In response to yesterday’s The Color of Market Share post, here’s a guest post from Brian Crockett, Managing Partner at the Customer Imperatives Group, with some great insight into how the retail shelf space game works. Brian, thanks for the note! And take it away…
Brian says: "Dominant companies such as P&G, General Mills, Kraft, etc. exert enormous influence at retail. They often assume ‘category captain’ roles, which means that the retailer essentially delegates a lot of the tactical management of a category/section to the manufacturer. The category captain recommends a shelf set, which determines how many facings each SKU receives and where those facings are located on the store. In most cases, the # of facings (and location on the shelf) that are recommended to the retailer by the category captain have a very strong analytical basis.
The planogram (great word, meaning the layout of the SKU’s on the shelf) is typically based on the # of turns per SKU per store per week. Turn a lot and you get the prime spot. Turn a little and you get relegated to the top row or the bottom row (or you ultimately get thrown out). It’s all about maximizing the profitability of a store category. There are some special circumstances – back in the early 90’s, we helped a manufacturer design a planogram for the popcorn section, which in most stores takes up a standard 6-7 shelf, 4-foot wide section. The dominant brand was Orville Redenbacher, the challenger was Pop-Secret (our client). Orville had about a 45% share, Pop-Secret about a 25% share, and the rest were lesser competitors and the store brand. We came up with a solution that positioned Orville on the right (on shelves 2, 3, 4), Pop-Secret on the left, and the store brand in between. Lesser brands were on the very top row (hard to see, hard to reach), and the Jiffy Pops, poly bags of kernels, and the jarred kernels were on the bottom rows. We called it the “Twin Tower” program (long before 9/11). Retailers loved it because it favorably displayed their store brands. Pop-Secret loved it because it signified to consumers that Pop-Secret was comparable to Orville. Other manufacturers didn’t like it, because they were relegated to a far lesser status, but they didn’t have the retail presence (in most cases) or strength in the category to prevail. But the net result was that this shelf set helped Pop-Secret gain market share.
In the case of Tide and other big brand names, there’s another big factor … the amount of money that the manufacturer spends on their brands, both in terms of advertising (which pulls consumers to the store looking for the brand) and merchandising/promotion dollars that P&G provides the retailer (which incents the retailer to provide better displays and even shelf placement in order to earn the manufacturer’s promotion dollars). Those merchandising dollars (in some cases) make up a big share of total retailer profit. Pay enough to play and you increasingly call the ball."
Brian, thanks for the note and the insight. Great to hear from you!