ecr europe forum ‘08. shopper-based assortment planning

Shopper Based Assortment Planning1 ECR Europe 2008 – Berlin – Crash Courses

‘Crash Course’

Shopper Based Assortment Planning

Tuesday 27th May 2008

Chris Leach, Peter Lloyd – Partners, TPG Europe

[email protected]@thepartneringgroup.com


1.Introduction & Objectives1.1 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


InterfaceConsulting

Strategy “Go to Market”

Category Management and Shopper Marketing

Strategic Customer Management

Supply Chain Optimization

Integrated Business Planning

Brand Marketing Innovation

ManufacturerBest Practices

RetailerBest Practices

Strategy

Category Management

Supplier Management

Consumer Partnerships

Supply Chain Optimization

Organisation Design

Expert Training

Organisation Design

Process Improvement

Expert Training

TPG Consulting Scope


Introduction to Shopper Based AssortmentThe 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?


Introduction to Shopper Based AssortmentThe Opportunity for Shopper Based Assortment

Retailers• Grow Share• Grow Sales• Grow Profit

Manufacturers• Grow Share• Grow Sales• Grow Profit

Shoppers• Meet my Needs• Make it Easy• Give me Value

Strategies:• Accelerated NPD cycle• Increased Promotion / Trade Spend• Fragmenting Media Plans• Supply Efficiency Drives

Strategies:• New Channels• Store Expansion• Increase in # Categories• Own Brand Development• Traditional Category Space

Reduction• Supply Efficiency Drives• Loyalty Schemes• Promotion

Behaviour Changes:• Changing

Consumption Needs• Changing Shopping

Patterns• Value & Promotion

Sensitivity• Environmental

concerns etc



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..

Shopper/ User

RetailerSupplier

“TRIPLE WIN”


Efficient and Effective Assortment

Meet ShopperNeeds

Consumer TrendsVarietyIn StockDifferentiation

Reduce Costs

Retailer Operating CostsTradingDistributionMarketing

Supplier's Operating Costs

ManufacturingDistributionMarketing



Factory Supplier'sDepots

Supplier'sShipping

Supplier'sOrder & Billing

Retailer’sReceiving

Retailer’sDepot

Retailer’sShipping

In-Store Ordering& Stocking

Check-out

Supplier's Costs

Retailer Costs


Assortment (SKUs) Drives Operating Costs..


1970 2008

“Shall I have Coca Cola in a can or a bottle?”

“Do I want Coke or Pepsi or Own Brand in 330ml or 500ml or 750ml or 1 litre or 2 litre in Diet or Regular and which flavour”


But changing tastes and Innovation have exploded what is available to shoppers..


Unique attributesFlavour, size, package, etc.

Meeting each genuine separate shopper need

Payoff/reward if limited Assortment

Lower retail priceConsistently availableClarity at point of sale

Same attributes

Undifferentiated products meeting the same shopper needs

Penalty for unnecessary duplicated products

Higher costsOut of stocksConfusion at point of sale

Source: TPG Research

“Choice”


“Duplication”

Shoppers are looking for choice - not duplication



1. Maximise Number of Shopper

Needs Met

2. Scorecard Win for Retailers

3. Scorecard Win for

Suppliers

Shopper Based

Assortment 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


Introduction to Shopper Based AssortmentThe 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 Duplication3. Make Assortment choices that support Retailer and Supplier Scorecards


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.

Overview of the Shopper Based Assortment ProcessDefinition

The process is collaborative & retailer specific..

..with a focus on the shopper

..to both reduce costs and increase sales by better meeting shopper needs

..has a category management background


Overview of the Shopper Based Assortment Process Shopper Based Assortment is part of Category Management

1. Market Coverage

2. Assortment Assessment

3. Assortment Finalisation

4. Assortment Quantification

Objectives & Context

Implement

8.

Cate

go

ry R

evi

ew

5. Category Strategies

4. Category Scorecard

3. Category Assessment

2. Category Role

1. Category Definition

6. Category Tactics

7. Implementation

Merchandising

Assortment

Price

Promotion

Category Management Business Process

Assortment Process


Overview of the Shopper Based Assortment Process The Shopper Based Assortment Process

Determine performance of SKUs against key measures

Do we have the right representation of attributes in our new Assortment?

What are the benefits/costs of the new Assortment?




