Planogram Powering Retail Benefits and Best Practices

Technology | 5 minutes to read

03rd Jul, 2020

In an age where retail brands are vying with one another to get consumer attention, by leveraging the high impact technologies like AR, VR etc. there are some foundational elements which often steal the game in the competitive landscape. Basic aspects like the store design, the way merchandise is kept in the store, the rate of replenishment of stock etc. can play a defining role in building your customer count.

Bundling all these factors like merchandise display plan, shelf & fixtures layout etc. under one umbrella, we get planogram. It’s a diagrammatic approach to have an easy-to-navigate as well as appealing product placement within the store. It’s non-static in nature since it requires constant adjustments based on changes in customer demand etc.

Building Blocks

From a macro point of view, a planogram consists of three main components:

  • Cover page – Comprises general information and instructions
  • Schematic– Comprises of details like the number of shelves needed and their dimensions etc. (as such, the overall layout of each section)
  • Stock keeping unit (SKU) listing & accompanying universal product codes (UPC) – It contains information around correct placement of each item and details like the proper number of facings, or shelf positions, each product requires.

Types of Planogram

Based on the way products are displayed, planograms can be broadly classified into following types:

Text Based Planogram

In line with its name, this planogram is a textual document with boxes indicating space for various products, and they are then filled with product names. Quite naturally, they are the simplest one to be made however, they are the most traditional one and therefore lack much of intuitive or reactive feature.

Picture Based Planogram

This is a more complex planogram type and apart from detailing out the location of the product, it also describes the way the product is going to be exhibited.

Three-Dimensional Planogram

This is the most comprehensive type of planogram which not only include the location of the products along with the visuals of their outlay but also the quantity and the signage accompanying them.

The 3D nature of the planogram provides you a detailed layout of the entire store or section of the store in such a manner that it poses a striking resemblance with the actual outlay.

Era of Smart Planograms

In these technology-driven times, the traditional planograms have been replaced with smart planograms. These smart planograms are tech-enabled avatars of their former self and use the power of better decision models and advanced algorithms to adjust microsegments. As a result, you get granular level precision and management, be it in terms of visual merchandising or even back-end inventory management.

Earlier when a new product used to be launched or there was a change in marketing strategy, it meant the repetition of entire exercise, right from planogram drafting to its implementation. However, now with the add-on automation, the time and effort required for this task has been significantly lessened.

Even from execution point-of-view, the smart planograms are interactive (provide instructional walkthroughs to sales reps), real-time (ensuring a tighter compliance) and integrated (all info like stock level, product performance etc. in one place).

Thus, the display setup and the field management process are easily managed which leads to a streamlined remote retail management and ultimately, better sales. These are the reasons why many brands are ditching traditional planograms these days and choosing these tech-enabled next-gen planograms.

Benefits of Planogram

The primary objective of any exercise in the retail sector is to amplify sales. Planogram acts as an effective tool in the same direction.

An aptly designed and managed planogram boosts sales, cuts down on costs and enhances overall consumer experience (thus, making them more probable to return).

Here’s a quick view of the key benefits which retailers stand to gain with effective planograms, both in short-term (or real time) and in long term.

Supporting the customer decision tree

When consumers step into a store, they want to get the product they need at the earliest and a long search to find where that specific product is kept, is a sure-shot turn-off. Hence, keeping the product at a place where consumers would generally expect it to be kept becomes quintessential. A planogram will suffice this requirement of appropriate assortment planning.

Also, once they lay their hands on the product they want to buy, they are always keen to compare it with similar products from different brands. To assist them in their decision journey, a planogram will help you place the right combinations of product at the right place (also known as product hierarchy’s management) and will ensure a satisfied customer.

Well-executed and timely replenishments

What’s worse for a consumer – to find an empty shelf or to find the shelf being filled with another product which is usually not kept there? Actually, both the situations pose a risk for the retailer to lose the customer.

This is where historic data comes to the rescue and with information on supply days and sales history, space planners can easily predict when the product would run out and when should the next order be placed.

These planogram techniques will ensure that you’re never left with empty gaps on the shelf and thus, in turn, no more disappointed or waiting consumers.

Knowledgeable in-store staff

When you deploy planogram, the in-store staff is involved in shifting or re-doing any product display arrangement. When they have spent considerable amount of time in keeping the products in the shelves at the right places, they’d invariably be well-versed with information like which product category is kept where and can easily direct the consumers.

They’ll be expert in dealing with vague consumer queries also. such as where the consumer doesn’t know the name of the product but remembers the kind of packaging.

The new-age planograms are also interactive and ensures that they are easy to manage for the store staff.

