Evaluating a planogram can take many directions but there are really three kinds of measures to consider – Planogram performance, assets and productivity:
Performance is a question of how well did the planogram do – what kind of numbers did it generate? These can be expressed as Movement, Sales and Profit.
- Movement – How many units did you sell? Typically expressed on a per store, per week basis. Measures demand and traffic
- Sales – How many overall dollars did you generate? Retail price times movement. Also expressed per store, per week. Measures dollar volume through the cash register.
- Gross Profit (Gross Margin Dollars) – How many dollars did you keep? (Retail Price – Unit Cost) x movement. Measures profitability. Profitability is a reflection of Movement AND Margin.
Assets is a question of what did we invest to get the return.
- Space – How much space was required for the category? Measured in linear, square, or cubic feet
- Inventory units (capacity) – How many units fit on the shelf? Based on the product dimensions, shelf dimensions, and how the product is merchandised with facings, stacking, etc.
- Inventory dollars (capacity x unit cost ) – How much money does it take to fill the shelf? Based on the item capacity within the planogram and the cost of the item
Productivity brings Performance and Assets together to give us the measure of the return on our investment. This can be expressed in a number of ways including:
- Movement per foot – this measures movement generated per foot of space allocated and answers the question – how productive is the space in generating traffic?
- Sales per foot – this measures dollars generated per foot of space allocated and answers the question – how productive is the space in generating sales?
- Profit per foot – this measures profit generated per foot of space allocated and answers the question – how productive is the space in generating profit dollars?
- Shelf Turns – this measures how many times you will sell through the units on the planogram in a year, assuming similar movement and is a measure of stocking efficiency.
- Days of Supply – this measures how many days’ worth of stock you have on the shelf and is measure of inventory efficiency, especially when used in conjunction with delivery and stocking schedules.
Gross Margin Return on Inventory Investment (GMROII – my favourite!) – this measures the ratio of annual profit to average inventory investment and answers the question – for every dollar invested in inventory, what does the retailer make in a year in profit dollars?
As you can see, from a few straight-forward measurements, of Performance and Assets you can get to some powerful ways of evaluating the planogram performance and planogram productivity.Tags: Evaluating planogram, planogram, Planogram Compliance, planogram performance, planogram productivity, planograms