Retail Data Transformation Solutions

Author: hpt_victoire

  • How to setup your Retail CRM System

    Customer relationship management (CRM) is a strategic approach to managing customer interactions and data throughout the customer lifecycle. It involves using technology to organize, automate, and synchronize business processes, including marketing, sales, and customer service. CRM can help retailers to better understand and meet the needs of their customers, and ultimately drive increased sales and profitability. Here are five steps for implementing CRM at a retail organization for a company that has already selected its Retail CRM system.

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    Step 1: Define Business Goals and Objectives

    Though it seems obvious, this first step is by far the most difficult one. It is about defining the business goals and objectives that the CRM team will support. This might include increasing sales, improving customer retention, and optimizing marketing and sales efforts. By defining clear goals and objectives, retailers can better understand the specific needs and challenges that the CRM Team will need to address.

    To achieve the business goals and objectives, it will also be the opportunity to define the CRM team:

    • Role & Responsibilities
    • Assessment metrics
    • Decisions Scope
    • Authority Level

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    Step 2: Gather Customers Data

    The level of data gathered depends on the technology advance the company is ready to implement. In a first phase, we recommend gathering sales record and basics customer data. In a second phase, when the company is ready to extend its CRM systems to a Customer Data Platform level (CDP), social media interactions, Customer Service and Surveys data can also be added1. The information will help gain insights into consumer behavior and preferences and use this information to tailor their marketing and sales efforts to meet the needs of their target customers.

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    Step 3: Become Legally Compliant

    In addition to collecting and using consenting Customers data, it is legally critical to setup a Data Controller and define data access rules (who can access the data and for what purpose), storage rules (where are the data store and what are the data security systems in place) as well as data breach procedures (what needs to be done in case of a hack or data breach)

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    Step 4: Build the CRM Team’s Budget

    The CRM team’s expenses include the following:

    • Recruitment, salaries & benefits
    • Customers Acquisition costs
    • 1 By law, consents from customers must be obtained to collect, store and use their data. Most countries are using the GPRD model.
    • Solutions to continuously improve Shopper Engagement – rds.hyper-trade.com/ 2 | P a g e
    • Customers Retention Costs
    • Planned Campaign Costs
    • Unplanned Campaign Cost (to accelerate spending or frequency)
    • Systems Costs (CRM systems, Big Data Engine, CDP…)
    • Social Media Costs
    • Communication Costs (including in store)

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    Step 5: Position the CRM Team in the organization

    Depending on each company’s available resources and maturity level, several options are possible

    Option 1: CRM Team reports to Marketing

    This is the most frequent case. It requires the Marketing Senior Leadership to be familiar with CRM, agile with data and metrics and possess a reasonable level of strategic thinking.

    Option 2: CRM Team reports to Merchandise

    This is an alternative solution when the Marketing Leadership is not ready yet. In this solution, one has to be aware that Merchandise de facto becomes Judge and Jury on its decisions concerning Customers strategies, the biggest trap being to transform CRM in a predominantly monetizing vehicle.

    Option 3: CRM Team reports to CEO

    While CEOs are already busy with so many other topics to drive, this is, in our opinion, the most reliable and efficient alternative in the case where no suitable Marketing Leadership is to be found. It guarantees the neutrality of Customers Strategies, protects from to much suppliers influence and supports operations and supply chain fully.

    Option 4: CRM Team reports to an external party

    This solution can only be temporary until a suitable Marketing Leadership can be found. This option also guarantees neutrality, execution and efficiency.

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    Step 6: Build the Team

    At its starting point, the CRM Team needs at least 1 manager and 2 executives.

    CRM Manager Profile: 6 essentials skills

    Strong analytical skills: A retail CRM manager should have strong analytical skills and be able to analyze customer data and market trends to identify opportunities for improvement and inform CRM strategies.

    Leadership skills: A retail CRM manager should be a strong leader who can motivate and manage a team of employees and work effectively with other stakeholders, such as marketing, merchandise, operations and supply-chains teams.

    Strategic thinking: A retail CRM manager should have strong strategic thinking skills and be able to develop and implement long-term CRM plans that align with the business goals and objectives of the organization.

    Communication skills: A retail CRM manager should have excellent communication skills and be able to clearly articulate CRM strategies and recommendations to other stakeholders, as well as effectively listen to and incorporate feedback from employees and customers.

    Technical skills: A retail CRM manager should have a good understanding of CRM technologies and be able to effectively use CRM systems to organize, automate, and synchronize business processes.

    Customer-focused mindset: A retail CRM manager should have a customer-focused mindset and be able to anticipate and meet the needs of customers to drive increased satisfaction and loyalty.

    CRM Executive

    The CRM executive should have excellent analytical skills and communication skills

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    Step 7: Establish the Team in the Organization

    Establishing the Team in the organization is achieved by performing the following tasks:

    • Define the routines & reporting tasks of the CRM Team as well as its decisions scope
    • Introduce the role & responsibilities of the CRM team to other Business Units and the benefits they will gain
    • Explain to other teams what actions are needed when receiving CRM’s data and insights
    • Build the official communication channels between the CRM Teams and other units
    • Officialize the CRM Team’s budget with Finance Team
    • Decide which Teams can access to what insights with what type of decisions scope
    • Solidify all CRM related interactions with Suppliers (Marketing, CRM and Merchandise: who does what? how do they inform each other? what are the business rules to be respected?

    Depending on the CRM goals and business objectives (see Step 1) and each company’s specific organisational structure, some tasks can be added or deleted

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    Step 8: Train the CRM Team

    Continuous training on the selected Retail CRM system should be in place, to ensure the Teams is aware of what can be done, what cannot be done and what are the walk arounds.

    A clear communication between the CRM Team and the Retail CRM system service provider will also enable the provider to give better guidance.

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    Step 9: Train the Other Teams

    To avoid useless emails and accelerate agility, all divisions concerned by the CRM Team data and customers insights should have a protected and defined access to the retail CRM system. These teams must be trained both on the tool itself, and on how to read data and be able to connect data reading and actions.

    The training should be articulated around the agreed shared data and decision-making rules and responsibilities.

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    Step 10: Include CRM Insights in the Executive Committee

    By setting up a CRM full fledge team, the company asserts its willingness to put Customers at the centre of its business. From strategic, operational and performance perspectives, CRM should be participating in the Excom meetings not only to share performances, but also to provide their strategic and tactical recommendations.

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    What solutions will you probably have to find

    Inserting a new cog in any mechanism often carries it share of challenges. The challenges described below happen the most frequently

    Conflict of Interest with Merchandise

    The conflict will arise first on the Assortment:

    • Merchandise Team often make written or non-written agreements with Suppliers
    • Merchandise teams will have difficulties in accepting the data-driven recommendations
    • Merchandise will have difficulties in executing the actions recommended by the CRM Team

    Conflicts will also arise on Promotion:

    • Merchandise will defend their promotion items choices based on written or non-written agreements with Suppliers
    • Merchandise teams will have difficulties in negotiating the promotions suggested by the CRM Team
    • Merchandise will argue on the CRM Campaign fees negotiated with Suppliers
    • Merchandise and CRM Team might have different views on the number of campaigns and the maximum number of times a (consenting) customer can receive a campaign by month
    • Merchandise and CRM might have different views on promotion sales forecast, especially if the promotion business model limits the quantity sold

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    The solution: layout all the concerned business rules in advanced and review them regularly for adjustment when necessary. Additionally, the setup of a CRM Team is a good opportunity to review existing Vendor Management Policies, or establish them if they don’t exist yet.

