During a presentation to a cat food manufacturer, I observed the interesting trend depicted in Exhibit 30.2. The number of SKUs for the client’s brand A was trimmed from 28 to 22, as part of a cost cutting initiative. The retailer responded by sourcing more items from the competitor, and brand B’s range expanded from 15 to 20 variants.
This led to very substantial sales gains for brand B. A year by year comparison revealed a 30% growth for brand B, whereas brand A’s volume dipped by about 2%. Brand B’s market share went up from 42% to 49%.
Cat food is one among a number of categories where a brand’s share of space has a strong bearing on market share. Brand A’s margins may have improved a little over the two year time frame, yet, by trimming its range, it yielded some competitive advantage to brand B.
The battle for shelf space stems from the relationship between share of space, share of mind and share of sales. By expanding its range on the shelf, a brand is able to offer consumers greater choice. It usually gets more facings to accommodate the additional items. This gives it greater visibility i.e. more mind space. At the same time the incremental shelf space must be relinquished by some other brand. As a result of all these factors the brand usually gains market share.
Needless to say that though the temptation may be there to grab space, each item in a brand’s range must earn its place on the shelf. If it fails to do so, it will erode the retailer’s and the manufacturer’s margins, and reflect poorly on the brand and the manufacturer. Ultimately, if it fails to perform, it will get de-listed.
Note: To find content on MarketingMind type the acronym ‘MM’ followed by your query into the search bar. For example, if you enter ‘mm consumer analytics’ into Chrome’s search bar, relevant pages from MarketingMind will appear in Google’s result pages.
The Plannogrammer is an experiential learning facility for category managers, trade marketers, and retailers in consumer markets. Ideally suited for hybrid learning programmes, Plannogrammer imparts hands-on training in the planning and evaluation of promotions and merchandising.
It supports a collection of simulation and analysis platforms such as Promotions and Space Planner for optimizing space and promotions, Plannogram for populating shelves and merchandising, a Due To Analysis dashboard that decomposes brand sales into the factors driving sales, and a Promotion Evaluator to evaluate the volume, value and profit impact of promotion plans.