Identify the implications of Role & Strategy & Set Objectives


Ensure efficient implementationImplement

We will run throughthis processstep by step

Determine broad vs. narrow Assortment driven by key Strategic inputs

1. Market Coverage



XX Market

€ Turnover

% of Family Dessertssub-category €

Turnover

% Cumulative

€ Turnover ofsub-category

€18,000€15,600€11,600€7,000€2,315€2,300€2,000€1,600

€500€250

€61,165

PRODUCT 1PRODUCT 2PRODUCT 3PRODUCT 4PRODUCT 5PRODUCT 6PRODUCT 7PRODUCT 8PRODUCT 9PRODUCT 10

TOTAL

29.4%25.5%18.9%11.4%3.8%3.8%3.2%2.6%0.9%0.5%

100%

29.4%54.9%73.8%85.2%89.0%92.9%96.0%98.6%99.5%100%

100%

sub-category: Family DessertsMarket: XX

Narrow Assortment?

‘Average’ Assortment?

Broad Assortment?

Step 1: Market Coverage− For each Sub Category - setting the percentage of total

market sub-category sales we wish to ‘cover’ with our Assortment



Step 2: Assortment AssessmentFor each sub category looking carefully at all of the ‘Question Mark’ SKUs following the setting of a Target Coverage level..

Delete?

Retain?

Add?

Selected Market Coverage Line

XX Market

€ Turnover


Turnover

% Cumulative


€18,000€15,600€11,600€7,000€2,315€2,300€2,000€1,600

€500€250

€61,165


TOTAL

29.4%25.5%18.9%11.4%3.8%3.8%3.2%2.6%0.9%0.5%

100%

29.4%54.9%73.8%85.2%89.0%92.9%96.0%98.6%99.5%100%

100%


Currently Listed?

YesNoYesYesYesYesYesNoNoYes

Decisions to make:



Step 3: Assortment FinalisationReferring to the Shopper Purchase Decision ProcessDoes 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



Step 4: Assortment QuantificationWhat is the estimated € impact on the scorecard from the proposed Assortment changes?

-

+Will the we net

100% of the projected turnover or

profit gains from product additions in the

segment or category?

Will we net 100% of the projected

turnover and profit losses from the product deletions?

What is the turnover and profitcontribution of the deleted

SKUs?

What is the projected turnover and profit contribution

of the added SKUs?


Overview of the Shopper Based Assortment ProcessThe Shopper Based Assortment Process

Shopper Based Assortment combines three different data sets to ensure informed, fact based Assortment decisions..

Market DataRetailer DataConsumer HH Panel Data

The majority of ranging decisions are made with publicly available data..



What are the implications of incorrect Definition or Structure?

Key Principle #1: Valid Shopper based Definition & Structure..

French Italian Spanish New World

Wine

Red White

Appellation

Brand

O/B

Size

1st Decision Level - Switching unlikely

2nd Decision Level- Switching more likely

3rd Decision Level – Switching highly likely

• Shopper Purchase Decision Hierarchy drives structure

• The proper structure helps us determine where switching is more/less likely



Key Principle #2: Assortment Decisions are made at sub-category level

i.e. for groups of SKUs that meet similar needs

Healthy Desserts

Organic

Pack size

Low Fat

Brand

Speciality

Pack size

Functional

Benefit

Family Desserts

Pots

Brand

Other

Brand

Special Desserts

For One

Flavour

Sharing

Type

KidsDesserts

Organic

Format

Regular

Format

Chilled Desserts


Overview of the Shopper Based Assortment ProcessSummary

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


Understanding the ProcessThe Objectives & Context Stage





1. Market Coverage








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?



Q1: What is our most robust view of the Category Definition and Structure? (fictional example)

Refresh Me Drinks

Waters Fizzy Drinks

Functional Drinks

Energy Drinks

Sport Drinks

Drink Later

Still Drinks

Healthy Drinks

Soft Drinks

Refresh Me Drinks

Waters Fizzy Drinks

Functional Drinks

Energy Drinks

Sport Drinks

Drink Now (Chilled)

Still Drinks

Healthy Drinks

Category

Occasion

Need state

Type

Various

Shopper PurchaseDecision Hierarchy Category Structure



Q2: What are the category role & scorecard measures for this category & how does this impact on Assortment?