    Conflict of Interest with Operations

    • For the most popular items display guidelines, it is not rare that Operations asserts a better local knowledge and understanding of its catchment area’s customer knowledge
    • For the Loyal Customers sales contribution, stores with a low contribution will often complain about a lack of marketing budget (store decoration and signage)

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    The solution: for Housewife basket, jointly decide of the scope to be integrated for the calculation and agree on a planned performance review. For the sales contribution, the in-store communication budget should be decided in the CRM Team’s budget (see step 4)

    Conflict of Interest with Supply Chain

    Direct conflict with supply chain is rare. They mostly occur when the promotion or campaign ordered quantities are very different from the sales forecast. If Merchandise is the Business Unit that validates quantities, then the conflict will be with them.

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    The solution: layout all the concerned business rules in advanced and review them regularly for adjustment when necessary.

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    Conflict of Interest with Finance

    Conflicts with the Finance Department arise mostly in 2 areas:

    • Budget: the spending is over budget
    • Margin: CRM operations do not generate the margin target

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    The solution: For Budget, CRM should be subject to the same established budget management rules as other Business Units. These rules should include the exceptional situations when Senior Leadership requests for additional campaigns to boost basket and traffic.

    For the margin issue, the solution goes to a higher organisational concern: who is responsible for gross margin. The established rules should apply to CRM events.

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    Conflict of Interest with Marketing

    Conflicts with the Marketing Department arise mostly in 2 areas:

    • Communication Plan: depending on the business and sales situation, the CRM Team will, often, create campaigns or events that are not planned
    • When joined marketing operations are created, CRM and Marketing might disagree on the suppliers’ budget and its allocation

    ‍The solution: The solution: layout all the concerned business rules in advanced and review them regularly for adjustment when necessary.

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    Retail CRM System Mapping: an Example Overview

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    Learn More about Retail CRM

    Contact us to get the White Papers you are interested! I want to learn more about Retail CRM

  • How to Implement Category Management

    Implementing category management in a retail setting involves several key steps. These steps need to be carefully planned and will help retailers to effectively analyze and organize their product & promotion offerings, optimize their operations and resources, and stay ahead of market trends. Here are five steps for implementing category management in a retail setting.

    0. Reminder: What is Category Management

    Category management is a strategic approach to managing and organizing products. At its core is the idea of segmenting products into distinct categories and then managing each category as its own business. This approach allows retailers to focus on the specific needs and characteristics of each product category, rather than treating all products as a single entity.

    It involves analyzing data and market trends to determine the most effective way to select, distribute, promote, price, present and sell products within a particular category. The goal of category management is to increase sales and profitability by ensuring that the right products are in the right place at the right time, and by tailoring the shopping experience to meet the needs and preferences of the target customer.

    1. Define and segment product categories

    The first step in implementing category management is to define and segment product categories. This involves dividing products into distinct group of categories, then categories, sub-categories and segments, based on similarities in product characteristics, consumer needs and preferences, and market trends. This segmentation is also called Merchandise Hierarchy or Merchandise Structure.

    Though it appears simple, this first step is critical for the success of the Category Management implementation. An improper or inaccurate segmentation means that Teams won’t be able to manage categories. Imagine – a common case actually – that Skin Care products are present both in the Beauty Category and in the Import Products Category. Not only do shoppers not necessarily care whether the product in locally manufacturer or imported, but the Team in charge of the Skin Care products will need to gather data from both categories to understand what the dynamics and performance of the Skin Care Products are.

    2. Phase the Key Processes implementation

    An effective management of the category requires a certain number of actions to be performed. Each of these actions reflect the Retail Mix:

    • Decide how the product assortment must evolve [Product]
    • Decide what products to promote, when and how [Promotion]
    • Decide how and where to display the products [Place]
    • Decide how to define the selling price of each item [Price]

    Each of these actions are the results of thought processes and decisions, hence the name of process. And because each of these processes regulate the heart and lungs of the category, they are often called Core Processes.

    Because each Core Process requires its own RACI1 approach and own tools – which implies building, training, coaching, and adjusting – it smart to phase the implementation2 of each process with selected group categories over a period of time.

    3. Schedule the data analyses

    To understand shopper behavior and identify market trends and patterns within each product category, a certain number of data analyses must be done. To save time and increase teams’ efficiency – which translates into faster decisions (agility), these analyses are best when pre-formatted and automated.

    In a first step, sales data are the best sources. In an advanced stage, POS data can also be added to the analyses. At an expert level, additional data sets like customer surveys, and market research, to gain insights into consumer preferences and needs, must be added.

    To successfully implement this step, and following the phasing defined in Step 2, 3 steps must be taken:

    1. Train the teams on the metrics (and their reading) required to take decisions relative to the selected processes
    2. Define the specific analyses relative to the relative to the selected process
    3. Define precisely when each analysis must be done, and the corresponding decisions taken as defined in the company’s RACI

    This information can be used to make informed decisions about which products to carry, how to price them, and how to present them in the store.

    Before going to the next steps, we recommend ensuring that all categories representing 60% of the sales value have already been through the steps 2 and 3.

    4. Develop category strategies

    Based on the data and insights gained from the previous step, retailers can develop category-specific strategies to meet the needs of their customers and optimize sales and profitability. These strategies might include promotions and marketing campaigns, product assortment and placement, and pricing strategies.

    These Strategies will support the key objective assigned to each category, which are summarized in the below table

    At a more advanced stage, retailer can introduce the concept of category role. The role that is referred to corresponds to the shopping need the category must address. There are in general 4 commonly accepted roles, to which specific strategies can be assigned:

    5. Collaborate with internal & external stakeholders

    Effective category management also involves collaboration and communication with suppliers and other stakeholders.

    Internally, the stakeholders are Operations (for execution), supply chain (for availability), Marketing (for communication), CRM (for assortment, promotions, and pricing). For the collaboration to be effective, a clear communication structure (i.e., contents, media, meetings, frequencies…) must be added to the RACI.

    Externally, retailers should work with suppliers to ensure that they have access to the products and brands that consumers want, and that these products are of high quality and delivered on time. Such collaboration can be formalized through Join Business Plans, Category Captainship and Data Collaboration Programs.

