Shopper Based Assortment Planning Crash Course

‘Crash Course’

Shopper Based Assortment Planning

Tuesday 27th May 2008

Chris Leach, Peter Lloyd – Partners, TPG Europe

cleach@thepartneringgroup.com
plloyd@thepartneringgroup.com

1 ECR Europe 2008 – Berlin – Crash Courses Shopper Based Assortment Planning

1.Introduction & Objectives
1.1 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


TPG Consulting Scope

Manufacturer Retailer
Best Practices Best Practices

Strategy “Go to Market” Strategy

Integrated Business Planning Consumer Partnerships

Strategic Customer Management Category Management

Brand Marketing Innovation
Interface Process Improvement
Consulting
Category Management and Shopper Supplier Management
Marketing

Organisation Design Organisation Design

Supply Chain Optimization Supply Chain Optimization

Expert Training Expert Training


Introduction to Shopper Based Assortment
The 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?


The Opportunity for Shopper Based Assortment

Behaviour Changes: Strategies:
• Changing • New Channels
Consumption Needs • Store Expansion
• Changing Shopping Shoppers Retailers • Increase in # Categories
Patterns • Own Brand Development
• Value & Promotion • Meet my Needs • Grow Share • Traditional Category Space
Sensitivity • Make it Easy • Grow Sales Reduction
• Environmental • Give me Value • Grow Profit • Supply Efficiency Drives
concerns etc • Loyalty Schemes
• Promotion

Manufacturers
• Grow Share
• Grow Sales
• Grow Profit

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



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..

Supplier Retailer

“TRIPLE WIN”

Shopper/
User



Efficient and Effective Assortment

Reduce Costs Meet Shopper
Needs
Retailer Operating Costs
Trading Consumer Trends
Distribution Variety
Marketing In Stock
Differentiation
Supplier's Operating
Costs
Manufacturing
Distribution
Marketing



Assortment (SKUs) Drives Operating Costs..

Supplier's Costs

Factory Supplier's Supplier's Supplier's
Depots Shipping Order & Billing

Retailer Costs

Retailer’s Retailer’s Retailer’s In-Store Ordering Check-
Receiving Depot Shipping & Stocking out



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

1970 2008

“Shall I have Coca Cola in a can “Do I want Coke or Pepsi or Own
or a bottle?” Brand in 330ml or 500ml or 750ml or
1 litre or 2 litre in Diet or Regular and
which flavour”



Shoppers are looking for choice - not duplication

“Choice” “Duplication”

Unique attributes Same attributes
Flavour, size, package, etc.
Undifferentiated products meeting
Meeting each genuine separate the same shopper needs
shopper need
Penalty for unnecessary duplicated
Payoff/reward if limited products
Assortment Higher costs
Lower retail price Out of stocks
Consistently available Confusion at point of sale
Clarity at point of sale

Source: TPG Research



1. Maximise Shopper
2. Scorecard 3. Scorecard
Number of Based
Win for Win for
Shopper Assortment
Retailers Suppliers
Needs Met 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


The 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 Duplication
3. Make Assortment choices that support Retailer and Supplier Scorecards


Overview of the Shopper Based Assortment Process
Definition

The process is collaborative & retailer specific..
..has a category management background

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.

..with a focus on the shopper

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


Shopper Based Assortment is part of Category Management

Assortment Process
Category Management
Business Process
Objectives &
Context
1. Category Definition

2. Category Role 1. Market Coverage
8. Category Review

3. Category Assessment
2. Assortment
Assessment
4. Category Scorecard

Assortment 3. Assortment
5. Category Strategies Finalisation
Merchandising
6. Category Tactics
4. Assortment
Price Quantification
7. Implementation
Promotion

Implement


The Shopper Based Assortment Process

Objectives & Identify the implications of Role & Strategy
Context & Set Objectives

1. Market Determine broad vs. narrow Assortment
Coverage driven by key Strategic inputs

2. Assortment Determine performance of SKUs against key
We will
Assessment measures
run through
this process
3. Assortment Do we have the right representation of
attributes in our new Assortment?
step by step
Finalisation