Role Name(names may vary by

retailer)

Typical% Portfolio Description Scorecard Impact on Assortment

“Destination” 5-10%

• Drive footfall• Be the primary provider• Help define the image of the

retailer

• Above Fair Share Growth• Reduced Profit due

to investment

Category breadth & depth to appeal to highest # of CustomersInvest in new items

“Core”“Routine”“Preferred” 50-70%

• To be the preferred provider of these products to shoppers

• Consistent, competitive value to the target shopper

• Fair Share Growth• Fair Share Profit

Category breadth vs. competitive AssortmentFocus on new items

“Convenience”“Distress” 10-20%

• Reinforce the image of the retailer for one-stop shopping

• Good, everyday value

• Fair Share Growth or below• Higher than Fair

Share ProfitLimited Assortment

“Seasonal” 5-15%

• Help reinforce the shopper’s image of the retailer

• To deliver timely, competitive value

• Varies depending on Seasonal Destination or Seasonal Convenience

Category breadth & depth during peak seasonLimited Assortment off season



Q3: What Category strategies should direct the Assortment?

What Strategies does our Category Work Suggest?

Demand Strategies

1. Get New Shoppers

a. Increase Penetrationb. Increase Conversion

2. Get Existing Shoppers to Spend More

a. Increase AWOP (Average Weight of Purchase)

i. Increase Frequency of Purchase

ii. Increase Spend per Visit

3. Get Shoppers to Buy More Profitable Products

a. Trade into a more profitable product

Supply Strategies

4. Make the Category More Efficient & Effective

a. Improve availabilityb. Reduce resources used

Category Strategy Types – Simplified summary



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”



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”



Objectives & Context Check-list - EXAMPLE

Business Questions Source Answers Assortment

Implication

1. What is our most robust view of the Category Definition and Structure?

1. Supplier Consumer & Shopper Research

1. Yes – our view on structure has been updated to include ‘Healthy’ as a separate sub category

1. Need to prepare assortment for new category structure

2. What are the category role & scorecard measures for this category & how does this impact on Assortment?

1. Retailer Corporate Strategy / Category Scorecard

1. Role is core2. Main aim of Scorecard is to increase

Cash Profit

1. Ensure focus on productivity measures in the largest sub-categories

3. What Category strategies should direct the Assortment?

1. Existing Category Strategy work 1. ‘Trade up to something Healthy’

1. Need to ensure that we bias towards Healthy products identified by the strategy

4. What is the scope of our project?

Space/ Assortment size (increasing/ decreasing)?Store Formats?

1. Retailer & Supplier Direction

2. Judgement

1. Superstore Assortment2. Prepare overlay for ‘affluent’ store

profiles

1. Build standard Assortment for 12m bay *

2. Develop affluent overlay based upon brand shopper demographics *

5. What are the themes from the Retailer & Supplier goals & corporate strategies that must be reflected in Assortment?

1. Retailer & Supplier Corporate Strategy

2. Judgement

1. Focus is on everyday family value1. Ensure Children & Everyday

sub-categories reflect the joint target areas


Overview of the Objectives and Context StageSummary

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 DefinitionRoleCategory Strategy workPre-determined issues and guidelines (Scope)Corporate Strategies of Supplier & Retailer


Understanding the ProcessStage 1 – Market Coverage





1. Market Coverage








Stage 1: Market CoverageWhy 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?


Key Question: What is the appropriate market coverage for the Family Desserts sub-category?

Stage 1: Market CoverageUnderstand Market Coverage

XX Market

€ Turnover


Turnover

% Cumulative


€18,000€15,600€11,600€7,000€2,315€2,300€2,000€1,600

€500€250

€61,165


TOTAL

29.4%25.5%18.9%11.4%3.8%3.8%3.2%2.6%0.9%0.5%

100%

29.4%54.9%73.8%85.2%89.0%92.9%96.0%98.6%99.5%100%

100%


Narrow Assortment?

‘Average’ Assortment?

Broad Assortment?


Put another way - where do we draw the coverage ‘cut off’ line?

100%

% o

f C

ate

go

ry T

urn

ove

r (C

ove

rag

e)

In

Mark

et

% of SKUs Available in Market

80%

60%

40%

20%

0%10 20 30 40 50 60 70 80 90 100




Market Coverage is a Strategic DecisionA High Coverage = A Broad AssortmentA 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


Stage 1: Market CoverageDetermine the right Market Coverage

Area Question Source

Impact on Market Coverage (High / Medium / Low)

Sub Category #1

Sub Category #2

Sub Category #3

Sub Category #4

Category Plan

Direction

1.What is the Category role and what coverage does this suggest?

Category Plan

2.What coverage do the selected Category Strategies suggest for this sub-category?

Category Plan

3.How important to the target shopper is the sub-category & what does this imply for coverage?

Category Plan

Assortment Analysis

4.How fragmented is the sub-category and what does suggest for coverage?