    Common Traps to Avoid

    Below are the most common traps we have seen happening during a Category Management approach implementation

    • Inadequate Merchandise Hierarchy
    • Unprecise Core Processes
    • Lack of decisions criteria for each Action
    • Insufficient internal communication
    • Lengthy and administrative decision-making process
    • Inadequate Retail BI Tools
    • Lack of Training
    • Too short Phasing
    • Weak involvement of stakeholders
    • Fear of Failure

    Beyond the technique and processes, Category Management is above all a mindset. This mindset is built around 4 pillars:

    1. Customers are the final decisions makers, the judges, and the jury of all decisions
    2. Execution is as important as strategy
    3. The truth is in numbers. Planned quantitative monitoring and adjustments are critical
    4. Category management is a collective work

    By following these five steps, retailers can effectively implement category management, and improve their sales and profitability. Teams buy-in will be as strong as the phasing is timely and as the priorities will allow the capture of low hanging fruits.

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    Appendix: Category Management Implementation Schedule – Example

    Read More about Category Management

  • What is Retail CRM System

    Retail CRM (Customer Relationship Management) is a technology that retailers use to understand, segment, and engage Customers throughout their lifecycle, with the goal of growing Loyalty, ultimately leading to increased sales and customer retention.

    Retail CRM systems typically include a suite of tools to help retailers track and manage customer interactions across multiple channels, including in-store, online. These tools can include features such as customer data management, marketing automation, analytics, and reporting. Advanced Retail CRM are connected to a Customer Data Platform (CDP) and will also integrate other interactions with customer such as email and SMS, as well as customer service and support and social media profiles

    The main objective of a Retail CRM system is to optimize the relationship with customers, which includes increase retention and reduce churn, increase Loyalty, increase sales and profitability.

    To achieve these objectives, a retail CRM system helps teams in 4 areas:

    1. Understand Customers
    2. Engage Customers with personalized offers.
    3. Segment Customers
    4. Help all teams collaborate around Customers.

    1. Understand Customers

    One of the key benefits of retail CRM is its ability to provide retailers with a comprehensive view of their customers. The view depends on how much data can (legally and with customers’ consent) be collected about customers. It can include simple information like demographic, personal information, purchase history, or purchasing patterns like frequency, or interaction history…

    Example 1 of simple Customer Insights

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    Example 2 of simple Customer Insights (age group and purchase profile of a customer)

    A more advanced level of understanding is to create new information form the insights already collected from customers. It can start at understanding existing cross-purchases (from where the next best purchases can be statistically deducted) up to persona. i.e. fictional profiles that represent groups of similar people in a target audience. Persona can help figure out how to reach people on a more personal level, while delivering the right messages, offers, and products at the right time. Let’s check out four steps you can take to use personas in your marketing.

    This information can be used to personalize interactions with customers, such as sending targeted marketing messages or making personalized product recommendations. Retailers can also use this data to identify and segment their customer base, allowing them to tailor their marketing and sales efforts to different groups of customers.

    The global understanding of Customers can be translated in the performance of the loyalty program. The more we can understand customers, the more we can tailor commercial offerings to them, the more loyal customers contribute in terms of basket, transactions, sales, and margin.

    Example of a Loyal Customer profitability overview

    2. Segment Customers

    Still using the information available about Customers, retailer can then easily segment customers depending on a combination of demographics, personal and purchasing patterns.

    Retailers can use these segments for at least 3 types of actions:

    • Improve their assortment
    • Personalize promotion
    • Identify which customers segments are important and how they involve, including the movements of individual customers from 1 segment to another, highlighting purchasing and consumption trends.

    Some customers segmentations are well known and have become a standard. For example, the Cohort Analysis ( a cohort is a group of individual with the same characteristics. Cohort analyses will typically be used to understand where the big spenders and the most frequent shoppers are.

    Example of a Shopping Frequency Cohort Segmentation

    Another industry standard is the RFM (Recency Frequency Monetary), that tells where the customers are who are at risk of leaving and the VIP ones that need to be cocooned.

    Example of a RFM Segmentation

    The Never Buy is also an interesting segmentation, identifying customers who never buy specific products, or Switch segmentation, to identify customers who switched from 1 brand or 1 item to another.

    Whatever the segmentation models, one critical point is to ensure that each segment can be measured in terms of:

    • Sales value and contribution
    • Margin value and contribution Number of customers and contribution

    3. Engage Customers with personalized offers

    Building on the product personalization that can be done, retail CRM systems can also be used to manage and automate marketing campaigns. A retail CRM tool must be able to create and manage campaigns and ensure that the products and promotion mechanics in that campaign match the selected customer segment directly (products and categories customers already buy) or indirectly (through cross merchandising of next best purchase).

    Example of an automatic product suggestions based on Customers profiles.

    Example of promotion products finalization with margin and automatically calculated sales forecasts.

    As campaigns are an important part of the Retail CRM activities, the ability to precisely monitor the performances of any specific campaigns at any moment is essential for Retail CRM.

    The management of Customer Churn is also an important function of customer engagement that can be automated by a Retail CRM tool through an Alert Management system, which results can be monitored though campaign analytics.

    By analyzing each campaign’s results, marketers can progressively sharpen their product selection, and built increasingly effective campaigns with their suppliers.

    Example of Campaign Performances Analytics

    4. Engage All Teams around Customers

    In the past, Retail CRM was often confined to the marketing team. Today, it is much clearer how several items in a retail organization can benefit from CRM insights.

    Example of CRM insights that can benefit teams across the retail organization (Merchandise Team)

    Example of CRM insights that can benefit teams across the retail organization (Marketing & Operations)

    Discover how Ulys Customer Intelligence SaaS Software can help your Retail CRM Team

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  • How to Analyse Brand Performance

    Why do we need the Brand Analysis

    Brand analysis is the process of studying a brand and its performance in the market. It is an important tool for businesses to use to understand the strengths and weaknesses of their brand and identify opportunities for improvement. There are several reasons why businesses may need to conduct a brand analysis:

    1. To understand the brand’s market position: By analyzing the brand’s market share, customer base, and competitors, businesses can get a better understanding of their position in the market.
    2. To identify opportunities for growth: Brand analysis can help businesses identify areas for growth and development, such as new markets or product categories.
    3. To inform strategic decision-making: By understanding the brand’s strengths and weaknesses, businesses can make more informed decisions about their marketing, sales, and product development strategies.
    4. To measure brand performance: Brand analysis can help businesses track the performance of their brand over time and identify areas for improvement.
    5. To improve customer satisfaction: By understanding how customers perceive the brand, businesses can identify opportunities to improve the customer experience and increase satisfaction.

    Overall, brand analysis is an important tool for businesses to use to understand their brand and identify opportunities for growth and improvement.

    1. Brand Health Check

    Identify the Numeric KPI to see all perspectives of your brands, then build a scorecard dashboard that you can monitor every month. Brand Scorecard varies depending on the industry and business goals, but some common KPIs for a brand scorecard include:

    • Financial: Revenue, Profit and Loss
    • Competition: Market Share, Ranking
    • Shopper’s Basket: Number of Baskets, Unit per Basket, Penetration, Wallet Share
    • Shoppers: Shopping Frequency, Shopper Penetration, New Shoppers
    • Satisfaction: Number of the repeat purchase shoppers

    2. Market analysis

    The most popular measurement is the growth-share matrix, also known as the Boston Consulting Group (BCG) matrix, which assesses a company’s product portfolio and determines which product or segment should receive the most investment.

