The Assortment Challenge

In s i gh t s t oday f o r t omorrow’s de c i s i on s

S e p t e m b e r 1 9 9 9

Private Label Grows Up

What Makes a Good CategoryManagement Partner?

Trend Watch: Business-to-Business Websites

The AssortmentChallenge: Marrying Supply Cost with Consumer Demand

CONSUMERINSIGHT:

A powerful

tool in

building

competitive

advantage.

For More Information

150 North Martingale Road

Schaumburg, IL 60173

800.988.4ACN

World Wide Web site:

http://acnielsen.com/ci

CORRECTION: In our June 1999 issue,the article titled “Fresh Food ConsumersRedefine the Meaning of Green Grocer”contained two charts on p. 14-15 that did not accurately reflect the informationin the text. The corrected charts and text can be found on our website athttp://acnielsen.com/ci.

CI Fall 8/30/99 2:22 PM Page b

September 1999, Volume 1, No. 3

3A ‘New Year’ Like No Other

Many clients have asked what ACNielsenhas been doing to prepare for Y2K. We would like to share with you the efforts our company has undertaken

to prepare for the millennium.

4Cover Story

The Assortment Challenge: MarryingSupply Cost with Consumer Demand

It can be argued that the focus on growingmarket share by increasing variety has contributed to low consumer loyalty. To

determine optimum product assortment on retailer shelves, it is important to

understand both cannibalization and incremental profitability.

8Private Label Grows Up

To understand the role private label prod-ucts play in today’s marketplace, one needsto gain an understanding of the dynamics

across retail channels and consumer demographics. It is also important to seehow U.S. private label use ranks globally

and compare shelf price sensitivity betweenprivate label and national brands.

14What Makes a Good Category

Management Partner?For successful category management, decisions should be focused through the bias of the consumer. Here are

ten critical areas that should be considered when developing category

management partnerships.

CI Fall 8/30/99 2:22 PM Page c

In every issue…18 Trend Watch—

Business-To-BusinessWeb Sites

Business Tools20 Consumer Behavior

21 Analytics

22 Merchandising

23 Retail Tracking

24 Retailers

Volume 1, No. 3

Publisher

ACNielsen

Editors

Mark Chesney

Art Massa

Contributing Writers

Ryan MathewsFuturistFirstMatter

Milton MerlPresident and CEOMilton Merl & Associates

Design & Layout

Kathy Zonyk

Editorial Board

Gary Binkoski

Don Drews

Kathy Mancini

Elaine Noone

Mark Puccetti

ACNielsen Global Creative Services

Laurel A. Kennedy Marketing/Communications

Slack Barshinger & Partners

Copyright 1999 ACNielsen. Printed in USA. Allrights reserved. ACNielsen, the ACNielsen logo,ACNielsen Tech✽Watch, Convenience Track,Homescan, Priceman, SCANTRACK, SPACEMAN,SPACEMAN Enterprise and Tech✽Watch are trade-marks or registered trademarks of A.C. NielsenCompany. Other brand, product or service namesare trademarks or registered trademarks of theirrespective companies.

Microsoft, Visual Basic, and the Visual Basic logoare either registered trademarks or trademarks ofMicrosoft Corporation in the United States and/orother countries.

CI Fall 8/30/99 2:22 PM Page d

Consum

er Insight3

As a result

of Y2K,

ACNielsen has

improved its

infrastructure,

applications,

and

collaboration

across

business

segments

and countries.

A ‘New Year’ like no otherSteve Schmidt

ACNielsen

President, U.S. No issue has gotten moreattention this year than theYear 2000 bug. By now we

have all heard the dire predictions ofairplanes dropping from the sky,banks ‘zeroing out’ everyone’s per-sonal accounts, and public utilitiesceasing to function. Some havetaken the contrary view—that Y2Kis overrated, a minor programmingfix with nothing to worry about.The truth, as with most things, willlie somewhere in between. It is clear,however, that the areas with the most potential risk are the ones thatare most computer-dependent—ourindustry, for example.