4. Assortment What are the benefits/costs of the new
Quantification Assortment?

Implement Ensure efficient implementation



Step 1: Market Coverage
− For each Sub Category - setting the percentage of total
market sub-category sales we wish to ‘cover’ with our
Assortment

sub-category: XX % of %
Market Family Desserts Cumulative
Family Desserts € Turnover sub-category € € Turnover of
Market: XX Turnover sub-category

PRODUCT 1 €18,000 29.4% 29.4%
PRODUCT 2 €15,600 25.5% 54.9%
PRODUCT 3 €11,600 18.9% 73.8% Narrow Assortment?
PRODUCT 4 €7,000 11.4% 85.2%
PRODUCT 5 €2,315 3.8% 89.0%
PRODUCT 6 €2,300 3.8% 92.9% ‘Average’ Assortment?
PRODUCT 7 €2,000 3.2% 96.0%
PRODUCT 8 €1,600 2.6% 98.6%
PRODUCT 9 €500 0.9% 99.5% Broad Assortment?
PRODUCT 10 €250 0.5% 100%
TOTAL €61,165 100% 100%



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

Family Desserts Market Family Desserts Cumulative Currently
€ Turnover sub-category € € Turnover of Listed?
Decisions to Market: XX
Turnover sub-category
make:

PRODUCT 1 €18,000 29.4% 29.4% Yes
Add? PRODUCT 2 €15,600 25.5% 54.9% No
PRODUCT 3 €11,600 18.9% 73.8% Yes
PRODUCT 4 €7,000 11.4% 85.2% Yes
PRODUCT 5 €2,315 3.8% 89.0% Yes
Retain? PRODUCT 6 €2,300 3.8% 92.9% Yes Selected Market
PRODUCT 7 €2,000 3.2% 96.0% Yes Coverage Line
PRODUCT 8 €1,600 2.6% 98.6% No
PRODUCT 9 €500 0.9% 99.5% No
Delete? PRODUCT 10 €250 0.5% 100% Yes
TOTAL €61,165 100% 100%



Step 3: Assortment Finalisation
Referring to the Shopper Purchase Decision Process
Does 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 Quantification
What is the estimated € impact on the scorecard from the proposed
Assortment changes?

- What is the turnover and profit
contribution of the deleted
SKUs?
Will we net 100%
of the projected
turnover and profit losses
from the product deletions?

Will the we net

+
What is the projected turnover 100% of the projected
and profit contribution turnover or
of the added SKUs? profit gains from
product additions in the
segment or category?



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

Consumer HH Retailer Data Market Data
Panel Data

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



Key Principle #1: Valid Shopper based Definition & Structure..
• Shopper Purchase Decision Hierarchy drives structure
• The proper structure helps us determine where switching is more/less likely

Wine

1st Decision Level
Red White
- Switching unlikely

2nd Decision Level
French Italian Spanish New World
- Switching more likely

Appellation O/B
3rd Decision Level
– Switching highly likely
Brand Size

What are the implications of incorrect Definition or Structure?



Key Principle #2: Assortment Decisions are made at sub-category
level
i.e. for groups of SKUs that meet similar needs

Chilled Desserts

Healthy Kids Family Special
Desserts Desserts Desserts Desserts

Functional Low Fat Organic Speciality Organic Regular Pots Other For One Sharing

Benefit Brand Pack size Pack size Format Format Brand Brand Flavour Type


Summary

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 Process
The Objectives & Context Stage



Assessment measures

Finalisation attributes in our new Assortment?




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)

Shopper Purchase
Category Structure
Decision Hierarchy

Category Soft Drinks

Drink Now
Occasion Drink Later
(Chilled)

Refresh Me Functional Refresh Me Functional
Need state Drinks Drinks Drinks Drinks

Fizzy Still Energy Sport Healthy Fizzy Still Energy Sport Healthy
Waters Waters
Type Drinks Drinks Drinks Drinks Drinks Drinks Drinks Drinks Drinks Drinks

Various



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

Role Name Typical
(names may vary by % Portfolio Description Scorecard Impact on Assortment
retailer)

• Drive footfall • Above Fair Share Category breadth & depth to
• Be the primary provider Growth appeal to highest # of
“Destination” 5-10% • Help define the image of the • Reduced Profit due Customers
retailer to investment Invest in new items

