You are a merchandising manager who wants to increase planogram compliance. You use a planogram management solution to send notifications that a campaign has started, track task compliance, and communicate with the stores.
Your first foray into analytics is understanding how the stores use the technology solution and where you should focus your efforts. Here’s how:
What's Planogram Compliance?
A planogram is a visual representation that shows how and where retail products should be placed on retail shelves or displays to maximize sales.
For example, consider the requirements for setting up a smartphone display.
Beyond schematic tools to manage shelf space and inventory turnover, a planogram can provide a powerful competitive differentiator that increases brand power and store sales.
Planograms are critical tools for retailers. To design a planogram, you consider customer behaviors, product demand, and the visual appeal of the merchandise. The goal is to attract customer attention effectively and drive sales.
Why Is Planogram Compliance Important?
Planogram compliance means that the stores set up the planogram as designed by the merchandising manager. Compliance is important because:
- Legal: Retailers and brands sign a financial contract specifying the product positioning requirements.
- Operations: Setting up a planogram is a task. The process of planogram compliance is a factor in operational effectiveness.
- Branding: A planogram is a marketing tool. Planograms are a message of consistency and recognition to consumers.
Behavior Analytics of "Planogram Compliance"
As a merchandising manager, how do you know there is a problem with planogram compliance?
Your goal is to achieve 100 percent store compliance in the planogram setup. Therefore, you want to know if there is a problem.
You start with a box and whiskers chart that clarifies the distribution and highlights the median and outliers for statistical analysis. The box contains the middle 50 percent values.
In the chart below, you’ll see that on the first day following the campaign announcement, most of the stores of Retailer 1 complied with the new planogram setup, but stores of Retailer 2 and Retailer 3 were trailing far behind.
The planogram management solution helps you to understand what the stores do. Your first question is: Are the stores logged in to learn what they must do for the campaign?
As you can see, most of Retailer 1's stores logged into the system between 4 and 8 times during the first 24 hours of the campaign.
In the lagging Retailer 3, the login rate was once or twice.
Let’s see what the most successful retailer is doing right.
Retailer 1—Compliance and Productivity
A histogram chart shows the frequency of the data. It is a descriptive chart to help you understand behaviors, patterns, and trends.
In our case study, by the seventh day of the campaign, 97 percent of Retailer 1 stores achieved 100 percent compliance (1413 out of 1462 stores).
Yeah!
Our merchandising manager is happy, but she wants more. She knows that the store's ability to comply with planogram requirements and staff productivity are two different things.
The scatter chart shows the relationship between the two variables. In our case study, you are searching for a relationship between login into the system and compliance rate.
Our manager investigates when and how long it took the stores to set up the planogram according to requirements. It is evident that some of the stores achieved compliance but had to log in many times.
The login data helps our merchandising manager identify stores needing more training and logistical challenges. To identify these stores quickly, she digs into store behaviors within 24 hours of launching the campaign.
1005 stores (69 percent) achieved 100 percent compliance by the first day of the campaign.
Most importantly, our merchandising managers found that 50 percent of the stores logged into the system 4-7 times during the first day of the campaign launch.
A Pareto chart shows frequency and cumulative percentage. It is based on the Pareto principle, which states that 80 percent of effects come from 20 percent of causes.
As you can see below, of the 1,462 stores, 19 percent (285 stores) logged in 6-8 times during the campaign. By the end of the campaign, only 34 stores had logged in less than four times.
In Retailer 1, our merchandising manager is ready to explore the logistics and operational challenges of increasing planogram compliance more thoroughly.
The picture does not look good for the other retailers.
Logins Lead to Compliance
Planogram compliance management starts with monitoring how the stores use the system.
The first step is simple: Identify how many times and when the stores logged into the system to learn what needs to be done.
On Launch Day 1, only 20 percent of stores in Retailer 2 achieved planogram compliance. Worse, 67 percent of stores did not log in during the first 24 hours of the campaign.
The inconsistency continued throughout the campaign. You can see the login rate after Day 7 in the Pareto chart.
Retailer 3 lagged far behind, with only 41 percent of stores achieving planogram compliance by Day 7 of the campaign.
Amplify Store Sales
When done right, the planogram compliance management system creates a feedback and growth loop.
Our recommendations are:
- Use the stacking behaviors technique to increase login at the beginning of the campaign. If stores log in during the first day of the launch, it creates psychological ownership and increases the motivation to finish the task.
- Monitor each step in the setup process. Compliance is an outcome of a series of activities by different people.
- Communicate, communicate, communicate!
Planogram compliance is about more than following guidelines; it's about creating a shopping experience that maximizes sales and strengthens your brand. By leveraging analytics and understanding store behaviors, you can improve compliance rates, drive sales, and create a more engaging shopping environment for your customers.
Ronny Max is an author, speaker, and executive coach. In 2015, Ronny served as the domain expert at Stanford University Vision Project, the first research venture into AI technologies for physical retail. In 2017, she founded the Behavior Analytics Academy to help retailers, brands, malls, service integrators, and solution providers maximize the benefits of in-store technologies with Behavior Analytics. You can sign up for her newsletter here.
