Building a ’convenient shelf’ in accordance with customer decision tree does not necessarily support the category sales value

The traditional way of thinking about the planogram involves the intention of arranging products on the shelf in such a way that their layout reflects main divisions present in the consumers’ idea about the category. For example: if the main criterion featured in the ideas about the category of drinking water is the division into still and sparkling, those responsible for the category management will often say that this division should be reflected in the way products are placed on the shelf. However, it turns out that introducing divisions in keeping with consumers’ ideas very often cause the sales value in the category to decrease and is unprofitable.

CONSEQUENCES FOR BUSINESS

The result of building a planogram in accordance with the dominant divisions existing in customers’ perception is that they have greater chance to optimise their choices (e.g. price-wise) and immediately find the area of shelf which is most interesting for them, avoiding the contact with products which would prompt an impulse purchase under different circumstances. This, in turn, decreases the sales value of the category. The ideal planogram is a compromise between organisation (according to the customers’ understanding of the category) and the controlled chaos which stimulates impulse purchases, induces them to try out new products and forces to browse through the category.

CASE STUDY

An owner of a drugstore decided to carry out an experiment of changing the planogram, according to the consumer’s decision tree. The primary layout of the category of colour makeup arranged according to brands was replaced with a layout reflecting the needs connected with the use of products for eyes, lips, nails, etc. It turned out that the new planogram did meet consumers’ approval (assessed as highly functional) but caused a close to 20% drop in the sales value. The reason was that products of various brands for a particular use arranged together on one shelf supported the customers’ tendency to choose the cheapest alternative. People who used to buy more expensive brands and did it automatically, now got the chance to optimise their choices with regard to prices.

BUSINESS RESULTS

Establishing a planogram which is convenient for customers, according to their decision tree, can reduce purchases in the category even by 15-29%.

TIPS BEFORE APPLICATION:

  • Ask yourself: Does the order imposed by the decision tree involve the risk of price optimisation during the shopping?
  • Ask yourself: Doesn’t the order dictated by the decision tree limit the motivation for impulse purchases?
  • Ask yourself: Is the order dictated by the decision tree favourable with regard to the placement of the manufacturer’s products (cannibalisation, competitive surrounding on the shelf)?