“Core” • To be the preferred
provider of these products • Fair Share Growth Category breadth vs.
“Routine” competitive Assortment
50-70% to shoppers • Fair Share Profit
“Preferred” • Consistent, competitive Focus on new items
value to the target shopper

• Reinforce the image of the • Fair Share Growth
“Convenience” retailer for one-stop or below
“Distress” 10-20% shopping • Higher than Fair Limited Assortment
• Good, everyday value Share Profit

• Help reinforce the shopper’s • Varies depending
image of the retailer on Seasonal Category breadth & depth
“Seasonal” 5-15% • To deliver timely, Destination or during peak season
competitive value Seasonal Limited Assortment off season
Convenience



Q3: What Category strategies should direct the Assortment?

Category Strategy Types – Simplified summary

1. Get New a. Increase Penetration
Shoppers b. Increase Conversion

a. Increase AWOP (Average Weight of
2. Get Existing Purchase)
What Shoppers to i. Increase Frequency of
Demand Spend More Purchase
Strategies
Strategies ii. Increase Spend per Visit
does our
Category
3. Get Shoppers to
Work Buy More
Suggest? a. Trade into a more profitable product
Profitable
Products

Supply 4. Make the
Category More a. Improve availability
Strategies Efficient & b. Reduce resources used
Effective



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 Assortment
Source Answers
Questions Implication
1. What is our most robust 1. Supplier
1. Yes – our view on structure has been
view of the Category Consumer & 1. Need to prepare assortment
updated to include ‘Healthy’ as a
Definition and Shopper for new category structure
separate sub category
Structure? Research

2. What are the category
1. Retailer
role & scorecard 1. Role is core
Corporate 1. Ensure focus on productivity
measures for this
Strategy / 2. Main aim of Scorecard is to increase measures in the largest sub-
category & how does
Category Cash Profit categories
this impact on
Scorecard
Assortment?

3. What Category 1. Need to ensure that we bias
1. Existing Category
strategies should direct 1. ‘Trade up to something Healthy’ towards Healthy products
Strategy work
the Assortment? identified by the strategy

4. What is the scope of our 1. Build standard Assortment for
project? 1. Retailer & 1. Superstore Assortment 12m bay *
Space/ Assortment Supplier Direction 2. Prepare overlay for ‘affluent’ store 2. Develop affluent overlay based
size (increasing/
decreasing)? 2. Judgement profiles upon brand shopper
Store Formats? demographics *

5. What are the themes 1. Retailer &
from the Retailer & Supplier 1. Ensure Children & Everyday
Supplier goals & Corporate 1. Focus is on everyday family value sub-categories reflect the joint
corporate strategies that Strategy target areas
must be reflected in
Assortment? 2. Judgement


Overview of the Objectives and Context Stage
Summary

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 Definition
Role
Category Strategy work
Pre-determined issues and guidelines (Scope)
Corporate Strategies of Supplier & Retailer


Stage 1 – Market Coverage



Assessment measures





Stage 1: Market Coverage
Why 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?


Understand Market Coverage

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

Market Family Desserts Cumulative
Family Desserts € Turnover sub-category € € Turnover of
Market: XX Turnover sub-category

PRODUCT 1 €18,000 29.4% 29.4%
PRODUCT 2 €15,600 25.5% 54.9%
PRODUCT 3 €11,600 18.9% 73.8% Narrow Assortment?
PRODUCT 4 €7,000 11.4% 85.2%
PRODUCT 5 €2,315 3.8% 89.0%
PRODUCT 6 €2,300 3.8% 92.9% ‘Average’ Assortment?
PRODUCT 7 €2,000 3.2% 96.0%
PRODUCT 8 €1,600 2.6% 98.6%
PRODUCT 9 €500 0.9% 99.5% Broad Assortment?
PRODUCT 10 €250 0.5% 100%
TOTAL €61,165 100% 100%



Put another way - where do we draw the
coverage ‘cut off’ line?
% of Category Turnover (Coverage) In

100%

80%
Market

60%

40%

20%

0%
10 20 30 40 60 70 80 90 100
50
% of SKUs Available in Market



Market Coverage is a Strategic Decision
A High Coverage = A Broad Assortment
A 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


Determine the right Market Coverage

There are 7 key questions that will help us determine what level of
market coverage we should choose for a sub-category.
Impact on Market Coverage (High / Medium / Low)
Area Question Source Sub Sub Sub Sub
Category #1 Category #2 Category #3 Category #4

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

Category 2.What coverage do the selected Category Category
Plan Strategies suggest for this sub-category? Plan
Direction
3.How important to the target shopper is the Category
sub-category & what does this imply for Plan
coverage?