Range Analysis –Mkt Data

5.How productive is the sub-category and what does this suggest for coverage?


6.What are coverage positions of the Retailers competition and what does this suggest for coverage?

Own Analysis

7.What is the sub-category's past and predicted performance and how does this impact coverage?


Implied Market Coverage Level:

There are 7 key questions that will help us determine what level of market coverage we should choose for a sub-category.

Do we need to answer all of these questions to proceed?


Stage 1: Market CoverageSummary & 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-categoryBut could also vary by market, profile or store/outlet


Understanding the ProcessThe Assortment Assessment Stage





1. Market Coverage








Key Question: Which SKU's should be deleted, retained or added to the Retailer's Assortment?

Stage 2: Assortment AssessmentUnderstand Assortment Assessment

Delete?

Retain?

Add?

Selected Market Coverage Line

XX Market

€ Turnover


Turnover

% Cumulative


€18,000€15,600€11,600€7,000€2,315€2,300€2,000€1,600

€500€250

€61,165


TOTAL

29.4%25.5%18.9%11.4%3.8%3.8%3.2%2.6%0.9%0.5%

100%

29.4%54.9%73.8%85.2%89.0%92.9%96.0%98.6%99.5%100%

100%


Currently Listed?

YesNoYesYesYesYesYesNoNoYes

Decisions to make:


Stage 2: Assortment AssessmentUnderstand 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?


Stage 2: Assortment AssessmentUndertaking Assortment Assessment for each SKU

Area Question – asked for each SKU being Assessed Source

Market Data

Questions

1. What is the (National) Loyalty level for this SKU (brand) as an index of average loyalty in this sub-category?

Panel Data Analysis

2. What is the (National) Shopper Worth for this SKU (Brand) as an index of average worth in this sub-category?

Panel Data Analysis

3. What is the (National) €WROS for this SKU as an index of average SKU €WROS in this sub-category?

Audit Data via coverage tables

Retailer Data

Questions

4. What is the Turnover (€) for this SKU in this Retailer as an index of average SKU turnover in this sub-category?

Retailer Data

5. What is the Profitability for this SKU in this Retailer as an index of average SKU Profitability in this sub-category?

Retailer Data if available (could be H/M/L)

Other Questions

6. Are there Competitive Reasons or any other unique reasons why the SKU should be included/excluded in this Retailers Assortment?

Distribution Data & Judgement

There are 6 key questions that will help us decide on the SKUs to include or exclude from the Assortment.

Do we need to answer all of these questions to proceed?


Stage 2: Assortment AssessmentMake 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 should1. ADD SKUs above the coverage line that are currently not stocked2. DELETE SKUs below the coverage line currently stocked3. 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


Understanding the ProcessThe Assortment Finalisation Stage





1. Market Coverage








Stage 3: Assortment FinalisationUnderstand 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?


Key Question: Does our preliminary Assortment have the right representation of the product attributes important to our shoppers?

Sizes?Forms?Flavours?BrandsPrices?Performance?




An Assortment Finalisation Matrix is constructed for each sub-category in the Category, based on the Shopper Purchase Decision Hierarchy

Each box therefore represents a Shopper need

• Purchase Decision 1




PD 3 PD 3 PD 3 PD 3 PD 3 PD 3 PD 3 PD 3






By plotting onto the matrix the SKUs identified from Steps 1, the gaps and duplication areas can be identified

This in turn suggests whether further adjustments to the Assortment are needed


Sub Category: Drink Now Drinks

•Refresh Me Drinks (1) •Functional Drinks (1)

330ml (3) 500ml (3) Pouch (3) Carton (3) 330ml (3) 500ml (3) Pouch (3) Carton (3)

• Waters (2) • SKU 1• SKU 16 • SKU 18

• SKU 2• SKU 8• SKU 10

• SKU 15• SKU 20• SKU 22• SKU 28

• SKU 13 • SKU 27

• Fizzy Drinks (2) • SKU 12 • SKU 9

• SKU 21• SKU 23 • SKU 29

• SKU 31

• Still Drinks (2) • SKU 4 • SKU 17

• SKU 24• SKU 33 • SKU 25 • SKU 30

(Occasion)

1. Need state

2. Type

3. Flavour


Where are there genuine gaps that, if closed, will increase choice?





• Waters (2) • SKU 1• SKU 16 • SKU 18


• SKU 15• SKU 20• SKU 22• SKU 28

• SKU 13 • SKU 27 ? ?