    ‍The grid is based on the Brand market growth rate and Brand market share and is divided into four quadrants. Brand strategy in each quadrant should be different.

    • Star: Expand
    • Question Mark: Invest or Divest
    • Cash Cow: Harvest
    • Dog: Divest

    ‍The growth-share matrix can help a company prioritize its investment decisions and allocate resources effectively. However, it has some limitations, such as its reliance on market share as a sole measure of a product’s success and its failure to consider other factors that may affect its performance.

    Customer analysis: Study the brand’s customer base to understand their demographics, preferences, and behaviors.

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    ‍3. Opportunity Lost Analysis

    Quantifying the number of expected sales would help us know how much we should invest.

    There are 2 possible ways.  

    3.1 Growth opportunity loss

    It refers to potential business growth that was not realized due to missed opportunities or poor decision-making. It can be caused by various factors, such as a lack of resources, inadequate planning, or a failure to seize opportunities as they arise.

    The calculation is

    • My Brands Sales Growth = A
    • My Brand Sales Last Year = B
    • My Benchmarked Sales Growth = C

    Formula = (A-C) x B

    3.2 Fair Share Gap

    The fair share gap is the difference between a company’s actual market share and its potential market share, also known as its “fair share.” It is typically used to measure a company’s performance in a specific market.

    To calculate the fair share gap, you can use the following formula:

    Fair share gap = Actual market share Potential market share Potential Market Share can be, for example

    -Your company’s market share combining all brands

    -Your brand market share on average in many markets

    -Your targeted competitor’s market share

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    4. Competitors Analysis

    Competitor analysis studies your brand’s competitors to understand their strengths, weaknesses, and strategies. It is an essential tool for businesses to stay competitive in their market and make informed strategic decisions.

    To conduct a competitor analysis, you can follow these steps:

    1. Identify your competitors: Who are the main competitors in your market? Next, make a list of all the companies that offer similar products or services.
    2. Benchmark your brands vs them in terms of
      – Number of SKUs,
      – Assortment Variety for different shopper group
      – Pricing
      – Promotion: Above the line and below the line
    3. Evaluate their strengths and weaknesses: Identify your competitors’ key strengths and weaknesses,  By conducting a competitor analysis, you can better understand your competitors and their strategies, which can help inform your own business decisions.

    5. Brand perception analysis

    The process of studying how consumers perceive a brand and its products or services. It is to understand their brand’s strengths and weaknesses and identify improvement opportunities.”

    There are several ways to conduct a brand perception analysis, including:

    1. Surveys are a common method for collecting data on brand perception. You can use online tools or hire a research firm to conduct a survey and gather data on consumer attitudes and perceptions of the brand.
    2. Focus groups involve gathering a small, diverse group of consumers and facilitating a discussion about the brand. This can provide valuable insights into how consumers perceive the brand and its products or services.
    3. Social media analysis: Social media platforms can be a rich source of data on brand perception. By analyzing social media conversations and sentiments, you can understand how consumers feel about the brand.
    4. Customer feedback: Customer feedback, such as online reviews or comments on social media, can provide valuable insights into how consumers perceive the brand.
    5. Brand tracking studies: These are long-term studies that track changes in brand perception over time. They can be useful for identifying trends and patterns in consumer attitudes towards the brand.

    Common Traps to Avoid

    Below are the most common traps we have seen happening during a Category Management approach implementation

    • Relying too heavily on subjective opinions  
    • Failing to consider the competitive landscape
    • Ignoring the customer perspective:
    • Failing to update the analysis regularly

    ‍Success Factors

    What company could help brand manager to successfully implement brand review process.

    • Solidify RACI (response, account, consult and inform) of each brand review step
    • Schedule the timeframe clearly.
    • Action Driven Data Analytic Solution, so that team can build the action plan efficiently.
    • Arrange the training regular for newcomers and refresher training for the existing member.

    Read More about Brand Review and Implementation at Retailer stores

  • Top 10 Retail CRM Benefits

    From an increase of customers acquisition costs over 60% in the last five years (source: Digital Information World) to communication clutters to general inflation and customers’ annoyance of being so often contacted for offers that do not relate to them, several factors are making it necessary for retail marketers to rethink their Customers Engagement Strategies.

    In these new engagement strategies, the relevance of the communication to Customers (or Personalization) and ROI plays a critical role. This is where Retail CRM comes into action.

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    1. Improved Customer Loyalty

    Customer Loyalty defines the behaviors of customers who come back often and progressively grow their spending, either in the same categories or across new categories they never purchased before.

    By providing a personalized and efficient customer experience, retail CRM software can help retailers build customer loyalty and increase repeat business. It can also identify areas for improvement, which once realized, can further enhance customer loyalty.

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    2. Cost efficiency

    Because Retail CRM systems shares data and insight among Teams, it can streamline category management and promotion processes, reducing the amount of time and resources needed to improve commercial offerings’ relevance. Retail CRM systems can also help businesses automate certain tasks, such as sending personalized emails or generating reports, which can further increase efficiency.

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    3. Sales Growth

    By providing retail Teams with a comprehensive view of customer interactions and preferences, retail CRM systems can help identify.

    • Next best purchase opportunities
    • Categories with declining spending
    • Categories with declining penetration
    • Campaigns’ performance tracking

    Merchandising and Marketing Teams are therefore empowered to focus on the most important opportunities.

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    4. Reduced Customer Churn

    By monitoring, for each carded customers, the frequency, recency and value of transactions, Retail CRM can help retailers identify at-risk customers and take proactive steps to retain them, such as offering special promotions or personalized customer service. The reduction of customer churn not only reduces the cost of acquiring new customers, and also increase the lifetime value of their customer base.

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    5. Advanced Customer Segmentation

    Retail CRM systems allow businesses to segment their customers based on various characteristics, such as demographics, purchase history, and customer behavior. Fixed segmentations allow to monitor the movements of customers across segments while dynamic segmentation allow to create ad hoc segmentation. This allows retailers to tailor their marketing efforts and create targeted campaigns that are more likely to be successful. Advanced segmentation also enables teams to identify customers at risks (lapsing) and reduce churn, as well as VIP Customers, who must be cherished and cocooned

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    6. Increase Campaigns ROI

    Building on advanced segmentation, it is possible Retail CRM systems to propose commercial offers that are more relevant to the targeted customer group. Not only is the number of targeted customers smaller, but higher conversion rates and sales derive from this targeting. By targeting marketing efforts to specific customer segments, businesses can more effectively reach and engage their audience, leading to increased ROI and sales.