4.How fragmented is the sub-category and Range
what does suggest for coverage? Analysis –
Mkt Data

5.How productive is the sub-category and Range
what does this suggest for coverage? Analysis –
Assortment Mkt Data
Analysis 6.What are coverage positions of the Retailers Own
competition and what does this suggest for Analysis
coverage?

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

Implied Market Coverage Level:

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

Summary & 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-category
But could also vary by market, profile or store/outlet


The Assortment Assessment Stage



Assessment measures





Stage 2: Assortment Assessment
Understand Assortment Assessment

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

Family Desserts Market Family Desserts Cumulative Currently
€ Turnover sub-category € € Turnover of Listed?
Decisions to Market: XX
Turnover sub-category
make:

PRODUCT 1 €18,000 29.4% 29.4% Yes
Add? PRODUCT 2 €15,600 25.5% 54.9% No
PRODUCT 3 €11,600 18.9% 73.8% Yes
PRODUCT 4 €7,000 11.4% 85.2% Yes
PRODUCT 5 €2,315 3.8% 89.0% Yes
Retain? PRODUCT 6 €2,300 3.8% 92.9% Yes Selected Market
PRODUCT 7 €2,000 3.2% 96.0% Yes Coverage Line
PRODUCT 8 €1,600 2.6% 98.6% No
PRODUCT 9 €500 0.9% 99.5% No
Delete? PRODUCT 10 €250 0.5% 100% Yes
TOTAL €61,165 100% 100%


Understand 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?


Undertaking Assortment Assessment for each SKU

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

Area Question – asked for each SKU being Assessed Source

1. What is the (National) Loyalty level for this SKU (brand) as Panel Data Analysis
an index of average loyalty in this sub-category?
Market 2. What is the (National) Shopper Worth for this SKU (Brand) Panel Data Analysis
Data as an index of average worth in this sub-category?
Questions
3. What is the (National) €WROS for this SKU as an index of Audit Data via coverage
average SKU €WROS in this sub-category? tables
4. What is the Turnover (€) for this SKU in this Retailer as an Retailer Data
Retailer index of average SKU turnover in this sub-category?
Data
Questions 5. What is the Profitability for this SKU in this Retailer as an Retailer Data if available
index of average SKU Profitability in this sub-category? (could be H/M/L)

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

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


Make 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 should
1. ADD SKUs above the coverage line that are currently not stocked
2. DELETE SKUs below the coverage line currently stocked
3. 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


The Assortment Finalisation Stage



Assessment measures





Stage 3: Assortment Finalisation
Understand 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?
Brands
Prices?
Performance?



An Assortment Finalisation Matrix is constructed for each sub-
category in the Category, based on the Shopper Purchase Decision
Hierarchy
• Purchase • Purchase • Purchase • Purchase
Decision 1 Decision 1 Decision 1 Decision 1

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

• Purchase
Decision 2

• Purchase
Decision 2

• Purchase
Decision 2

• Purchase
Decision 2

Each box therefore represents a Shopper need



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

Sub Category:
Drink Now • Refresh Me Drinks (1) • Functional Drinks (1)
(Occasion) Drinks

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

• SKU 15
1. Need state • SKU 2 • SKU 20
• SKU 1
• Waters (2) • SKU 16
• SKU 18 • SKU 8 • SKU 22 • SKU 13 • SKU 27
• SKU 10 • SKU 28

• SKU 21
• Fizzy Drinks • SKU 29
2. Type (2)
• SKU 12 • SKU 9 • SKU 23
• SKU 31

• SKU 24
• Still Drinks • SKU 25
3. Flavour • SKU 4 • SKU 17 • SKU 33 • SKU 30
(2)

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



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

Sub Category:
(Occasion) Drinks


• SKU 15
1. Need state • SKU 2 • SKU 20
•
• Waters (2) •
SKU 1
SKU 16
• SKU 18 •
•
SKU 8
SKU 10
•
•
SKU
SKU
22
28
• SKU 13 • SKU 27 ? ?