Many of our clients have askedwhat ACNielsen has been doing to prepare for Y2K. I would like to share with you the efforts ourcompany has undertaken.

ACNielsen began preparing for themillennium in 1997 when we under-took a process to evaluate all thesystems that could be affected byY2K and upgrade or ‘retire’ thosethat were non-compliant. This hasbeen the largest cross-functional project in the history of our company. I am happy to say that we are on schedule.

In June, ACNielsen completed itsupgrade of all programs and filestructures to be Year-2000 compli-ant. We have assessed our infrastruc-ture—including our databases, computer applications, voice/datacommunications, and storagespace—for compliance and willcomplete any remaining upgrades by end of third quarter. We’ve evalu-ated, upgraded and retired software applications.

We have leveraged our Y2K learn-ings and processes across business

segments and around the world tospeed the transition everywhere inthe company. And we have helpedour clients by completing their Y2K compliance surveys andupgrading them to compliantACNielsen applications.

Our final step is to evaluate theinteraction between our systems toensure there are no hidden effects of the date change. This will becompleted in September of this year.

Despite all the negative predictionsfrom many doomsayers, this immov-able deadline has had some positiveeffects on the industry. It hasrequired companies to evaluate andretire old program code—a systemshousecleaning for the millennium.As the first commercial business toever use a computer, ACNielsen hasbeen in the electronic world forquite a while. You can imagine theinventory we needed to evaluate. In all, we have removed more than2,500 old program routines andretired more than eight millionlines of code. This gives us a base for more efficient creation of applications in the future.

As a result of our Y2K work,ACNielsen has improved our infrastructure, applications, and collaboration across our business segments and countries. We have also helped our clients prepare byproviding assistance and upgrades of ACNielsen applications. And this progress has been completedwith virtually no impact on the day-to-day production work of the company.

I encourage you to ask us questionsand give us feedback if you have any additional issues regarding theYear 2000.

CI Fall 8/30/99 2:22 PM Page 3

Con

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ht4 Cover Story

The Assortment Challenge:Marrying Supply Cost with Consumer Demand

Milton MerlPresident and CEOMilton Merl & Associates

Marshall WhiteVice President, AnalyticsACNielsen


Consum

er Insight5

The more we learn about how consumers shop—

through panel data, loyalty card data and

advanced modeling routines—the more we real-

ize how disloyal consumers are to a large majority of the

items they purchase. We also learn how easily they will

switch to similar, lower-priced or heavily promoted alter-

natives. It can be argued that the industry’s historic focus

on growing market share by increasing variety, largely

through line extensions, and by using aggressive promo-

tions, often with deep price cuts, has contributed to this

low loyalty dynamic by training consumers to reach

for alternatives.

When determining product assortment on retailer

shelves, it is important to understand the consumer in

this market context. The two hurdles to achieving opti-

mum assortment lie in understanding cannibalization

and incremental profitability.

First, we need to determine how much of an item’s vol-

ume is incremental to a category. It is critical to under-

stand how volume from added or deleted SKUs affects

the category, how items cannibalize existing volume and

the resultant profitability of the total category. In other

words, how does the addition and deletion of a SKU

impact category volume and profit?

By separating an item’s volume into the proportion that

is incremental to the category and the volume transfer-

able to other items, we can effectively manage an item in

the context of assortment. It is ill-advised to determine

assortment needs based solely on market coverage.

Consumers use, and are apparently satisfied by, many

different items that meet the same need. Think about it—

if half the varieties of toothpaste and toothbrushes cur-

rently available disappeared from shelves tomorrow,

would half the nation stop brushing its teeth?

Second, we must understand how shelf assortment can

be used to maximize profitability, taking advantage of

every SKU on the shelf. One way to get to the bottom of

these issues is by incorporating the concept of Activity-

Based Costing (ABC) into the assortment analysis. ABC

can be defined as: “determining an individual product’s

profit after all costs, including the resources required to

offer the product for sale—such as labor, equipment and

building utilities.” ABC is pivotal to accounting for all

the costs of getting and maintaining an item on shelf.

