Sense & Perform ISI 2011-09-09


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Main presentation from the ISI Network "Sense & Perform" workshop at the LEAD Marketing Conference.

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  • But first let me say a special thank you to the generous sponsor of this workshop, Gladson. We’ll be hearing from them later in the program.Thanks also to KSS Retail for donating the USB drives you received this morning.I’d also like to acknowledge RetailTactics for its ongoing hosting of the ISI Network Web site and years of participation.
  • Walmart is a large factor in this, but…
  • Return on Assets (Compustat data on may be available for Grocery estate value increaseReduce inventory-to-sales ratioIncrease inventory turns
  • What is Impact on sales per square foot? How much unproductive space? Suggests an asset to be optimized.
  • Also may be related to the supply chain bias in many organizations – a legacy of ECR.Overstock cost of capital approaches $17 billion a year? LOST PROFITS
  • Supply chain error has been shifted into the stores where it is unmeasured
  • Shopper Marketing innovation is intensifying this challenge.
  • More than half indicate NO measurement
  • Retailers everywhere are crying out for execution. The quintessential internal conflict in store conformance – between operational cost savings and conformance Store managers are in the dark and swamped with clerical tasks
  • Compare that with just the world wide overstock costs IHL identified.
  • Ability to listen means: to each other; to the “signs and signals” generated by shoppers; to the rhythms of the stores
  • ISI Sensing depends on business practices that are embedded, always on, and continuous in nature and may be enabled by technology toolsThe Plan-Do-Measure process cycle reappears frequently within the ISI practices.
  • This is the core slide for the framework. Is DIMES verb? These are the things that happen in stores that we must maintain awareness. You can’t leave this stuff out and still get to ROI.
  • Here’s why a store sensory network that operates in near real time can revolutionize store performance.
  • Key shortcoming of most of these methods today is? TIME LAG
  • Key shortcoming of these today? Immature solutions
  • This is not a highly-developed area yet. But digital shopper media firms are keenly aware that highly-document messages delivery can help them increase CPMs.
  • Lots of keen competition in WFM and mobility. Much less in store manager systems
  • There is a naive belief among some in the tech community, that store shoppers may be closely tracked like online shoppers. But just because you can measure a thing easily doesn’t make it more important.
  • Storecards are essential to solution successMark Heckman has done some excellent relevant work on this
  • Exercise – time permitting – have workshop participants call out other storecard measures
  • Exercise – time permitting – have workshop participants call out other storecard measures
  • Another potential outcome that may support performance benchmarking
  • Sense & Perform ISI 2011-09-09

    1. 1. Pre-Conference WorkshopV 1.0 2011 VSN strategies Sept. 19, 2011
    2. 2. About Today’s Workshop Agenda/Introductions ISI Performance Management Conceptual Framework Visualize Best PracticesSense & Perform 2 © Copyright 2011 VSN Strategies
    3. 3. Thanks to Our Workshop SponsorSense & Perform 3 © Copyright 2011 VSN Strategies
    4. 4. Workshop Agenda An ISI Conceptual Framework • Situation Review • DIMES: The Five Senses of In-Store • The Habits of Highly Successful Store Managers • Compliance in Action – Space Management • What Constitutes Compliance? [Lunch] • Planogram Integrity Best Practice • Culture of Performance [Roundtable]Sense & Perform 4 © Copyright 2011 VSN Strategies
    5. 5. Situation Review The Retail Performance Challenge Opportunity for New PracticesSense & Perform 5 © Copyright 2011 VSN Strategies
    6. 6. Situation Dis-Economies of Scale? U.S. Grocery Retailing Concentration, 1992-2009 % 80 Top 4 Top 8 Top 20 Grocery retail consolidation 70 has concentrated 64% of 60 U.S. grocery sales within the 50 top 20 chains; 37% within the top four chains. 40 Along with scale economies 30 and buying 20 clout, however, comes intensified store operational 10 complexity and remoteness 0 from HQ. 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 How has this combination affected profits? Sources: Monthly Retail Trade Survey, Census Bureau; Company annual reports Note: Sales based on North American Industry Classification System (NAICS) From: Economic Research Service/USDA, & Perform 6 © Copyright 2011 VSN Strategies
