Shelf Arrangement KPIs and Planogram Compliance through Image Recognition
Shelf arrangement and planogram KPIs are often considered the gold standard for retail visibility execution, which is why their compliance is integral to creating a Perfect Store. In this blog, we take up the entire spectrum of shelf arrangement KPIs and how they can be effectively measured.
The right product visibility is the cornerstone for perfect store execution. This is the reason why CPG companies invest in point of purchase and point of sale data collection. This data is interpreted to create the ideal shelf layout which aids in product lift off from the shelves.
Some of the most popular shelf KPIs that CPG manufacturers measure are on shelf availability (OSA) to detect out of stocks and share of shelf (SoS) to ensure optimum usage of shelf space that gives the product maximum visibility.
However, when it comes to the Perfect Store programme, one of the most important KPIs for visibility are that of shelf arrangement. They are tricky to execute, because their implementation is dependent on the influence that a CPG has on shelf layout. And CPG manufacturers may not wield enough influence unless they have strong partnerships or relationships with key retailer accounts. Here’s a look at how shelf KPIs fare when it comes to the amount of control CPG requires for a particular shelf KPI, the difficulty in implementing that KPI, and its incidence of use.
The Spectrum of Shelf Arrangement KPIs
Some of the shelf arrangement KPIs are sequence of products, point of purchase or sale materials, adjacencies, eye-level product placement, category separation, the big picture planogram compliance and the exact planogram compliance. Shelf layout KPIs are different, and are an entire spectrum depending on the CPG manufacturer’s ability to influence the shelf layout, their market share in the category, ease of implementation, and more. Intelligent image recognition solutions like ShelfWatch, is capable of measuring and evaluating this entire spectrum.
1. Sequence of Products –
Sequence of product refers to the sequence (left to right or top to bottom) in which the brands’ products will be placed on the shelf.
The shelf size is limited and so is the shelf space allotted to a CPG. In that space, sequence of products becomes important. It greatly impacts sales — Many CPG manufacturers want to keep together associated products near their hero SKUs. It can help trigger impulse purchases. For example — keeping drinking coco right next to their hero SKU which could be coffee.
Determining product sequence also helps in creating complimentary sections in the store. For instance, by keeping dessert products like vanilla essence and baking ingredients side by side both CPG and retailer can cause customers to make complimentary purchases.
The process involved for auditing this shelf KPI is simple. The sequence is provided by the CPG, and the images captured by their field rep is checked against that sequence by the ShelfWatch AI. The AI after interpretation, calculates the compliance score and provides the same to both the field rep and CPG HQ in real-time.
2. Point of Sale Material (POSM) –
Many brands consider POSM as part of their shelf arrangement KPIs given their placement.
POSM is kept where purchase decisions are made, i.e., its present near the shelves in the form of posters/shelf talkers or just freestanding displays to influence consumer’s purchase decision. It may also consist of endcap displays that are the displays kept at the end of gondolas, often to introduce a new proposition, a promotion, or showcasing their hero SKU. In cases of new product launches, these displays are kept near the brands’ core SKUs to augment visibility.
It is also kept where customers pay for the products. This is done to trigger impulse purchases. It involves using dump bins, posters, and other secondary compliance display which is kept exclusively at the checkout area.
POSM helps improve visibility of the product and its USP, thus influencing consumer purchase behaviour. They effectively put spotlight on new product launches. ShelfWatch is capable of detecting POSM given by the CPG and verify its presence/absence and measure the compliance requirements associated with them.
3. Adjacencies –
Creating adjacencies means — keeping the same product of different brands side by side. For instance, if the hero SKU of Brand A is baby powder, then Brand B which is not famous for baby powder, keeps its baby powder product adjacent to that of Brand A.
Adjacencies are an integral part of visual merchandising where the advantage of one brand’s reputation is leveraged by another to better position itself on the shelf and increase its sales.
ShelfWatch is capable of detecting and establishing such adjacencies. It thus, also aids in competitor activities’ research.
4. Eye-Level product placement-
Eye-level product placement is a useful shelf arrangement KPI. CPG brands closely study the points of product lift-off at a store and have determined that products that are placed at the consumers’ eye-level have a higher probability of being purchased. Hence the saying — Eye level is buy level!
The definition of eye level changes from store to store depending on the store’s setting. Herein, the CPG on the basis of point of purchase data defines, which shelf position will be considered as eye-level, and what products will be placed on those shelves. For instance, generally products associated with kids like candies and multi-flavour yoghurts can be placed at lower shelves where they are at eye level for kids. And probiotic yoghurts can be placed at upper shelves where they’re at the eye level for adults.
The bottom-line is : quicker and easier the product is visible, better are the chances of its sale. Many a times, core SKUs are placed at eye-level for better visibility execution. Often new product launches are placed near core SKUs at eye level to augment their visibility as well.
This KPI is especially significant in big stores like Costco, which is akin to a store universe. In such big stores, clear visibility is most crucial for product lift off. Thus, brands can keep their star products at eye-level in the space allotted to them. The ShelfWatch AI can be easily trained to establish eye-level product visibility and gauge the KPIs’ compliance.
5. Separating Categories –
Establishing categories involves keeping variants of a product together. For example, instances where diet coke is kept alongside regular coke, herbal toothpaste is kept alongside regular toothpaste and more. The aim is to establish distinction between variants of a product. ShelfWatch AI is trained to processes images and ensure that variants of a product are kept together and then, compliance scores are evaluated.