We have seen that excessive assortment and a wide range

of pricing and promotion have fragmented market vol-

ume, making it appear that all items meet consumer

demand. In actuality, an elimination of 30–50 percent of

the market variety from most categories wouldn’t likely

put a dent in overall market volume. It is the manufac-

turer’s attempt to leverage share away from competition

that has driven up variety. We’re all competing for small-

er slices of the same pie, and consumer need does not, at

the moment, drive shelf assortment. Rather, it is driven

by retailers’ concern for disappointing their consumers

and, therefore, losing market share to the competition.

A Variety of Benefits One of the best ways to alleviate the worry over losing

share is to demonstrate how assortment change can

impact profitability. The concern over altering current

product assortment can be addressed by demonstrating

how to deliver the desired category volume at greater

profit by optimizing the variety of selections on the shelf.

To do this we need to employ statistical models that

ensure the items on the shelf do satisfy real consumer

need and do offer the potential for the highest possible

profit. Clearly, there are many combinations of items

that will meet consumer demand, so good decision-

making focuses on determining the combination of

items that meet the demand at the highest profit point.

By integrating advanced assortment modeling techniques

with measures of ABC, we can begin to see a methodolo-

gy for understanding the potential of item optimization.

All other things being equal, ABC is a function of vol-

ume. So, by first evaluating the change in volume as a

function of variety and then applying ABC, we can opti-

mize volume to deliver the highest possible profit.

Return to ROI In business, return on investment is king. Increasingly,

assortment and space decisions drive return on invest-

ment in all areas of business—manufacturing plants,

warehouses, stores, personnel and inventory. As loyalty

card marketing programs advance the ability to target

these investments, the accuracy of consumer strategies

and demand-generating tactics will increase in impor-

tance. ABC can be seen as a tangible operational

measure of ROI, so it is optimally designed for this

business context.


A Big Problem for ManufacturersMost manufacturers have a love/hate relationship with

assortment optimization. Historically, they have deter-

mined their growth via line, brand and product exten-

sions. At the same time, they have defined in-store mar-

ket gains by shelf presentation, floor presence and media

advertising. However, as product categories increased in

variety and/or complexity, production costs and ineffi-

ciency spiraled. And perhaps more problematic, retailer

sophistication increased as retailers improved their ability

to market and sell their own items—all in the context of

finite warehouse, shelf and floor space.

Con

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To cap the manufacturer headache, consumers also

became used to trying the different line extensions

and brands available in the marketplace. Brand loyalty

eroded as consumers discovered that almost anything

was available—somewhere—for less money. Even more

important, as consumers rotated among products, they

often found the cheaper product met their need quite

adequately, regardless of the brand.

Space for Variety Obviously, shelf space is a critical enabler to sales—if

products are not available, then consumers cannot buy

them. However, retail real estate is not cheap. In the

grocery channel, it costs an average annually of $10

per facing in product inventory and labor to stock and

manage the facing. The key to maximizing shelf ROI

is to discover how to support the maximum product

profitability with the minimum amount of space.

An understanding of the dynamics of cannibalization,

item volume and the cost of space is required to support

this decision.

The decision-maker’s dilemma is when to invest in

space to meet and satisfy demand. This is not an easy

question to answer without knowing the following

two things:

1. The incremental category volume generated by introducing a new item to the space, and

2. the incremental profit generated by the item.

Chart 1

Analysis:• Adding a Dough SKU generates the highest incre-

mental Activity Based Profit of $0.96/store/week.

• Adding a Dessert SKU generated a net loss of$0.42/store/week.

• Deleting a Dough SKU generates a loss of$0.52/store/week.

• Deleting a Butter/Margarine SKU increases profits by$0.72/store/week.