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    7. Better Relationships with Customers

    By definition, a Retail CRM software tracks customers interactions and preferences. These tracking data – in online or physical stores – can then help improve CX and build stronger relationships. In return, these actions lead to increased customer loyalty and repeat business.  The personalization of offers also contribute to the strengthening of the relationship.

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    8. Enhanced Customer Service

    Still building on the tracking of customer interactions and preferences, Retail CRM empowers team to provide more personalized and efficient customer service. By getting a quick and accurate access to Customers’ history, Teams can provide a faster service in addressing inquiries or complains. Just think about the management of a return or customer calling to review its latest purchases. The impact on Customer Satisfaction can be quite significant.

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    9. Better & Faster Decisions

    A Retail CRM software has access to a wealth of data on customer preferences and behavior. These data can then be used in Range, Distribution, Promotion and Supply Chain processes with great accuracy, access in minutes. As a Retail CRM systems can be used by different business units, the identification of  trends and patterns in customer data can be used to optimize business operations and improve the customer experience.

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    10. Improved Data Security

    Retail CRM solutions often include robust security features to protect customer data (which can help businesses avoid data breaches and maintain customer trust) as well as protect customers from unwanted solicitations and offer (GPRD compliance). By securely storing and managing customer data, retailers can demonstrate their commitment to protecting customer privacy and build customer trust.

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    Read More About Retail CRM

  • Is your ERP limiting your Segmentation?

    Is your ERP limiting your Segmentation? Bypass it!

    ‍From the very beginning, the products a Retailer offers to its customers are classified based on its Merchandise hierarchy, also called structure or product hierarchy. The Merchandise hierarchy enables Retailers to organize their products into different categories and sub-levels, making it easier for

    • their Customers to find the products they are looking for while shopping in-store or online. For most Retailers, Products are displayed according to the Merchandise Hierarchy they belong to.
    • their Operation Team to display products in a logical pattern and quickly identify where a new product should be displayed.
    • their Analysis, easily identify which Division, Department, Category, or Sub-Category is performing or not based on Sales, Margin, and Inventory.

    Ideally, retailers enjoy having several segmentation levels, this creating a granularity that supports finer analyses and better decisions.

    Challenge

    The lack of granularity was preventing Merchandisers and Buyers to understand customers’ preferences an take the relevant category decisions. It translated in decreased cashflow, and non-optimized sales opportunities.

    Due to its ERP limitations to only 3 levels of Merchandise Hierarchy, our Client  – an Hyper and Supermarket Chain with a national presence with above 70 stores – and its Team struggled in their product segmentation. Because they had to gather several different types of products in similar groups, they were not able to detect:

    • Which Sub-Category was the main sales or margin contributor of the Category
    • Which Sub-category was having too many  
    • Which Sub-category was performing well among other Sub-Categories within the same Category
    • If the space allocated was sufficient or not to display the number of products belonging to the Category

    For example, in the Electronics Division, the next sub-level of Merchandise Hierarchy in our Client Merchandise Hierarchy was TV, Sounds, Computers & IT, Appliances, and Small Appliances.

    When drilling down into Small Appliances, the next sub-level was Food preparation, then all products belonging to Food Preparation were attached to it.

    Buyers and Category managers were naturally struggling managing the 600 skus of the Food Preparation group, not being able to know sales and margin contribution of, for example, Rice Cooker, Blender, Food Processor, Juicer……

    ‍

    Action

    To bypass the limitations of the ERP, a virtual merchandise hierarchy was built in our cloud-based retail merchandising solution, supported by automated mapping of each skus.

    Putting the Client’s ERP on the side for a moment,

    the 1st step was for our Client’s Merchandise Team to build their ideal Merchandise Hierarchy. It was a practical and detailed approach of What Good Looks Like. The exercise enabled the Team to create 1,927 sub-categories, whereas their ERP was limited to 492.

    The 2nd step was to map each existing product from the existing ERP Merchandise Hierarchy with the new one they just built. Using key words in products description, the 80,000 Skus of their current assortment were successfully mapped.  

    The 3rd step was to automate the mapping from the ERP to our Retail Merchandising solution and ensure this mapping would be flawless.  

    The 4th step focused on defining the business rules required to map every new product coming into the assortment, from the ERP to the Retail Merchandising solution.

    In just 3 months, our client’s Teams was able to reach a level of granularity that was not possible in the past. And they started to immediately see where the improvement levers were.

    For instance, and back to our Food Preparation Category example, the Category Manager discovered that its Top Sub-Category was Kettle with 40% of the Share of Sales for 29% of Share of Assortment and only 25% of Share of Space but the Sub-Category Sales growth was at 2.2% when Electronics was growing by 5.1%. Based on Kettle performances the Team then decided to allocate more space and redefined the number of Products for the Kettle Sub-Category.

    In opposition to Kettle Sub-Category, Toaster Sub-Category had a Share of Sales of 2% with a Share of Assortment of 7% and a Share of Space of 10% when the Sales Growth was negative. Then the Team decided to reduce the number of Products and space allocated for the Toaster Sub-Category.

    The Merchandise Team reviewed their entire Assortment allocation based on those principles:

    Share of Sales, Share of Assortment, Share of Space to improve their Assortment effectiveness. They increased or maintained the Number of SKUs for Sub-Category having potential growth but having big gap between their Share of Assortment, Share of Sales, and Share of Space, and they reduced the Number of SKUs for Sub-Categories over displayed and having too many SKUs.

    Results

    In addition to massive savings in ERP upgrades, The assortment was optimized, with direct and measurable impacts on sales, profitability and cashflow.

    After 3 Months for Food Preparation

    • Sales Growth is + 8.9% and Kettle Sub-Category is having a 17.2% Sales Growth
    • Margin Value improved by 12.4%
    • Total Assortment for Food Preparation reduced by 29.6%
    • Stock Days reduced by 14 Days (12.8%)

    What does this show?

    Having the possibility to segment and drill down till Sub-Category or segment allows Category Manager to have a more granular vision of its Category and to take actions and decisions based on performances.

    • Easily and quickly identify which are the Sub-categories underperforming.
    • Manage Share of Space Vs Share of Sales Vs Share of Assortment
    • Assign a fixed Number of SKUs by Sub-Category with a basic principle (One-Product-In, One-Product-Out)

    On our side, we were of course happy to see that our Tool and Expertise are helping create the right value for our client and help strengthen their Assortment efficiency.

    What does it demonstrate?

    Effective assortment management requires a certain level of granularity. Investing time in building this granularity deliver almost immediate results  for all stakeholders:

    • Easily and quickly identify which are the Sub-categories underperforming.
    • Manage Share of Space Vs Share of Sales Vs Share of Assortment
    • Assign a fixed Number of SKUs by Sub-Category with a basic principle (One-Product-In, One-Product-Out)
    • Improved display guidelines

    …and better shopping experiences!

  • How Can Retail CRM help Improve Assortment

    A customer relationship management (CRM) team can help improve a retailer’s Commercial Offers by using customer data and insights to inform product selection and placement decisions, promotions, pricing, products availability, and Customer Engagement through personalized campaigns. Here are several ways that a retail CRM team can implement to help improve commercial offerings.