    7. 7. Situation Profit Picture Post-ECR 3.00 “The historical mean Industry Net Profits (% of Sales) 2.50 annual change in return on investment has been 2.00 insignificant for both retailers and 1.50 manufacturers since 1.00 the early 1990s.” Source: Bjornson, B. and 0.50 Kaufman, P. (2004), “Change and Firm Valuation in U.S. Food 0.00 Retailing and Manufacturing,” Journal of Food Distribution 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Research 35(2). Source: “Supermarket Facts,” Food Marketing Institute, 2011Sense & Perform 7 © Copyright 2011 VSN Strategies
    8. 8. Situation Performance Gaps in Grocery Out-of-stocks continue to run at 8.2% - unchanged in 15 years, Yet, within the assortments: Items sell <1 unit/wk. Items sell <3 units/wk. Unprofitable SKUs Source: Willard Bishop Consulting (May 2011) Competitive EdgeSense & Perform 8 © Copyright 2011 VSN Strategies
    9. 9. Situation Global Challenge at Retail Total Inventory Distortion 2010 - $778.5B Worldwide Inability to maintain consistent in-stock Out-of- Overstock levels plagues Stock $343.1B retailers in every $435.4B 44% category and every 56% country. Hypothesis: The problem may be rooted in the huge differentials in item turn rates?Source: Holman, L. and Buzek, G. (2011), “Inventory Distortion –Retail’s $800 Billion Global Problem,” IHL GroupSense & Perform 9 © Copyright 2011 VSN Strategies
    10. 10. Situation Taking Off The Blinders• Despite retail industry consolidation… – Industry earnings and ROI remain flat – Operating complexity is increasing• Despite notable progress in supply chain effectiveness since 1996… – Store-level inventory performance is unimproved• Store-level performance may be slipping… – But we can’t really be certain, because we don’t yet have the tools or practices in place to assert control over In- Store ImplementationSense & Perform 10 © Copyright 2011 VSN Strategies
    11. 11. Situation Industry Demands Improvement Which of the following In-Store Implementation practice areas is of highest importance within your organization today? Plan-O-Grams Promotions Displays Source: ISI Network ISI 30-Sec Polls: 35% indicated no process to track compliance, the remainder rely on spot-checks and managerSense & Perform sign-offs 11 © Copyright 2011 VSN Strategies
    12. 12. Situation How Well Do You Implement? How often would you estimate that your in-store promotions, resets and other merchandising activities are completely and accurately implemented? n=176 All the time 4% 75% - 99% of the time 23% 50% - 74% of the time 33% Less than half the time 38% Source: Supermarket News (2009) 0% 10% 20% 30% 40%Sense & Perform 12 © Copyright 2011 VSN Strategies
    13. 13. Situation Shopper Marketing Challenge One of the reasons why some retail marketers may struggle with converting insights into effective programs is a lack of internal processes for execution.76% of shopper marketers report that a process does not exist or is not very effective. Q. Do you have an internal process that is used for execution of 12% shopper marketing programs? 64% 24% Yes and its very effective Yes and it isnt very effective No Source: “Retailer-Activated Shopper Marketing Program Survey,” Marketing Lab 2010 Sense & Perform 13 © Copyright 2011 VSN Strategies
    14. 14. Situation How Well Do You Measure? Four out of five respondents to a prior poll said they expect 90-100% execution of their in-store programs. How do you measure execution in-store? Make assumption that 28% the job got done Do not measure in-store 23% execution Use an independent 3rd 21% party firm Rely on program 17% vendors "self audits" Source: Other 13% (2008) 0% 10% 20% 30%Sense & Perform 14 © Copyright 2011 VSN Strategies
    15. 15. Situation Shopper Marketing Limitations What is limiting shopper marketing success? Take your pick. Execution, compliance and measurement account for 44% of responses. Q. What are the hurdles in getting a program 9% launched within your organization? 10% Upper level buy in 10% 13% Merchandising alignment 4% Vendor collaboration Execution 10% Compliance 15% Measurement Vendor sell in 9% 20% Concept development Obtaining actionable insights Source: “Retailer-Activated Shopper Marketing Program Survey,” Marketing Lab 2010Sense & Perform 15 © Copyright 2011 VSN Strategies
    16. 16. Situation Top Store Business Challenges 50% 2011 45% 49% 2010 40% 30% 37% 43% 20% 22% 10% 19% 0% Need for more consistent store execution Need to improve customer service while holding the line on payroll costs Store managers lack information they need on the selling floor - too much time spent in the ba Source: “The 21st Century Store: the Search for Relevance” RSR Research 2011Sense & Perform 16 © Copyright 2011 VSN Strategies