$4.45

$6.09

$7.39

$0.02$0.72

$(0.06)$0.66

$0.07

$(0.42)

$0.43$0.96

$(0.52)

Dairy CategoryAverage and Incremental SKU ABC(Leading East Coast retailer equivalized to industry)

CM$/STORE/WEEK

Average $CM/SKU/store/weekIncremental ABC Profits/Added SKUIncremental ABC Profits/Deleted SKU

DOUGH CHEESE DESSERT BUTTER/MARG

Increasingly, assortment

and space decisions drive

return on investment in

all areas of business.


Consum

er Insight7

When using ABC to calculate profit, we have found that

it is rare for incremental space (and therefore, variety)

to deliver a positive return. This is mostly because the

majority of categories are so over-assorted already that

the additional volume from an added item is so small

that it rarely pays the rent on the space it occupies.

The more high-cost and space-constrained a department

is, the more critical it is to pinpoint SKU profitability.

Using ABC against Frozen and Dairy categories demon-

strates this idea. Here, adding space to Dough returns

the most ABC profit since new item volume is more

incremental than in the other categories which are

apparently maxed-out in variety [See Chart 1].

Right-Sizing VarietyThe effect of changes in space and variety on volume

and profit are what is behind a general industry focus

on optimizing secondary packaging size to demand

needs. In a desire to keep broad variety, retailers are

seeking to minimize facings by reducing case pack in

slow movers.

But, this is a double-edged sword because reduction in

case sizes dramatically increases product and replenish-

ment costs. So, in reducing pack size to meet a believed

consumer need, manufacturers and retailers may be

over-investing. However, if variety is critical and space

constrained, then it probably pays to invest in higher

replenishment cost to meet demand.

Everybody Wins However, there is a solution to these continuing prob-

lems. Through diligent management of item offerings,

manufacturers can become the lowest price producers

and respond to available consumer demand, while mini-

mizing raw material costs, manufacturing complexity,

warehouse inventory and safety stock levels. And retail-

ers, through understanding how to maximize shelf space

profitability, can deliver the items consumers want in a

more efficient way.

It is crucial for both manufacturers and retailers to

understand the dynamics of assortment—both cannibal-

ization and incremental profitability—when making

variety, space and packaging decisions.

The key to maximizing shelf

ROI is to discover how to

support the maximum product

profitability with the

minimum amount of space.


Con

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ht8

No longer content to be the drab ‘second-class’

product on retailers’ shelves, private label

brands have begun to take on the air of national

brands—colorful graphics, mainstream packaging, high-

quality ingredients. And consumers have taken note.

Each year, virtually every U.S. household purchases at

least one private label product, and the average private

label buying household has almost 70 private label buy-

ing occasions throughout the year.1 The message is clear:

private label products are here to stay.

To understand the role private label products play in

today’s marketplace, one needs to gain an understanding

of the dynamics across retail channels, as well as the dif-

ferent consumers who make up private label purchasers.

It is also important, given the move in the U.S. toward

retail consolidation, to see how private label products are

performing around the world. Finally, we can look at the

differences in shelf price sensitivity between private label

and national brands.

For more detailed analysis of private label products,

visit us at http://acnielsen.com/ci.

Changing ChannelsTo help better understand the dynamics of private label

products, it is helpful to look at its behavior in different

channel formats. On an aggregate basis, the majority of

private label offerings held share positions of less than

10%. However, offerings in the grocery channel generat-

ed higher relative shares than offerings in the drug and

mass channels, with two categories generating between

60–100% share. On a dollar basis, the relative impor-

tance of private label sales within the grocery channel is

even more pronounced—17 private label product groups

in grocery generated more than $500 million, while drug

and mass combined had only one product group at this

level [See Charts 1 & 2].

In the grocery channel, strong dollar sales of private

label are primarily in the food and beverage arena

(particularly Milk, Bread and Baked Goods, Cheese,

and Eggs). However, some of the greatest private label

dollar growth in grocery stores has come from non-food

categories, such as Bath Accessories, Family Planning

products, and Women’s Fragrances. It is no surprise that

smaller-share categories have greater percentage-growth

potential, but this also provides support for the fact that

private label products continue to make inroads.

Most of the high-share categories in the grocery channel

are also food products, with two groups—Milk and

Eggs—taking shares of more than 50%.