    Data Analysis: a necessary stepIn addition to the regular data analyses routinely performed by the Merchandise Team and the Customer Surveys and Social Media interactions monitored by the Marketing Team, the CRM Team can gain insights into consumer behavior and preferences. This information can be used to identify trends and patterns in customer demand, and to tailor the product assortment to meet the needs of the target market.

    The CRM Team will setup routine and planned analyses that will be shared with the Merchandising Team. For example: basket components, categories penetration, categories spending, Housewife basket

    1. Identify gaps in the product assortment

    By analyzing customer data, the CRM team can identify gaps in the product assortment and recommend changes to the product mix to better meet the needs of customers. For example, if customer data shows that a particular product segment is underperforming, the CRM team might recommend reviewing the products or brands in the assortment to identify what is missing (unit of needs, price level, brand, pack type, quality…) or what is not needed to increase sales and meet customer demand.

    Functions: Category Penetration, Category Spending, Basket Value

    2. Optimize product placement

    The CRM team can also use customer data to optimize product placement within the store or the website. By analyzing data on customer traffic patterns and cross-merchandising sales data, the CRM team can determine the most effective locations within the store to display and promote products and make recommendations for changes as needed.

    Function: Cross Merchandising

    3. Improve promotion effectiveness

    The CRM team can identify opportunities for promotions that are likely to be successful with the target market. For example, the CRM team might identify a specific product category or brand that is underperforming and recommend a promotion to drive sales in this area. The CRM Team can also use customer data to optimize promotion strategies to maximize the impact of promotions. By analyzing data on customer demand, competitor promotions, and other factors, the CRM team can recommend changes to promotion strategies to improve their effectiveness. Finally, it is important for the CRM team to regularly monitor and adjust promotion strategies and their performance to ensure that they are meeting the needs of customers and achieving the desired results. This involves tracking performance metrics and adjusting promotion strategies as needed.

    Functions: Promotion Performance, Promotion history, Suggested Categories, Suggested products, Campaign Analytics

    4. Increase Products Availability

    By using promotion and campaigns forecasts, the CRM Team is able to anticipate distribution and sales volume. This information is critical to help Merchandisers, Suppliers and Supply Chain anticipate the required quantities and supporting merchandise flows.

    Function: Promotion Forecasts

    5. Improve Marketing Strategies

    The CRM team can provide insights and recommendations to the marketing and sales teams based on customer data and trends. This can help the marketing and sales teams to create more targeted and effective promotions and marketing campaigns, even adjust the promotion and communication plan which can drive sales and improve the overall effectiveness of the product assortment.

    Function: Promotion Performances and Campaign Analytics

    6. Support Products Rotations at Store Level

    In addition to providing recommendations on store layout and products placement, the CRM Team can provide regular information on 3 critical information:

    • The most popular items (Housewife basket), which stores will use to ensure optimized display, availability and pricing. This is a simple and efficient sales driver
    • Loyal Customers sales contribution, which stores can use to increase their efforts on recruiting and servicing loyal customers with the objective of increasing customer loyalty.
    • Provide recommendations to Merchandise teams on stores’ specific assortment needs, based on each store Customers behaviors and shopping trends (basket size, basket contents, frequency)

    Function: Stores Loyalty Share of Sales, Basket Decision Tree, Shopping Trends

    Example of Constituencies & Communication Flow for a retail CRM Team

    Overall, a retail CRM team can help improve assortment by using customer data and insights to inform product selection and placement decisions, optimize product placement within the store, and collaborate with suppliers to ensure access to high-quality products. By using customer data to inform their decisions, the CRM team can help to improve the overall effectiveness of the product assortment and drive increased sales and profitability.

    You might also be interested in:

    💡Retail CRM
    💡CRM Persona and Personalization
    💡How CRM Customer Experience impact the whole CX Experience
    💡How Retail Tech is changing Category Captainship
    💡CRM Glossary For Retailers

    Contact us to get the White Papers you are interested!  I want to learn more about Retail CRM

  • Category Management

    The objective of Category Management is to ensure each Category’s performance is maximized to its full potential. Ideally, each category is assigned a specific role. Each role will determine how the range, pricing, distribution, display and promotions will be managed through different strategies and tactics. These strategies and tactics start from purchasing and supplier management to Visual Display and Sales performance management.

    In that view, category management is a working approach supporting a business model (a category must contribute to X% of
    sales, Y% of margin and Z% of cash flow)

    In this approach, each Category is considered as a stand-alone business unit managed by a Category Manager. The category manager will pay specific attention to ensure that each product performances is maximized.

    Challenge

    Our Client’s was aware of the importance of Category Management and how it was critical to implement it. Their struggle was on the execution side. How to make this new working organization work, make people’s life easier and deliver results. Our role in this assignment was to help the team kick it off, in real life.

    Action

    Obviously, Category Manager’s Team can’t implement Category Management process for all their Categories at once. Then, they selected their Top Categories according to their sales contribution and the least performing Categories. When we follow the book, the category management process includes 7 steps. As our client was at the early stage of implementation, there was no benefit in trying to implement the complete process at once. We preferred a step-by-step approach, with easy wins. In that view, we agreed with the Team to focus on 2 main steps, plan them and define what had to be done.

    STEP 1

    Ensure all is counted and accounted for: Category Assessment

    The first step we agreed to take and later planned recurringly is the Category Assessment. The objective of the assessment is to be able to decide what to do next. Beyond the sales assessment, which the Team was already familiar with, we agreed to add dimensions to the assessment. A Category Management Wheel (see illustration) was designed to help align decisions and conditions.

    Sales Quantities: the team defined an average daily sales quantity threshold under which each concerned item was to be challenged: selling price, availability, service level, duplication level, promotion intensity and distribution.  Sub-Category effectiveness: the team defined an effectiveness threshold under which each sub-category assortment was to be challenged Brand Effectiveness: the team defined an effectiveness threshold under which each sub-category assortment was to be challenged

    For each threshold, a set of checking points were set up in the system, along with defined decisions and actions.

    STEP 2

    Focus on Action: Tactics

    Traffic and Destination were the main roles of the top categories selected by the Team. Depending on the results of the Assessment, we set up a simple table of objectives and corrective action (tactics) to be implemented for each category type, for each sales Driver.
    These were used as a guideline, with only one rule: Action MUST be taken.
    ‍ An example of this table is illustrated below.

    RESULTS

    Beyond the progressive improvements of the categories’ key indicators, the biggest success was by far the buy-in from the Teams. They became able to better understand the reasons of the performance, as well as deciding rationally what actions to take. And for each action taken, they were also able to read its impact on their system. It sparked a stronger feeling of ownership of the category and its performance.