    17. 17. Situation Industry Opportunity “The ISI Sharegroup estimates that the total cost to the U.S. RCP industry of sub-optimal merchandising performance (actual and opportunity costs) is approximately 1% of gross product sales, or $10 - $15 billion of the $1.5 trillion total annual sales across the food, drug and mass channels.” Source: “In-Store Implementation: Current Status and Future Solutions” (2008)Sense & Perform 17 © Copyright 2011 VSN Strategies
    18. 18. Workshop Agenda An ISI Conceptual Framework • Situation Review • DIMES: The Five Senses of In-Store • The Habits of Highly Successful Store Managers • Compliance in Action – Space Management • What Constitutes Compliance? [Lunch] • Planogram Integrity Best Practice • Culture of Performance [Roundtable]Sense & Perform 18 © Copyright 2011 VSN Strategies
    19. 19. DIMES: The Five Senses of In-Store “Active Sensing” A New Metrics Framework StorecardsSense & Perform 19 © Copyright 2011 VSN Strategies
    20. 20. The Five Senses of In-Store Sensing = “Ability to Listen” What Category Management activities will differentiate companies in the future? Retailers 100% Manufacturers 80% 88% 68% 81% 60% 73% 71% 40% 58% 20% 0% Execution Shopper/ Consumer Insights Ability to Listen Source: 2011 Category Leadership Benchmarking Study, Kantar RetailSense & Perform 20 © Copyright 2011 VSN Strategies
    21. 21. The Five Senses of In-Store What is “Active Sensing”?• Plan – Put measures and methods in place with specific intent to monitor the voice and behaviors of the shopper and the store• Do – Methodically capture and track data on the desired dimensions• Measure – Use embedded analytics and Source: In-Store Implementation – Current Status and Future Solutions, In- collaborative tools to extract insights and Store Implementation Sharegroup (2008) distribute them to relevant decision makersSense & Perform 21 © Copyright 2011 VSN Strategies
    22. 22. The Five Senses of In-StoreDIMES: The Five Senses of In-Store Effective management of retail performance requires continuous intelligence about implementation, compliance and conditions. Sensing is needed in five key areas: DEMAND: Detailed understanding of POS transactions by basket, shopper and segment and correlation with the other in-store senses ITEMS: Status, condition and in-stock position of product on display throughout the store, including planogram compliance MESSAGES: Delivery, views and responses to digital and traditional shopper media, signage, promotions and compliance EMPLOYEES: Direction and task performance of store associates, brokers, DSD reps, jobbers and third-party merchandisers SHOPPERS: Detect, track and analyze what shoppers do, including who, what, where, when, why they shop and buySense & Perform 22 © Copyright 2011 VSN Strategies
    23. 23. The Five Senses of In-Store DIMES: Five Senses Gap Analysis Demand How Important? 6 How Well? 5 4 4.01 3 3.29 Shoppers 2 4.58 Items 3.14 1 3.66 3.93 0 Source: In-Store Implementation 3.02 Network “30-Sec Poll” 2011 3.22 N=103 3.60 3.90 Employees MessagesSense & Perform 23 © Copyright 2011 VSN Strategies
    24. 24. The Five Senses of In-Store Why We Need Better Sensing• At best, most present tools measure outcomes (sales data) without an understanding of causality• Time lag on most reports makes them un-actionable; most/many issues detected are also un-correctable.• Wild misinterpretations are also possible (i.e. was a non- selling item out of stock, or out of date?)• Correlation with demand model (POS T-log) allows for some useful inference (i.e. promotional lift, ROI)Sense & Perform 24 © Copyright 2011 VSN Strategies
    25. 25. The Five Senses of In-Store Perilous Crossing Operating a chain of retail stores based only on sensory information derived from the POS is a bit like trying to cross a street safely based solely on yesterday’s traffic reports.Sense & Perform 25 © Copyright 2011 VSN Strategies
    26. 26. The Five Senses of In-Store DIMES: Demand SensingSolutions ProvidersPrice Optimization and Demand Modeling KSS Retail, Demandtec, Revionics, SAP, Oracle, etc.T-Log and Basket Analytics JDA, Teradata, various othersFrequent Shopper Data Analytics dunnhumby, various othersSyndicated Data Nielsen; SymphonyIRICoupon Redemptions Processors and Manufacturer AgentsSense & Perform 26 © Copyright 2011 VSN Strategies
