Fundamental of planogram & strategy to implement it.
TOPICS
1. What is a planogram?
2. Purpose of creating planograms
3. Principles of constructing planograms
4. How to make a planogram
5. Tools for making a planogram
1. What is a planogram?
A planogram is a schematic instrument used to design a retail location format. Planograms put unique consideration on item situation and presentations, as well as retail location areas.
Likewise called Plays of the game (POG), rack space plans, space plans, and retail schematics, planograms are one piece of a bigger, more thorough visual marketing plan. They normally give a plan to visual promoting, item shows, and eventually assist with stock administration.
Below are the major leading types of planograms:
· Product placement based on category & sub category
· Block product placement
· Horizontal product placement
· Vertical product placement
· Product placement based on commercial status
· Product placement based on margin
· Product placement based on market share
Below is an example of a planogram for a retailer selling x products?
2. Purpose of creating planograms
Close by the way that the planogram importance is a surprising asset for retailers, equipping them with the snippets of data they need to make compelling presentations that resonate with their clients and drive deals, the bona fide planogram besides helps the retailer to:
· Influence client lead, thought, and advancement bearing in the store.
· Control the store assortment about brand, order, and individual SKUs.
· Zero in the took on and made method of plan and reproduce it in onto a couple of trade centers/regions.
· Blend plans that control the region of the things with the supplier and brand chief
· Precisely place transient things and do not allow their waste, discard them
control the execution of advancing aide or book (internal planograms definition, created direction, and advertising philosophy) on the trade centers control the execution of marketing guide or book (internal planograms definition, formed direction, and advancing framework) on the trade points of the chain, and avoid deviations in the plan procedure
Planograms maximize sales
The process of using a planogram for your retail store allows you to collect valuable data about how products and displays work at the store level.
Mapping each product to its exact shelf or display location is like taking a magnifying glass to your data, helping you glean super actionable insights for in-store sales. Use planograms over the course of six months to a year, and you will learn how your product placement impacts purchase behavior.
Look at historical sales data and compare that to your planogram to identify your highest-converting shelves and displays. Do the same with slow-moving merchandise, and consider placing those items together to increase retail sales.
Planograms can open your eyes to a wealth of sales opportunities you may otherwise never have taken note of. Have you ever noticed that higher-priced products are typically shelved at eye level? Retailers intentionally do this to optimize for sales and product turnover—especially perishable product categories.
How to Use a Planogram to Increase Revenue
You can combine historical sales data with your planogram to identify high and low selling items and their placement. If you need to nurture some products, you may want to move them to an area with higher sales. In addition, low-selling products in traditionally high-selling placements should probably be replaced.
Planograms can help grow your retail business by:
· Grabbing a consumer's attention using a pleasing layout
· Creating incentives to trade-up to higher margin items
· Emphasizing bestsellers using placement
· Tracking success and failures to offer future improvement
· Monitor inventory and reduce both overstocked and out-of-stock products
What is Cross Merchandise?
Planograms also allow for strategic product placement from a cross merchandising standpoint. For example, potato and potato peeler are usually in the back corner of grocery stores. Why? Those retailers want to make customers walk past other items, which can help increase impulse purchases.
3. Principles of constructing planograms
A correctly made merchandising planogram must correspond to the 5 classic principles of merchandising. These are sufficiency, visibility, systematics, efficiency, and compatibility. Let us look at each of them individually.
The principle of sufficient layout implies the availability of the complete product assortment on the racks and showcases, taking into account the level of sales and demand, store area, the size of equipment, customer behavior, seasonality, etc.
The sufficiency principle is not only about putting the entire assortment on the shelf but also about correctly defining the number of facings of each SKU within each trade equipment unit.
Principle of the visible layout. Their eyes lead customers. The more visible the product is, the more attractive, appetizing, and appealing it looks, and the more likely the purchase will be made and the buyer will return again. The customer must see the product clearly from every angle of view. When you make a grocery store planogram, sometimes it is important to take into account the angle of view and the attractiveness of each product.
Do not forget about the connection between the layout and the customer’s view angle. We have written here in more detail about the rule of “hat and eye level.”
The principle of systematics means grouping the layout of connected products or, in other words, “commodity complexes” – for instance, household chemicals are often located near paper products for home, paper towels. The showcase with tea is located in close proximity to sugary products, chocolate, and cookies.
Following the principle of systemic layout, you can create commodity complexes of products from one category, use, brand, or even price category (mass market, luxury, and premium).
The principle of efficient layout involves keeping the balance between expenses and profit. The main markers of efficient layout (thus the efficient planogram) increases the sale rates along with a decrease in costs for the product, an increase in the turnover of products and customer traffic, a reduction of time spent by the customer on the search of product, etc.