1. ACNielsen product category databases cross the majority of consumer packaged goods categories. We collect and classify most (but not all) of the categories selling at retail. As such, not all private label sales will be reflected in the following series of tables and graphs.

Feature

PrivateLabel Grows Up

By Gail Geisler


Consum

er Insight9

In the drug channel, strong private label dollar sales were

dominated by categories that are more typically oriented

to this channel, including First Aid, Hair Care,

Medications, Oral Hygiene, Remedies, and Vitamins.

Private label sales growth is coming in part from

cold/frozen categories, as more drug stores build

refrigerated and frozen items into their aisles.

In evaluating private label share, there were a few non-

typical high-share categories in the channel, such as

Bottled Water, Cookies, Frozen Seafood, Ice Cream,

Nuts, and Spices/Seasonings [See Chart 3]. This suggests

that consumers who purchased these categories within

the drug channel may be less brand-sensitive—perhaps

because it is an impulse rather than a destination

purchase in this outlet.

A look in the mass merchandise channel2 revealed that

top-in-sales private label categories are as varied as the

product offerings themselves. Top sellers included Bottled

Water, Cookies/Ice Cream Cones, Disposable Diapers,

Motor/Vehicle Care/Accessories, Office/School Supplies,

Pet Care and Pet Food, and Bread and Baked Goods.

Significant private label dollar increases occurred in

Tobacco, Women’s Fragrances, Bath Accessories,

Desserts/Gels/Syrups and Shelf Stable Juice Drinks. The

mass channel is also experiencing strong growth in sta-

ples such as cereal and pasta, as well as grooming aids

and personal soap [See Chart 4].

As with the drug channel, there

were no categories in the

mass channel where private

label held greater than 50%

share. However, four product

groups in the mass channel

(Bottled Water, Vitamins,

Dry Vegetables and Grains,

Sugar/Sugar Substitutes)

held share positions of 33%

or higher.

2. For the purposes of this study, the mass channel definition includes Supercenters. Share levels within Supercenters may be quite different than ‘regular’ mass formats, but are not separated here for purposes of data confidentiality.

45%38%

31%28%28%28%

25%23%23%

22%19%

17%16%16%16%

Some Non-Typical Categories Have High Share in Drug

Chart 3

PL $ Share of CategoryIce Cream

Wrapping Materials Bags

Spices/Seasoning/Extract

Nuts

First Aid

Vitamins

Bottled Water

Paper Products

Pain Remedies

Cough and Cold Remedies

Disposable Diapers

Battery/Flashlight/Charge

Cookies/Ice Cream Cones

Light Bulbs/Telephone

Unprep Meat/Seafood-Frz

393280

21010597

7878

686562

575656

4441

Tobacco, Women’s Fragrances and Bath Accessories Show Strong Growth in Mass

PL Dollar Growth %Tobacco & Accessories

Fragrances–Women

Buckets/Bin/Bath Accessories

Desserts/Gels/Syrups

Juices Drinks–Shelf Stbl

Grooming Aids

Seafood–Canned

Household Supplies

Cereal

Baking Supplies

Prepared Foods–Ready Serve

Pasta

Personal Soap/Bath Needs

Fresheners/Deodorizers

Cookies/Ice Cream Cones

Chart 1

Chart 4

$ Market Share Grocery Drug Mass

214

182365

0127

1489

60–100%

40–60%

30–40%

20–30%

10–20%

less than 10%

0249

1781

PL Shares Are Stronger in the Grocery Channel

Grocery Drug Mass

51212321438

00256

100

$1b+

$500mm–$1b

$300mm–$500mm

$100mm–$300mm

$50mm–$100mm

less than $50mm

01199

93

Grocery PL Group Sales Outpace Drug and MassChart 2

Product Group $ Sales:

113 product groups included; 52 w/e 10/31/98; Total U.S.

113 product groups included; 52 w/e 10/31/98; Total U.S.

52 w/e 10/31/98; Total U.S.