    27. 27. The Five Senses of In-Store DIMES: Items SensingSolutions ProvidersDigital Image Audits ShelfSnap, NeuralIDPOS Demand Signal Monitoring KSS Retail; Standard Analytics; IRIManual Audits Multiple vendors, Brokers and MSOsShelf Sensors & Product Pushers BVI-RockTenn “Shopper Gauge”DSD Store Visits Hand-held scanners from various vendorsSense & Perform 27 © Copyright 2011 VSN Strategies
    28. 28. The Five Senses of In-Store DIMES: Messages SensingSolutions ProvidersManual Audits Various custom market research firmsDigital Signage Screens that watch the watchersCoupon Downloads/ Redemption Data Processors/ Manufacturer agentsKiosk Interactions VariousIn-Store Coupon deliveries Catalina; Acuity AisleCaster; SmartSourceIn-store media NewsAmerica /SmartSourceSense & Perform 28 © Copyright 2011 VSN Strategies
    29. 29. The Five Senses of In-Store DIMES: Employees SensingSolutions ProvidersWFM/SEM/MPM Reflexis, RedPrairie (StorePerform); Natural Insight; Dayforce; Infor (Workbrain)Store Check-In/Out Systems Synergy Systems, StorePortOnline Reporting Portals RetailTactics, Driveline, Acosta, Crossmark, various retailersStore Manager Systems RedPrairie (StorePerform)Mobile Devices Quofore, Airwatch, Honeywell,Sense & Perform 29 © Copyright 2011 VSN Strategies
    30. 30. The Five Senses of In-Store DIMES: Shoppers SensingSolutions ProvidersPeople Counters Shopper Gauge, PRISM’s conceptLoyalty Card Programs dunnhumby, Circular Logic, Brick Meets Click, and many othersVideo Videomining; LighthausPath-Tracking TNS Sorenson; 3GTV; Cabco USAMobile Media google; comscoreConversions, shopper movement Euclid elements; T-log analysisSense & Perform 30 © Copyright 2011 VSN Strategies
    31. 31. The Five Senses of In-Store DIMES Solution Portfolios• Each firm will require a set of in-store sensing tools and associated practices to support its performance goals – a solution portfolio• That adds up to a good many players and moving parts• How can you keep them straight without a scorecard?Sense & Perform 31 © Copyright 2011 VSN Strategies
    32. 32. The Five Senses of In-Store ISI “Storecards” • Industry-wide there are no acknowledged scorecards for In-Store Implementation • Scorecard: A tool that defines, records and monitors performance versus plan • Storecards drive retail performance dashboards and benchmarking • An ISI solution portfolio must develop and incorporate these to support routine measurement and evaluationSense & Perform 32 © Copyright 2011 VSN Strategies
    33. 33. The Five Senses of In-Store An ISI Sample Storecard SAMPLE CATEGORY RESET PERFORMANCE STORECARD RESETS Week 23, 2012 Target Actual Gap This high-level storecard Number of Projects is designed for tracking # Store Visits performance across % On-Time Completions common center-store Total Linear Feet reset projects. Total Labor Hours Versions might be created for each major project, for Labor Hours Per Linear Foot each reset provider, etc., Reset Accuracy Index to permit post-hoc % Issue-Free Completions performance Average # Issues/Reset comparisons, goal-setting Re-work Hours and benchmarking.Sense & Perform 33 © Copyright 2011 VSN Strategies
    34. 34. The Five Senses of In-Store Better Stores Sell More Stuff Persistent disconnect between operations and merchandising goals continues to plague chain retailers; it limits their merchandising performance and financial success. Best practice leaders will incorporate store-to-HQ alignment: • End-of-day conditions • Start-of-day conditions • Marketing/merchandising plan • Supply chain monitoring • Strategic financial plan Source: Dawson ThoughtwareSense & Perform 34 © Copyright 2011 VSN Strategies
    35. 35. The Five Senses of In-Store A DIMES Sample Storecard SAMPLE SHOPPER MEDIA PERFORMANCE STORECARD Promotion Week 23, 2012 Target Actual Gap MESSAGES Messages delivered/hour This high-level storecard % system downtime developed to track an in- Redemptions/store store Shopper Media # Stores Implemented implementation. Total weekly store traffic In a Web Service-based Weekly category/aisle traffic system, the storecard cycle may be as rapid as Weekly Category Sales Units every 15 minutes, with Weekly Brand Sales Units updates reported via Weekly Category Baskets dashboards and Weekly Brand Sales $$ automated alertsSense & Perform 35 © Copyright 2011 VSN Strategies
    36. 36. The Five Senses of In-Store Proposed DIMES Index Demand Chain A 10 9 Chain B 8 7 6 5 4 Shoppers 3 Items 2 1 0 Employees MessagesSense & Perform 36 © Copyright 2011 VSN Strategies
    37. 37. Thank You! James Tenser, Executive Director 520-797-4314Sense & Perform 37 © Copyright 2011 VSN Strategies