If you are a Founder/CEO or a Sales Head of a CPG company you already know how painful it is to get your product assortment right across all the stores. And if you happen to have a high number of SKUs- where many remain unsold- then the struggle intensifies many-fold.
I remember what happened to the iconic Dalda Vanaspati ghee when it didn’t pivot its product mix to cater to the changing consumer demands. At its peak, Dalda held more than 70% market share. A few years later refined oils started getting recognized as a healthier option and began gaining market share. Dalda didn’t have other products to retain leadership and was eventually replaced by groundnut (Postman), sunflower (Sundrop) and others.
So why is the depth of distribution important?
Observe the overall consumer market and you’ll discover most customers are brand-loyal. Which means if they like your product, they will continue to buy it. But what if your product isn’t available? Or what if they want to try a different brand? To ensure consumers stay loyal to your brand, you need to be able to offer them a variety of options. Here, the basic rule of thumb to remember is, the more the number of SKUs the more fine-tuned your depth of distribution should be.
For e.g. When Amul launched its processed cheese, the taste of that cheese became familiar for thousands of Indians. In the past decade or so, Amul has expanded its cheese category to include processed cheese slices, blocks, cubes, spreads, shredded mozzarella and cheddar and even Emmental and Gouda cheese. Today, even though there are many Indian and international options to choose from, I still buy Amul cheese, because that’s the taste I prefer.
So if I go to buy cheese slices, and there is a scheme on the new flavours of Amul Cheese Spreads, I will most probably try them. That’s how customers usually are. Because they have faith in the company and its products. This strategy of extending depth of distribution helps to retain leadership on your high-performing categories and also ensures sustained patronage from the customers.
Challenges around the depth of distribution
Have you identified the product lines you want in large-format stores versus small mom-and-pop stores? How do you retain the shelf share amid the aggressive undercutting by competition? Is your Sales Team aware of the targeted categories for each store profile?
Unfortunately, when companies have a large array of SKUs, salesmen try and eventually struggle to sell all product lines and SKUs equally. These companies don’t know if their salespeople are selling on the basis of customer profiles or only jotting the orders that retailers need. They don’t know if the right schemes are being communicated to the retailer, or whether the salesman is even aware that a relevant scheme exists.
Not surprisingly in such cases, 20% of the product range tends to contribute to nearly 80% of the revenue, because if one category is the cash cow, the sales team would rather milk the existing one than create new ones.
Increasing your Depth of Distribution
A 2019 study from Deloitte and Google states that product assortment should not be stagnant, but change over time in accordance with customer behaviour. To hit the sweet spot, your product mix should ideally be defined for every retail outlet. But is that even possible?
We say it is. But with the right kind of automation solution. FieldAssist’s end-to-end automation platform assists your on-field sales team to smartly book orders with features like:
1. ‘Must Sell’ Products – One of our top FMCG customers wanted to add some newly launched product lines so it could help distribute the load off their star product. But things didn’t go as expected. Possibly the salesmen didn’t remember to promote these new products or they had no reason to as there was no incentive to sell them.
To get more traction, the customer used FieldAssist’s Must Sell feature which allowed mid-managers to define geography-wise or even SO-wise products that are mandatory for him to sell. Apart from helping the company revive slowly running SKUs with attractive and personalized schemes for retailers, the ‘Must Sell’ products contributed an average of 23% towards overall sales. By marking products as Must Sell, the SOs in the field knew exactly what and how much they needed to sell.
2. ‘Focus’ Products – Certain products or SKUs do not have a high sales volume because they might cater to a specific target audience. Over time, the company’s ROI around this long tail of product mix can fall drastically if efforts are not made to promote them.
A customer in the dairy business wanted to find a solution to this challenge with technology. They have many different products under various categories. The company identified certain products that required a little push to sell. With the ‘Focus Product’ feature, their mid-managers could choose and pull in all these specific products and create a Focus Group. Their salesmen could immediately see which products they needed to promote when booking orders.
By using the Focus Product functionality, they improved the product placement of a key SKU by 17% & and another by 11%.
3. ‘Near-Peer Stores’ Feature – One of the biggest apparel and innerwear companies in India has nearly 15 product categories and SKUs in the hundreds. Each category, therefore, has a separate sales team with its own unique outlet universe. Since most of their retailers keep 4-6 categories and not all, the company realized the enormous untapped potential for all the sales teams to tap into outlets that are in the master list, but not part of their category’s outlet list.
With the innovative ‘Near-Peer Stores’ feature, every SO of every team could view potential ‘new outlets’ within a 30 km radius. These were stores that already stocked the company’s products, but not that particular category.
Just by using the Near-Peer feature, nearly 300 salesmen were able to tap almost 700 outlets to upsell their product line and bring in a whopping Rs 1.5 crore of revenue in just 6 weeks!!
4. Artificial Intelligence-based Product Recommendations
This fantastic feature will show the SO the highest selling products for that specific outlet, based on historical intelligence from the last 3-4 orders. Additionally, the SO will also receive a suggested order quantity that can speed up the order taking process as well as ensure no hot-selling products gets missed.
Technology-assisted depth distribution can tangibly help brands achieve assortment optimization and maximize the opportunity to grab more space in a consumer’s grocery bag.
To know how you can also re-calibrate your perfect product assortment for every store you are present in, reach out to us.