52 w/e 10/31/98 vs. year ago; Total U.S.


Con

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Private Label—A Public AffairConsumers can tell us much about the dynamics of pri-

vate label products.

As mentioned earlier, virtually every U.S. household buys

at least one private label product per year. However,

although every household buys private label, half of

buying households (the heavy and super-heavy buyers3)

drove 77% of the sales. Half of the sales were concen-

trated among just 25% of U.S. households [See Chart 5].

When looking at private label buyers, one can see that

heavier private label shoppers also dedicate a larger pro-

portion of their basket to private label (based on dollar

sales). And super-heavy buyers spent more than twice as

much per buying occasion than the light buyers spent

[See Chart 6].

As one might hypothesize, the heavier private label

buying households also purchase in a wider array of

product groups.4 Three-fourths of the super-heavy buyers

purchased private label products in 41 or more product

groups. However, even light buyers purchased private

label in a sizable variety of product groups [See Chart 7].

Although not nearly as diverse as the heavier buyers, the

data suggest willingness on the part of even lighter buy-

ers to purchase private labels across a fairly wide array

of categories. A more in-depth analysis of category

buying habits and attitudes toward private labels would

be required to determine whether or not private label

offerings are right for every product group or category.

Private Label Conquers Foreign LandsFor a global view of private label development,

ACNielsen examined its International Private Label

Retailing Study across 57 categories in 30 countries from

1995–98, including Food, Drink, Personal Care and

Household product categories. More information on this

study can be found on our website at http://acnielsen.com/ci.

Private label sales growth far outpaced average retail

sales growth in many countries around the world.

Growth in Argentina alone was 114 points higher than

total category growth. Private label volume growth in

Norway, Mexico, and Japan were also 50 points higher

than their respective branded category growth [See

Chart 8]. Four countries (Netherlands, Switzerland,

Great Britain and Australia) showed slower private label

volume growth compared to total category. By compari-

son, the U.S. had slight private label growth against flat

total category growth.

In terms of volume share, private label growth in the

United States was in the middle compared to other coun-

tries in the study. Based on the categories examined, the

United States shows an average private label share of just

over 15%. Private label holds stronger share positions in

many European countries, which is not surprising given

Key Demographic Descriptors:Consumers may choose to be heavy or light private label shoppers because of a variety of factors—product quality, product availability,household finances, personal preference, and attractive pricing. Through ACNielsen Homescan™

consumer panel data, we have determined a few key demographic descriptors that tend to separatelight and heavy private label buyers.

They are:

Heavier Buyers• Lower Income (poor/getting by)

• More Rural (“C”/“D” county)

• Larger Households (3–4 members/5+ members)

• Lower level of formal education (high school graduate or less)

• Children in HH (kids under 18)

Light Buyers • Higher Income (affluent)

• More Urban (“A” county)

• Smaller Households (1 member)

• Higher level of formal education (college graduate)

• No Children in HH

• Ethnic Minority Households (Asian,African-American)

Note: The descriptors used for demographic segmentation above

come from the ACNielsen Homescan consumer panel.

3. Private label buying households were segmented into quartiles of light, medium, heavy and super-heavy buyer groups based on their private label expenditures across all product groups.

4. ACNielsen classifies its products into about 120 product groups. These product groups can be further delineated into over 1,000 individual categories. An example product group would be Salty Snacks (which is then categorized into product categories like Potato Chips, Pretzels, etc.).

