification Assortment? Implement Ensure efficient implementation 62 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 63. The Implementation Stage Implement the Assortment proposal in conjunction with Merchandising teams Do Use simple communication to explain the logic behind your Assortment recommendations Use the Assortment Attribute matrices to steer decision making Record deviations from recommended Assortment to allow you to check back and revise your quantification if necessary Don’t Allow the rigour of the process to break down at the last minute! 63 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 64. The Implementation Stage Key Learning 1. The main challenge is adapting the core Assortment proposal to the different store formats that exist in the Retailer’s portfolio This can effect your whole approach to the project and should be considered from the start of the project 2. Use the Assortment Attribute Matrix as a tool to aid adaptation to the retailer’s preferred merchandising & implementation approach, without losing the Assortment rigour 3. It is important to ‘sell’ the Assortment solution to ensure full commitment from all involved and a successful implementation 64 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 65. In summary, we have covered.... Assortment Process Category Management Business Process Objectives & Context 1. Category Definition 2. Category Role 1. Market Coverage 8. Category Review 3. Category Assessment 2. Assortment Assessment 4. Category Scorecard Assortment 3. Assortment 5. Category Strategies Finalisation Merchandising 6. Category Tactics 4. Assortment Price Quantification 7. Implementation Promotion Implement 65 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning
  • 66. www.thepartneringgroup.com 66 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning

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