    AUTHOR’S NOTES

    • A Retailer can easily manage hundreds of Categories and Subcategories within its Merchandise Hierarchy. It is a real challenge for Category Managers. Therefore, prioritizing Categories is a key success of Category Management.
    • If Implementing Category Management is not an alternative anymore, its execution must be progressive, documented and coached. Most teams are happy to accept pressure as long as they are effectively supported.
    • Rome was not built in a day. Ensure that the time allocated to the category management approach implementation matches with the Team’s capabilities.

    On our side, we were of course happy to see that our Category Management Experience and our Ariane solution for retailers are helping create the right value for our client and help strengthen their Category Management.

  • 9 Directions to revamp your Joint Business Plan

    Why Revisiting JBP is important?

    We are in a challenging economic situation where cumulative trends are creating tension for both retailers and their suppliers:

    • Decreased spending power
    • Fear of an economic Recession
    • Cost increases leading to both inflation and availability challenges

    Besides, a few new business drivers have changed during the last years, challenging the existing business models:

    • Rise and fall of e-commerce despite heavy investments
    • Multiple assortment rationalization
    • Lower shopping frequencies and basket value
    • Thinner margins for both Suppliers and Retailers

    In such a context, JBPs must ensure they address 5 requirements:

    1. Flexible Range Management to respond to shortages. quick shopper demand’s changes and maximize the sales of existing SKUs
    2. Much higher effective promotion plan to deliver higher returns on investment
    3. Integrate the diversity of each sales channel’s business drivers
    4. Ensure Shoppers (and their characteristics) are truly at the heart of each decision
    5. Your business with the Retailer is B2B, meaning that your JBP must fit in and support their business plans.

    Remember that Retailers and Manufacturers are facing similar challenges. A well-planned and executed JBP is one of the difference makers that can promote your company as a Preferred Strategic Supplier. In this article, we share 9 ideas on what you can do to become this Preferred Strategic Partner.

    Definition

    A Joint Business Plan (often called JBP) is a process that helps retailers, and their suppliers solidify the objectives, the activities they want to execute and jointly monitor to achieve these objectives and their respective conditions for success.  

    JBP is not new and has been a well-known practice for years, and is part of Key Account Management Activities, as described below by Bain & Company.

    9 directions to revamp your Join Business Plan

    1. Align your Mindset
    It’s all About the Category and its Shoppers -Not your Brand

    Of course, the JBP you are building is about your Brand. But remember: Retailers’ goal is to increase their category sales by increasing Shopper traffic and spending. Your Brand is just a tool. And you want your Brand to be one of the best – if not the best Tool – retailers will use.  
    What retailers are looking for when they build their categories plan is:

    • Ensure Range completeness, and appeal to all Shopper Groups by Store format
    • Product Availability‍
    • Attractive Promotions, but not create Promo Picker habits to Shoppers
    • ‍Price Image competitiveness compared to other Retailer competitors, not necessarily to be cheaper on all items • Make it Easy for Shoppers to find the products on the shelves (physical or digital)

    When reviewing your JBP, ensure you are ticking all these boxes and can substantiate each point.

    2. Know Your Retailer better than they know themselves
    ‍Share their performances in the market

    Whatever the strengths and depth of Retailers’ research capabilities, they can’t know everything. Still, retailers feed their decisions with numbers and data. And like their manufacturers, gaining market share is part of their priorities.

    Every bit of meaningful and quantified information you can share with retailers about their performances and benchmark, from your own Brands to the categories you service, will have 2 benefits:

    • Increase the Retailer’s perception of the value you deliver
    • Establish a legitimate and data-based benchmark to substantiate some of the activities and decisions you recommend in your JBP.

    Below is an example of calculating Lost Opportunities Values by using other retailers’ performance data.

    Such an approach should be applied to other metrics as well: volume, penetration, basket value, promotion intensity, …

    3. Put Shoppers at the Heart of the Discussion
    Share about your understanding of Shoppers Decision Trees.

    Shoppers satisfaction is the end goal for Both Retailers and Brands. Sharing critical shopper insights (from the retailer or from other retailers). Such an approach can bring massive value in building the Category together.  A robust Shopper Decision Tree with well-defined product attributes and the ranking of their importance is one of the most important insights into each Category.

    With such insights, Retailers can identify their Range Gaps (and maybe your range can fill some of these gaps), and improve their displays.

    Therefore, you can use Shopper Decision Tree insights to share your proposed action plan on  
    ‍

    1. New Items to close Category Range Gap
    2. Product Display to ease Shoppers in finding your product on the shelf  

    4. Strengthen the fit between your range and retailers’ expectations
    ‍Make Range efficiencies as the Corner Stone of your Approach.

    Shoppers visit stores because they want to buy the products that they want. To state the obvious, the range is the foundation of the Category (as well as the majority of its sales and profitability)

    With limited space for each Category, Retailers need to ensure that the selected items being displayed on the shelves deliver an optimal good return space.

    It’s therefore critical for you to know what is the effectiveness of your Brand’s range. If your Brand’s sales contribution is higher than your SKUs’ contribution, you are in a good place. When your Brand offers products that are present across several sub-categories, you want to know what your effectiveness by sub-categories (see example below) is

    The below chart presents Sales Share (Blue) vs SKU Share (Yellow) by subcategory. The higher Blue over Yellow, the better it is.

    In summary, you will always want to measure your Brands’ effectiveness in 2 perspectives:

    • From a sub-category view, to identify potential new items or items to remove
    • From a Brand view, to benchmark your Brand with the competitors  

    Below is the action summary for each

    5. Fish in pounds where Fishes are
    ‍Focus on your Targeted Shoppers

    The end of Covid19 restrictions in most markets generated a massive return of shoppers to stores. At the same time, the current economic recession has pushed shoppers to decrease their spending. More than ever, Promotions have become the major tool to entice shoppers and win as much share of wallet as possible.  

    In this context, traditional mass promotions might not always be the best option: they impact the margin of both Retailers and Brands. Additionally, the return on investment they deliver (in sales, in penetration, in basket growth…) is not optimal.

    Therefore, targeted promotions or campaigns can be an attractive alternative to consider for both parties. A collaborative approach using Loyalty data can be easily setup as soon as both agrees on:

    •  Which customer segment to target (you want both to focus on big spenders)
    •  Which products to select (you don’t want their promo selling price to be too much higher than the average selling price)
    •  Which mechanics to choose

    6. Make each planned campaign count
    ‍Be more precise and quantitative about the objectives and the tactics you choose  

    In addition to the standard financial KPI you can assign to your campaigns, understanding how shoppers respond to your brand activities can also be very valuable.  

    The first thing you want to do is to be crystal clear on what you want the campaign to achieve.
    Do you want to drive traffic to your brand (i.e. acquire new shoppers, even if they don’t spend much, so you can work with them again later)? In that case, penetration and number of transaction growth will be important to measure.
    ‍Or
    Do you want to drive spending to your brand (i.e. existing shoppers will spend more)? In that case, the number of items purchased as well as the average selling price of the items purchased will be important to measure.

    Once you have solidified your objectives, the 2nd thing you want to do is, with your retailer, ensure that the mechanics you will select will support your campaign objectives.