CI Fall 8/30/99 2:23 PM Page 10

Arge

ntina

Arge

ntina

Norw

ayNo

rway

Mex

ico

Mex

ico

Japan

Japa

n

Austria

Austria

Chile

Chile

Fran

ce

Fran

ce

Gree

ce

Gree

ce

Ireland

Ireland

Italy

Italy

Germ

any

Germ

any

South Afric

a

South Afric

aBr

azil

Spain

Colombia

Colombia

New

Zealan

d

New

Zealan

d

Cana

da

Cana

da

Swed

en

Swed

en

Portu

gal

Portu

gal

Finland

Finland

Denm

ark

Denm

ark

Puerto

Rico

Puerto R

ico

USA

Belgium

Belgium

Netherland

s

Netherland

s

Switz

erland

Switz

erland

Grea

t Brit

ain

Grea

t Brit

ain

Australia

Australia

+10 +5

+118

+11

+80

-0

+48

+3

+42 +42 +40 +38+29 +24 +14 +13 +13 +11 +9 +8 +7 +6 +4 +2 +2 +2 -1 -0 -1 -2+2+4 +2 +4 +11 +1 +0 +1 +2 +3 +5 +3 +4 +1 +2 +2 +2 -0 +0

+3 +0 -1

Consum

er Insight11

the tendency of many of these countries to be dominat-

ed by a few large retailers. Eight countries showed

average volume share of greater than 20%, with

private label in Switzerland commanding more than

50% of the market [See Chart 9].

Of those countries that exhibited the greatest private

label volume growth year-over-year, many—not surpris-

ingly—had lower private label share development to

begin with.

As retailers continue their strong positions internation-

ally and see the value of marketing their own brands to

local consumers, the growth of private label products

outside the U.S. is likely to continue.

Pricing: A Sensitive MatterTo assess the relationship between private label price

and sales compared to branded competition, ACNielsen

makes use of price elasticity studies.

Using regression-based analysis that uses 104 weeks of

non-promoted store-by-store data at the SKU level,

ACNielsen evaluated the change in sales over time with-

in a store by the change in price and/or price gap to

competitors. The model also controlled for seasonality

and promotions.

These studies indicate that sales of a private label

product are a function of the following:

1. Product price, and

2. Relative price to the competition.

First, let’s examine the effect that the private label price

has on its own sales.

ACNielsen has found that the ‘normal’ price sensitivity

of a branded pre-packaged consumer good is 1.5, mean-

ing for every one-percent change in price, the product

will affect sales volume by 1.5 percent. If a retail price

were increased by 5%, one could expect the volume to

decline by 7.5% (5% x 1.5).

As an example, let’s assume a branded product has an

annual sales volume of 500,000 units and retail price of

$3.00. If the price were upped to $3.15 (5% increase)

the volume could be expected to decline to 462,500

units (7.5% decline).

Light Medium Heavy Super Heavy


% of buyers

% of dollars

25 25 25 25

7

1626

51Not All Private Label Buyers Are the Same

Chart 5

Heavy Buyers Purchase More Frequently and Spend a Lot More than Light Buyers

Private Label Category Penetration Is Quite Deep

% Volume Growth by Country (’98 vs.’97)

Private Label Volume Share by Country

Chart 6

Chart 7

Chart 8

Chart 9

purchase frequency

% of $ basket

$ per occasion

Total Category

Private Label

$100$229

$377

$751

33 5876 102

5 10 13 19$3.05 $3.93 $4.98 $7.39


16%41%37%6%*0045

1%10%39%40%10%*054

10 or less

11–20

21–30

31–40

41–50

51–60

61+

MaximumPurchased

*3%16%40%35%6%*63

*1%5%19%37%31%7%77

No. of ProductGroups Purchased

Private Label Volume Share ’98

Private Label Share % Point Change ’98 vs. ’97

Spain

USA

60

30

0

shar

e ’9

8

share change ’98 vs. ’97

+124

All outlets; Annual 1997; Total U.S.

All outlets; Annual 1997; Total U.S.

116 product groups included; All outlets; Annual 1997; Total U.S.

Source: International Private Label Retailing–Indicators and Trends, 1999 Edition. Overall country consoli-dations have been calculated by using simple averages of up to 57 product categories per country.

Source: International Private Label Retailing–Indicators and Trends, 1999 Edition. Overall country consol-idations have been calculated by using simple averages of up to 57 product categories per country.

-3

+0.5

-0.5

+0.0

-1.0

+1.5

+1.0

+2.0

$ buying rate

CI Fall 8/30/99 2:24 PM Page 11

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In examining four private label items from different

product groups, we found their price sensitivity to be

much lower than that of branded products. Therefore, it

would appear that in some cases private label price is not

so sensitive [See Chart 10].