Principle of compatibility. Using this principle when making a planogram will help you avoid violation of commodity neighborhood, as well as spoilage of products and incorrect visual presentation.
4. How to make a planogram
How to create a planogram for your retail store
Proper planograms are extremely detailed and robust, but they do not have to be to be effective. Even if you are not using or do not require a detailed planogram, you can use the philosophies and strategies behind one to help plan your store layout and product displays.
If you do decide that a planogram is the way to go, there are a few options.
Ø Ø Hire a planogrammer (Visual Merchandiser)
A planogrammer, or planogram specialist, is someone fully dedicated to creating and managing retail planograms based on customer behavior and sales goals.
If your business is not big enough to hire someone completely dedicated to planograms, this is also a responsibility that you can allocate to a visual merchandiser. Unlike planogrammers, however, visual merchandisers tend to focus on creating aesthetically pleasing product displays to incite purchases.
While these two roles have different motivations, they ultimately serve the same goal: to make sales.
Ø Consult with planogram experts
If you do not need to hire a dedicated internal role, consider working with third-party experts to execute your planogram. Nielsen is a brand that specializes in using behavioral research to assist in visual merchandising.
Ø Ø Use planogram software
Speaking of software, you can find many planogram software and app options on the market. DotActiv offers free planogram software for retailers just getting started (the Free plan is limited to 40 products).
You can also invest in paid planogram software with more features:
· SmartDraw
· Shelf Logic
ØØ DIY your planogram
Take a DIY approach to your visual merchandising with planogram templates. Some retailers go the old-school route with paper and pencil and draw out the store space to scale. If you are savvy enough, you can also do this with tools in Google Docs. Generally, you will want to use a pre-existing template or create one in a tool that is more suited for visuals, such as Photoshop.
5. Tools for making a planogram
The planogram of the store/trade equipment is a reflection of the merchandising and marketing strategy based on the main merchandising principles that are applied and customized for the goals and tasks of each concrete retailer. When you make a planogram, it is important to take into account two key moments:
Planogram is not a static document. A showcase planogram is not a scheme that you can create once and use for many years. It will not be effective as the demand, customers’ behavior change very fast and dynamically, assortment gets out of date, and rotten, suppliers introduce new products, etc. On average, retailer changes the layout planogram 3 to 4 times a year at least. Experts suggest reviewing and adapting planograms once a month.
Store planogramming should be based on general merchandising principles but at the same time reflect goals of concrete trade point which in turn is based on assortment, financial, pricing, and promotional strategy of the company’s development. Every retailer should understand which product categories and SKUs are the target ones in their assortment and which products should be on top positions in layout, playing the role of sales engines. This data about products can be received by analyzing the consumer demand and sale rates from previous periods or in real-time. We explained how to do it here.
As soon as the retailer sets and realizes the goals for sales and promotion of their products, you can start the first stage of planogram creation.
STEPS:
1. Developing a concept of the store/trade point/trade equipment
At this stage, the general direction of the layout style and type is being formed, and for each product category, brand, price category, etc., the trade equipment is being selected. This selection needs to be conducted in such a way that every product is displayed openly and visually appealingly, and it should correspond with the customer’s moving trajectory in the store. The product should be placed in such a way that it will encourage a fast purchase.
2. Schematic drawing of outlines. Highlight popular, best-selling, or new products.
After dividing the products into categories, calculating sales shares of each product, developing a sale strategy for each category, and choosing the optimal layout, you should schematically depict all these outlines on the planogram.
Merchandising planogram must be very informative and contain all the technical parameters and details such as size, type, and dimensions of trade equipment, store area, number of faces and their type, product identifiers (color, size of the product package, number of SKUs placed on the showcase, prices, possible instructions and guidelines from marketers and brand managers, etc.) With such a large amount of information, the showcase planogram should also be easy to read. Modern planogram constructors present an opportunity to do it easily and effectively.
3. Planogram software to maximize sales
The planogram's meaning is essentially a roadmap for retailers that helps them arrange products in a way that optimizes space, promotes certain items, and creates a pleasant shopping experience for customers.
It is obvious that making an efficient layout planogram is not an easy process that requires systematic approaches and solutions. It is especially important for commercial networks with a large number of commodity items and an extensive network of trade points.
Pioneering software for making and designing planograms was MS PowerPoint and MS Excel. Considering the popularity and availability of these apps, we should not forget that the functionality of their merchandising tools is rather limited. Both apps allow you to perform a basic set of functions like generating formulas to calculate numbers and indicators or designing layout presentations.
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