Establishing categories is an inventive way to enhance sales. If we put herbal toothpaste and regular toothpaste together, it does not cause major product differentiation. But by stocking them separately, a visual distinction is provided. It provides the impression to the consumer that something different has been launched by the brand, and humans that they are, curious by nature, they have a look if the new product meets their requirements. At times, this new product can even reveal to them requirements they weren’t previously aware of! This consumer curiosity often translates to product lift-off from the shelf.
Category separation is often achieved through brand blocking — which means products are kept together in block formation to enhance visibility. Using the previous example of toothpaste, this gradual visual reinforcement causes distinction in the consumer’s mind, and eventually, herbal toothpaste gets established as a separate category. This strategy is very useful in the case of launching new variants of same product.
6. The big picture planogram-
A Planogram( often called POG, shelf space plan, shelf space, or simply a schematic) is a detailed diagram/schematic about how and which products will be placed on the shelf of the store. It is incredibly detailed and explicitly specifies which product occupies which space on the shelf of the store and in what quantity.
A planogram is designed by studying extensively the product lift-off from different areas of the shelf and store. When CPG manufacturers’ speak of the big picture planogram, they are referring to compliance in three areas –
- The products are all available.
- The product is kept at the right shelf
- The product is present in the right quantity.
This KPI tries to ensure that their is no out of stock occurrence, the products are kept at the right place and in right quantity to create a powerful impact for visual merchandising purposes.
Often in big picture planograms, hero SKUs are placed along with other related products to highlight their presence. Thus, it becomes important to ensure the hero SKUs occupy the right shelf (say, eye-level), are in right shelf number (for creating an impactful eye catching brand block) and in the right quantity(because a shelf under no circumstance can compromise with OSA since Stock Outs cause walkouts)
It is useful for brands which have sufficient control and influence to establish a brand block. Its also useful in retail stores like Walmart, where some brands cannot exert much influence when it comes to product placement, which is why they create detailed planograms to control their visibility in a manner that optimizes their sales.
7. Exact Planogram-
An exact planogram, covers 4 key areas-
- The products are all available.
- The product is kept at the right shelf
- The product is present in the right quantity.
- The products are all kept in the right sequence.
In this KPI, every SKU has been allotted a fixed position on the shelf. Deviation from that position becomes a cause for non-compliance which can be detected and calculated by ShelfWatch.
The exact planogram KPI is useful in stores where either the brand has very high control on visual display KPIs or very low, depending upon its dominance and its relationship with the retailer account. In either case, in every store the shelf space allotted to the CPG is fixed. Notwithstanding the control it has, the CPG wants to put into effect their best optimized planogram which may ensure them a high product lift-off. Hence, full use of the resources at hand is done to either overcome the other restraints put on the shelf layout (in case of newly emerging brands) or to make use of the freedom that has been provided to decide shelf arrangement (in case of market leaders in the category). Therefore stringently, all 4 paradigms of an exact planogram as stated above are followed.
ShelfWatch is capable of calculating all the above mentioned 7 scenarios. Apart from calculating compliance for above , another advantage of ShelfWatch is that it can be used to communicate with the field reps effectively about the ideal layout as per the shelf arrangements suggested by the CPG HQ for that particular week or month.
Many options are available to the CPG for shelf layout, which makes this a journey. CPG manufacturers are cognizant of the importance of shelf arrangement and should choose how to go about implementing these KPIs depending on the control they have, what their objectives are and what is the base-line level of compliance.
What makes Shelf Arrangement KPIs important for CPG and retailers-
Retail space is expensive. The CPG has to showcase its hero products and at the same time establish adjacencies and categories in limited space for visual impact. Which is why, when deciding on shelf arrangement KPIs, a CPG is essentially taking a magnifying glass to the shelf and analyzing product life-off from a particular section of the shelf. Now, this sales data is collected and interpreted, and shelf KPIs are further optimized.
The Shelf Arrangement KPIs help influence consumer behaviour. Using brand blocking, POPM and POSM, product sequences and more, CPG brands influence consumer purchases through visual merchandising.
They aid in putting spotlight on new product launches through POSM and POPM placement. Not only that, by using shelf visibility KPIs , customers can be switched to premium or large sized products.
They help create new categories by designing planograms that show distinction between variants of same products — like separation between yoghurt and fat-free yoghurt via product blocking. Moreover, product placement on the shelves is one of the primary reasons that induces impulse purchases.
They also allow for strategic product placement when it comes to cross merchandising which retailers capitalize on. For instance, often products like milk which are staples are kept at the end of shelf at the back of the store, so that consumer has to walk through the space of the entire gondola to get at the milk. This helps in triggering impulse purchases.
Retailers and CPG can even use shelf KPIs as a means to influence customer to purchase products which provide them with a higher profit margin.
Accurate shelf arrangement reading and implementation is important as it tells — what products are selling based on set shelf location, gauges if sales are due to innate consumer demand and determines which sales are impulse purchases or are due to promotional activity.
If shelf arrangement KPIs are implemented correctly, it helps with growing sales, betters the profit margins and aids in the long term strategies by increasing success of new launches or creating sub-categories.
Liked the blog? Check out our other blogs to see how image recognition technology can help brands improve their execution strategies in retail.
Want to see how your own brand is performing on the shelves? Click here to schedule a free demo for ShelfWatch.
