Applications of Retail Tracking

The retail tracking service yields metrics like market share (a term coined in 1935 by Arthur Nielsen), sales and measures for distribution. These measures, which are fundamental to formulating marketing strategies and sales plans, have numerous applications, including the following:

• Develop market strategies.
• Monitor brand health in terms of sales and distribution.
• Monitor competition.
• Understand market opportunities and threats.
• Develop sales plans.
• Evaluate performance in trade.
• Diagnose issues in distribution.
• Set goals and targets.
• Evaluate performance of individuals — business leaders, marketing and sales personnel.

The Data

Exhibits 29.2 and 29.3 provide a helicopter view of retail tracking data. The charts depict a visual overview of the sales of a product category and the sales of a firm’s products in that category, across a number of Asian markets. They are configured to reveal the overall category and corporate performance, across the different markets in the region. 

Whereas Japan (JP), in this example, is the biggest market in the region in terms of category sales, China (CN) is the most important market for this company. The inner circles in Exhibit 29.3, which represents the firm’s sales, reveal that it is the firm’s largest market; one where it is experiencing a 22.5% growth in value terms on a moving annual total (MAT) basis, which is well above the average category growth of 13.5%. Note too that this firm is also gaining share in South Korea (KR) and Hong Kong (HK) and losing share in Thailand (TH), Vietnam (VN), Malaysia (MY) and Singapore (SG). This macro view serves as a regional overview, highlighting the firm’s performance across countries. 

To act on the information, marketers need to drill down to markets, segments, and brands, identify opportunities and threats, and take strategic and tactical decisions. Brand and sales managers are therefore typically interested in the data at a brand and item level — variants, pack sizes — across segments, across chains, channels and markets, and across time periods — weeks, months, years. They need to know sales, market share and growth rates. They need to know distribution in terms of numeric, weighted, in-stock and out-of-stock. And they need this information for their own brands as well as their competitors’ brands.

Considering that a FMCG category typically comprises a few thousand stock keeping units (SKUs — i.e., items stocked), the data turns out to be extensive. To facilitate easy access to so much content, the data is hosted on user friendly software that permits speedy access to relevant data and supports visualization tools that make it easier for minds to process the information.

Performance Evaluation

Retail index is also increasingly used by firms for setting targets and for evaluating the performance of business units, business leaders, and marketing and sales associates. For example, during his tenure as CEO, Bart Becht benchmarked Reckitt Benckiser’s (RB) performance on Nielsen’s estimate for category growth rate. RB’s growth targets were set at +2% points ahead of Nielsen’s growth estimate.

The research agency’s estimates are viewed as accurate, objective, third party measures of the firm’s performance, and key metrics like market share and growth are considered essential Key Performance Indicators (KPIs) for the firm.

One drawback associated with using this data for performance evaluation is the potential politicization of the retail index. Besides heightening pressures and expectations on data integrity, it can, sometimes, divert attention from the core objectives of the research.

Retail Index, Consumer Panels and Customized Research

The retail index yields a host of very useful metrics for formulating market strategies and sales plans. Basic measures like market share, sales and distribution serve also as key brand health indicators. For deeper diagnosis of brand health, however, it is advisable to use the retail index in conjunction with quantitative and qualitative customized research as well as consumer analytics data from sources such as consumer panels and loyalty panels.

Consumer analytics reveal behavioural information that provides for an improved understanding of the factors affecting a brand’s health.

To diagnose issues, marketers also need to peek into consumers’ minds — Why are they buying what they are buying? This can be crucially important when it comes to acting on the information, and it falls within the scope of customized consumer research, both qualitative and quantitative.

All the three forms of research — retail tracking, customized research and consumer analytics have their strengths and limitation. They do, however, combine well to provide marketers with a holistic and powerfully diagnostic understanding of business issues in general.

However, do note that it is neither necessary, nor, in the case of small brands, desirable to purchase all forms of research, on an ongoing basis. Marketers should procure research based on their needs, weighing the costs and the benefits of doing so.