Intelligent cross-merchandising

Multiple time it happens that customer may not come with a prepared list of products he or she may want to buy but rely on their store tour to remember all the important things they need to keep in the basket. Such kind of situations offer a perfect opportunity for retailers to do effective cross-selling.

For example, keeping related products in nearby shelves, such as, keeping the butter shelves near the place where breads are kept or keeping the sock and stockings aisle near the shoe counter. At times, even keeping some low-value fancy or newly-launched items near the checkout counter can result in customers buying those items at the last minute.

This benefit of pushing an unplanned item into a customer’s basket and leveraging the impulse buying behaviour is also accrued by implementing effective planogram.

Creating visually appealing shelves

Visuals play a vital role in defining human behaviour. Planograms leverage these consumer psychology elements and ensure that the visual appeal of the store and even of individual product placement is such that it prompts people to buy.

For example, in a home décor shop, there might be areas which would get better consumer response if they are brightly lit and have bright colour hues such as living room decor spaces etc. while a cosy restaurant would do better with dim lightings in the evenings.

Even in terms of product arrangement, some would require a vertical shelf placement while other may need a horizontal setup for better customer view.

With planograms you can manage all these visual merchandising elements which in turn encourage customers to make the purchase.

Better grasp of category performance

Along with clean data and well classified products, as a retailer, you’d also be getting an understanding of product and category performance with the help of planogram metrics.

Location based performance of the product fused with the business intelligence allows for knowledge around the most profit-reaping locations and the ones needing some work, as well as knowledge about potential cross-selling opportunities.

This means, you’d be getting to know about customer reaction and expectation – the typical information which is an asset for retailers.

Armed with this knowledge, you’d be better equipped to plan your strategy – be it for new product introduction or inventory boost (or the opposite) or experimentation in visual merchandising etc.

Apart from these direct benefits, there are a few more long-term benefits as well which planograms bring to the business.

Meeting the sales goals easily

Apart from maximising the selling potential of entire shelf space, it places you in a better position to realise your sales goals. That happens since a major chunk of ‘doing what’s right and what’s required’ happens at store level which means that the strategy will start getting accomplished at store level itself.

Acting as an efficient negotiation tool

A planogram can be utilised as a great negotiation tool with different brands and supply vendors. The products and their placement can be made value elements for brands and agreements can be made with distributors in terms of placing their products in the most eye-catching spots.

Streamlined inventory engine

Another major leap happens in term of simplified and optimised replenishment engine which is accompanied by a healthy stock rotation and ultimately a significant boost in sales.

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Best Practices to Reap Maximum Rewards With Planogram

Use sales data for requisite tweaking

Once the planogram is in effect, analyse the sales statistics to understand which product is doing better and which is not. Then correlate that piece of information with the planogram placement of those products and accordingly make positional changes to make the slacking product follow the footsteps of the top performing product.

This exercise is fruitful only when the changes are also followed by a reconfirmation of sales numbers after a stipulated amount of time, to ensure if the experiments have been successful or not.

Compare planogram with store-level visual data

Planogram adherence is one major factor which will define if you’d benefit from it or not because how much so ever perfect and precise the planogram be, if not implemented well, it serves no purpose. Therefore, a full-proof compliance is critical to reap any benefit.

Sales reps can be instructed to go beyond data-level matching and instead click real-time picture to do product by product mapping with the planogram. This specific visual comparison allows them to compare how the shelf looks and how it should look like as per the agreed upon planogram. This exercise will ensure better retailer compliance in terms of managing the shelf real estate.

Ensure these basic add-ons

While focusing on bigger and complex elements, ensure that you don’t let go off the fundamental principles of planogram. These include keeping the new and seasonal products at the front, so it catches customer attention as soon as they enter. Practices like placing best-sellers at eye-level to maximise their impact and keeping the necessities in a manner that the customer has to traverse through the store to locate them (thus giving you an opportunity to make them pass through a lot of other ‘optional’ product categories) have proven to be beneficial to retailers.

Creating spaces amidst product display which causes people to pause, also provides an opportunity to emphasize a product to the customer. It’s like creating ‘speed-bumps’ with the help of uniquely packaged or boldly coloured products. Also, not ignoring the most significant impulse-buy zone (the cashier desk) and utilising it to advertise products which can easily fit into the category of ‘let’s try’ for the customers without making them think too much about the spend on that unplanned buy.

Conclusion

Planograms are the most effective way to make the most out of every square inch of your store space in the most effective way. Using the principle of space-elastic demand, highest profits can be drawn by following a logical product placement. It’s a great tool for the retailers to plan the best store navigation experience for their customers and a chance to subtly convert regular consumers into loyalists.

In a nutshell, if conceived and implemented properly, planograms have the power to revolutionise retail merchandising and brands are increasingly leveraging this concept to grab customer’s attention.

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