• Fizzy Drinks (2) • SKU 12 ? ? • SKU 9

• SKU 21• SKU 23 • SKU 29

• SKU 31 ? ?

• Still Drinks (2) ? • SKU 4 ? • SKU 17 ?

• SKU 24• SKU 33 • SKU 25 • SKU 30

(Occasion)

1. Need state

2. Type

3. Flavour


Where is there potential duplication that needs examination?





• Fizzy Drinks (2)

• SKU 1• SKU 16

• SKU 15• SKU 20• SKU 22• SKU 28


• SKU 13 • SKU 27 ? ?

• Waters (2) • SKU 12 • SKU 18 ? • SKU 9• SKU 21• SKU 23 • SKU 29

• SKU 31 ? ?

• Still Drinks (2) ? • SKU 4 ? • SKU 17 ?

• SKU 24• SKU 33 • SKU 25 • SKU 30

(Occasion)

1. Need state

2. Type

3. Flavour


Stage 3: Assortment FinalisationValidate the changes

Gaps: Shopper/ Consumer Rationale

Productivity Rationale Proposed SKU Action

Functional Fizzy Pouch Unmet Need in the market currently

Functional drinks are the fastest growing segment

NPD – ‘Boost Me’ Pouch –aimed at teenagers

Functional Pouch Water None – bottles fulfil the need

None – Bottles fulfil the need

No Action

Duplication: Shopper/ Consumer Rationale

Productivity Rationale Proposed SKU Action

Refresh Me 500ml Fizzy High duplication and confusion for shoppers

Poor productivity in this segment

Delete SKU

Refresh Me Pouch Fizzy Two duplicated sku’s Both have higher than average ROS

Retain the SKU

Assortment Finalisation Validation Summary

Will filling the gaps and/or removing duplication deliver shopper and productivity benefits?


Stage 3: Assortment FinalisationKey Learning

1. Assortment finalisation is where we overlay the needs of the Shopper onto the provisional Assortment

We look for gaps to fillWe 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


Understanding the ProcessThe Assortment Quantification Stage





1. Market Coverage








Understanding the ProcessStage 4 – Assortment Quantification

Discussion

We now have a proposed new Assortment

How could we quantify the potential impact?

Why would this be important?


Stage 4: Assortment QuantificationSummarise Assortment Decisions

• What is the Coverage?–Old –New

• What are the SKU changes?–Additions–NPD–Deletions–Retention

Market Coverage #SKUsOld New* Deleted Added/NPD Retained

Sub Cat #1 82% 87% 8 4 27Sub Cat #2 56% 65% 6 12 32Total Category 14 16 59

*Calculated by evaluating the new proposed Assortment in the coverage tables

Summary of Assortment Changes

Create a summary of the proposed changes for all sub categories and the category at a total level..


Stage 4: Assortment QuantificationDetermine Scorecard Impact of Decisions

-

+Will the we net

100% of the projected turnover or

profit gains from product additions in the

segment or category?

Will we net 100% of the projected

turnover and profit losses from the product deletions?

What is the turnover and profit

contribution of the deleted SKUs?

What is the projected turnover and profit

contribution of the added SKUs?


Current Turnover:

Loyalty:

A conservative estimate would be all turnover lost due to deletion

A line with high loyalty would lose a greater % of turnover when deleted than a line with low loyalty

Factors in estimating turnover or profit loss:


What is the projected Scorecard impact of a deletion decision?


Market Turnover:

Loyalty:

Factors in estimating turnover or profit gains:

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 a greater % of projected turnover


What is the projected Scorecard impact of an addition decision?


Stage 4: Assortment Quantification Determine Scorecard Impact of Decisions

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

What are the estimated other costs of the new Assortment?


Stage 4: Assortment QuantificationKey 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


Understanding the ProcessThe Implementation Stage





1. Market Coverage








The Implementation StageImplement the Assortment proposal in conjunction with Merchandising teams

DoUse simple communication to explain the logic behind your Assortment recommendationsUse the Assortment Attribute matrices to steer decision makingRecord deviations from recommended Assortment to allow you to check back and revise your quantification if necessary

Don’tAllow the rigour of the process to break down at the last minute!


The Implementation StageKey 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


In summary, we have covered....

1. Market Coverage





Implement

8.

Cate

go

ry R

evi

ew

5. Category Strategies

4. Category Scorecard

3. Category Assessment

2. Category Role

1. Category Definition

6. Category Tactics

7. Implementation

Merchandising

Assortment

Price

Promotion

Category Management Business Process

Assortment Process


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