    7. One size doesn’t fit all
    ‍Strengthen the offer by channel to gain Shopper wallet share.

    One shopper could shop for all the store types. However, they chose the store format differently based on their shopping mission.  
    Multi Format Retailers is an excellent place for your brands to please the different Shopper Types. You can drive the commercial offers for

    – Family shoppers to do one-stop shopping in Hypermarkets
    – Household buyers in Supermarkets
    – Conveniences Shoppers in Convenience stores

    The more you study about each channel’s shopper behaviors, the more you can build collaborative tactics that will deliver results.  This channel-based approach should ideally be applied to each of your Brand’s sales drivers.

    Below is an example of the offer’s differentiation by channel

    8. Give meaning & Purpose to Business Reviews
    Make it collaboratively and ensure it delivers a Win for the Category

    Remember that for your retailer counterpart, his or her performances are assessed on the Category growth, not your Brands’ growth. In their perspective, a great JBP is on which clearly explains and details how the Category is going to be (positively) impacted.
    This fact should be the beacon that drives your approach at each stage of the JBP, from the analyses of past performances to measured deliverables you expect to achieve with your proposed strategy and tactics.

    “Them, us, fit and action” is the structure to be systematically applied.

    An obvious recommendation: the review of each of the retailer’s business performance you address in your JBP is factual, not judgmental.

    9. Leverage technology in the meeting room to accelerate & improve Decision Making
    Don’t be stalled because you didn’t have the right numbers.

    Each of the actions you will propose must be legitimated by numbers. Some of the actions will be agreed, some adjusted, some challenged, some rejected. The point is that for all the arguments you will make, they also need to be supported by data if you want to have a chance to influence and convince.
    You can prepare some of the objections in advance ,identify some of the decisions you know will be a hard sales. But you can’t prepare them all.
    Still, you must be ready to provide supporting numbers and analyses at any time. So, bring your online category management tool with you and run, jointly, all the analysis and diagnostics you need in no time. Decide. Move to the net point.

    Below is an example of a category diagnostic tool

  • Assortment Rationalization How can Brands Take the Lead?

    For more than a year now, Assortment Rationalization has become a priority for many retailers. The frequent change of customer behaviors and the fear of a recession looming are being translated in a noticeable decrease in spending. This decrease in spending can be measured by both a decrease in volume as well as a decrease in the variety of products purchased, dragging the profitability per square foot down. Consequently, for cash flow and cost purposes, reducing the number of products in ranges – mostly in physical stores – is on top of retailers’ agenda. While it undoubtedly makes business and customer sense, the way it is designed and implemented can have either the effects of surgery with a chainsaw or laser-precise incisions.

    Victims of Rationalization?

    Over the last 8months, several manufacturers and distributors were feeling a bit bitter on howsome of their Brands’ product ranges had been brutally reduced without priorinformation or consultation. Their challenge was not necessarily that thenumber of their Brands’ skus was reduced on shelves, but rather that theselection of the removed products was not optimal and ales opportunities werelost. The most frequent feedback we heard – and confirmed through a deep divein their range performances – was

    • Medium performance skus were removed even though their distribution was not optimal
    • The products performances analyses were sometimes done across all channels, preventing each channel specific shopping mission to be considered
    • The Range Effect was being impacted every time only one SKU of that Brand was remaining on the shelf
    • The Unit of Needs were not systematically considered (like in Tesco’s famous business case: Anchovies might have very low sales performances, but if they are purchased by the top 10 spenders of a sore, it becomes a problem)
    • The strategic directions of the Brands were ignored (for example, a brand might want to push a specific variant of a product, even though it doesn’t perform well today)
    • The Previous equilibrium of share of assortment was broken

    And to the point of certain manufacturers, the rationalization impact on the category was sometimes affected as well.

    How does Assortment Rationalization Work?

    The idea behind rationalization is simple: if customers don’t buy a product, there is no need to have it on the shelves. Once again, it makes complete sense. The challenges come from the fact that the retailer has literally tens if not hundreds of categories to rationalize across several channels. As time is of the essence, the retailers’ teams do not always have the luxury of allocating enough time to doit as well as they – or you – wished.

    The rationalization exercise is like a major Range Review: it usually starts by setting up objectives and principles.

    Rationalization measurements

    To drive the rationalization exercise, the retailer is going to select measurement targets. When the rationalization is complete, these measurements must be achieved. The most frequent are: Total number of skus or linear meter. The impact of sales, profitability and inventory will validate the best options.

    Rationalization principles

    Once the objectives are solidified, retailers are then going to apply, for each category and each channel, a certain number of principles (we can also call them constraints) that will guide the algorithm first – and the category managers – in the final decisions. The most frequent constraints are:

    • Minimum sales quantities
    • Facing by product type
    • Number of products variants & number of products by variant
    • Number of Brands
    • Number of price points per selling price threshold
    • …

    Once these constraints are recorded in the algorithm; the machine will propose a list of items to keep or remove store by store. The final validation is often done by the Category Managers. Commercial agreements are often considered at that stage.

    5 Actions to avoid being a Victim of Rationalization?

    The rationalization exercise itself cannot be avoided. It creates similar benefits to manufacturers as it does to retailers, from supply chain to delivery, merchandising and return costs. There are XXX things to do adapt smartly to the reduction of your Brand’s range:

    1. Be informed about both the objectives and principles of the exercise. It will enable you to run your own calculations and projections
    2. Solidify the definition of “Non-Performing Items”
    3. If you can’t run the calculations, ask how many skus you can keep
    4. Propose your own skus choice and substantiate your selection with numbers
    5. Maintain your existing share of space – even with less SKUs – and propose supporting activities to maintain it

    4 Ways to make your Brand win through Assortment Rationalization?

    When your relationship with your favorite retailer are collaborative, you have normally been informed in advance about the rationalization exercise and when it will take place.
    Of course, the 4 actions mentioned above will need to be executed. But you can do more than this.

    Easy Approach: Anticipate

    When you know what the measurements are selected and their target [ e.g.: we need to reduce the number of SKU by 40%], using simple POS data, you can:

    • apply these 40% to you range
    • Count the number of skus you will have to remove
    • Select the critical skus you want to keep and ensure they are out of the agreed definition of non-performing items.

    Professional Approach: Propose an Assortment type by Cluster

    The approach is like the Easy approach, with one additional parameter in your selection of sku: baskets details. You will support you selection by integrating what is specific to each channel:

    • average spending by customer
    • number of items per basket
    • Items penetration

    This will help you ensure that the items you select to remain on shelves match shoppers’ expectations.  
    Brand’s aspiring to become Category Captain will do the same exercise on their competitors’ Brands and submit their selection as a suggestion.

    Expert Approach: Propose an Assortment by Store

    In addition to theProfessional Approach, the Brand’s own constraints must be added in thealgorithm. For example: number or type of flavor, associated purchases, packsize, price level, …

    In each approach, it is recommended to run a simple projection that will measure the proposal impact on sales, concerned Brands’ effectiveness and inventory.