• SKU 21
• Fizzy Drinks •
2. Type (2)
• SKU 12 ? ? • SKU 9 • SKU 23
•
SKU 29
SKU 31 ? ?

• SKU 24
• Still Drinks •
3. Flavour (2) ? • SKU 4 ? • SKU 17 ? • SKU 33
SKU 25
• SKU 30



Where is there potential duplication that needs examination?

Sub Category:
(Occasion) Drinks


1. Need state • SKU 15
• SKU 2
• Fizzy Drinks • •
(2) •
SKU 1
SKU 16 •
SKU
SKU
20
22
•
•
SKU 8
SKU 10
• SKU 13 • SKU 27 ? ?
• SKU 28

• SKU 21
•
2. Type • Waters (2) • SKU 12 • SKU 18 ? • SKU 9 • SKU 23
•
SKU 29
SKU 31 ? ?

• SKU 24
• Still Drinks •
3. Flavour (2) ? • SKU 4 ? • SKU 17 ? • SKU 33
SKU 25
• SKU 30


Validate the changes

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

Assortment Finalisation Validation Summary

Gaps: Shopper/ Consumer Productivity Rationale Proposed SKU Action
Rationale

Functional Fizzy Pouch Unmet Need in the Functional drinks are NPD – ‘Boost Me’ Pouch –
market currently the fastest growing aimed at teenagers
segment
Functional Pouch Water None – bottles fulfil the None – Bottles fulfil the No Action
need need

Duplication: Shopper/ Consumer Productivity Rationale Proposed SKU Action
Rationale
Refresh Me 500ml Fizzy High duplication and Poor productivity in this Delete SKU
confusion for shoppers segment

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


Key Learning

1. Assortment finalisation is where we overlay the needs of the
Shopper onto the provisional Assortment
We look for gaps to fill
We 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


The Assortment Quantification Stage



Assessment measures





Stage 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 Quantification
Summarise Assortment Decisions

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

• What is the Coverage? • What are the SKU changes?
–Old –Additions
–New –NPD
–Deletions
–Retention
Summary of Assortment Changes

Market Coverage #SKUs
Old New* Deleted Added/NPD Retained
Sub Cat #1 82% 87% 8 4 27
Sub Cat #2 56% 65% 6 12 32
Total Category 14 16 59

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


Determine Scorecard Impact of Decisions

-
What is the turnover and
Will we net 100%
profit
of the projected
contribution of the deleted
turnover and profit losses
SKUs?
from the product deletions?

Will the we net
What is the projected

+
100% of the projected
turnover and profit turnover or
contribution profit gains from
of the added SKUs? product additions in the
segment or category?



What is the projected Scorecard impact of a deletion decision?

Factors in estimating turnover or profit loss:

Current Turnover: A conservative estimate would be all turnover lost
due to deletion

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



What is the projected Scorecard impact of an addition decision?

Factors in estimating turnover or profit gains:

Market Turnover: 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
Loyalty: a greater % of projected turnover



What are the estimated other costs of the new Assortment?

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


Key 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


The Implementation Stage



Assessment measures





Implement the Assortment proposal in conjunction with Merchandising
teams

Do
Use simple communication to explain
the logic behind your Assortment
recommendations
Use the Assortment Attribute
matrices to steer decision making
Record deviations from
recommended Assortment to allow
you to check back and revise your
quantification if necessary

Don’t
Allow the rigour of the process to
break down at the last minute!


Key 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....

Assortment Process
Category Management
Business Process
Objectives &
Context
1. Category Definition

2. Category Role 1. Market Coverage
8. Category Review

3. Category Assessment
2. Assortment
Assessment
4. Category Scorecard

Assortment 3. Assortment
5. Category Strategies Finalisation
Merchandising
6. Category Tactics
4. Assortment
Price Quantification
7. Implementation
Promotion

Implement


www.thepartneringgroup.com


Shopper Based Assortment Planning Crash Course

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