The reality today is that 70% of consumers’ purchase decisions are still made at the shelf. But coveted shelf space in grocery stores is tight—a typical grocery store can have 30,831 items. While SKU growth is outpacing sales growth, competition isn’t heated just because of more items on the shelf; shoppers are going to stores less and less. Trip frequency has decreased, on average, 19 trips per year since 2011.
As Morgan Seybert, region vice president, Sales Effectiveness, Nielsen, noted during a presentation at Nielsen’s recent Consumer 360 event in Las Vegas, if a product isn’t where shoppers expect it to be, they’ll simply move on with a different purchase.
When it comes to creating the ideal in-store experience, you may think that it’s all about getting the right product on the shelf. However, that’s just part of the customer experience story, Seybert explained. In addition to the “right product, right place” school of thought, manufacturers also need to be able to answer key questions: Where should the product be on the shelf? How many facings should be on the shelf? How deeply should it be discounted and how often? What “shelf adjacency”—the brand next to a product—maximizes sales volume?
So, the goal is to create a so-called “perfect shelf” where consumers can easily find your product and a product’s brand and strategy are aligned. This, ideally, would create a ripple-effect of positive outcomes for cost, price and promotion. Not to mention stronger manufacturer/retailers bonds.
While idealistic, it is not impossible to achieve, assured Seybert. It requires the dynamic joining of demand and supply, assortment and space. Activating any of the aforementioned levers impacts all the rest. And yet, many manufacturers still exist in silos, facing multiple barriers.
Competing, and sometimes contradictory, goals in these silos confuse the situation. For example, marketing’s goals involve building a strong brand and loyal customer base. This may be through strategic promotions or shelving. Sales’ goals are driven by bottom line sales where pricing and volume are key. Creating that ideal in-store experience means breaking down silos, discussing goals internally and aligning against them in a cohesive way.
So what happens when communications are all aligned, and when price, promotion and assortment all work together? Retailers and manufacturers “win.” And winning is worth a lot—companies that get it right are growing their sales 11% faster, saving hundreds of hours per store using automated plan-o-grams, creating the ability to increase their price while still growing sales and achieving five times more efficient promotions. One client who optimized its shelf even grew sales by over 20% at one retailer alone. So, yes, while the right product on the right shelf is certainly important, it’s the total picture of price, product, placement and promotion that lead to great customer experiences.
The insights in this article were derived from four different sources:
- Nielsen Innovation Database, for the 52 weeks ending Dec. 18, 2015 for the food channel
- Nielsen Homescan – Total U.S. – All Outlets, All Buyers, All Brands (UPC), calendar years 2010-2014 and 52 weeks ending Oct. 24, 2015 in trips per shopper
- Meyers Research Center for the Point of Purchase Institute, Adapting with Speed: How agile selling organizations win in a demanding environment, by McKinsey & Co.
- Nielsen and Grocery Manufacturers Assoc., August 2014