It is rare, however, that private label products sell in a

vacuum. So we must look at how private label sales are

impacted by competitive pricing by analyzing the price

gap. It is important to note that the optimal price gap

(and the potential sales gain/loss for a private label

product) varies category-by-category, and sometimes

even SKU-by-SKU type.

The Price is RightFrom the pricing regression model, ACNielsen looked

at the all commodity volume (ACV) for a branded

orange juice product and its private label counterpart

[See Chart 11]. The results showed that the optimal

price gap for private label is about $0.50 lower than

the national brand. If the price were dropped to create

a gap greater than $0.60, it would not necessarily yield

incremental sales for private label, as indicated by

the flat line.

On the other end, the model also demonstrates that

pricing the private label orange juice any closer than

$0.40-$0.60 below the national brand may result in a

large sales loss for the private label product as consumers

may find it easier to “trade-up” to the national brand.

Chart 12 shows how this can vary by product and

category. The private label acetaminophen has a wide

price gap given the high sticker price of branded tablets

and perhaps consumer reliance on a brand name when

pain is involved. Thus, the optimal price gap to maxi-

mize private label acetaminophen sales would have the

private label price being $3.50 lower than the national

brand. Pricing the private label offering with less than

a $3.50 gap could result in a private label sales loss as

great as 12%.

Not surprisingly, the price gap is not as significant for

items with lower shelf prices or that may be seen as

more easily substitutable with private label. For example,

canned chicken noodle soup has an optimal price gap of

just 15 cents from the branded alternative; however, a

price any closer would risk a sales loss of up to 24%.

Branded norm 1.50

PL Chilled 32 oz. Orange Juice 1.01

PL Acetaminophen 1.21

PL 8 oz. Shredded Cheese 1.08

PL Canned Chicken Noodle Soup 1.01

Price Sensitivity

PL Chilled 32 oz. Orange Juice $0.50 –55%

PL Acetaminophen $3.50 –12%

PL 8 oz. Shredded Cheese $0.20 –20%

PL Canned Chicken Noodle Soup $0.15 –24%

PL Facial Tissue 150–200 ct. $0.40 –19%

PL 2% Milk–Gallon $0.10 –31%

Optimal PL Lost PL SalesPrice Gap if Below Gap

PL Facial Tissue upright—FOOD $0.25 –17%

PL Facial Tissue upright—DRUG $0.40 –16%

PL Facial Tissue upright—MASS $0.32 –8%

Optimal PL Lost PL SalesPrice Gap if Below Gap

Chart 10Among Products Examined, Private Label Price SensitivityAlone Is Relatively Low

Chart 11Price Gap vs. Branded Competition

Chart 12Private Label Price Sensitivity Relative to Price Gap Is High

Chart 13Private Label Price Sensitivity Varies by Channel

400

300

200

100

-1.19to

-1.15

-1.04to

-1.00

-0.89to

-0.85

-0.74to

-0.70

-0.59to

-0.55

-0.44to

-0.40

-0.29to

-0.25

-0.14to

-0.10

0

Pricing in this gap wouldresult in a 55% loss in sales

Sale

s pe

r M

illio

n

Optimal Price Gap

Private Label

Leading Brand

Total U.S.; Food Stores



Total U.S.

CI Fall 8/30/99 2:27 PM Page 12

Implications of private label products

For retailers:• Determine the composition of your shopper base

to determine opportunities for private labelexpansion or contraction.

• Understand that there is room for both privatelabel and branded offerings: optimum productassortment is the key to success.

• To maximize profitability, consider price elasticity to discover optimal price points.

For manufacturers:• Private label products are here to stay! If it

aligns with your marketing strategy, consideropportunities to supply your retail customerswith private label offerings.

• Branded marketing does work—leading nationalbrands appeal to some very attractive demo-graphic segments.

• Price elasticity studies can help determine pricegap differences between channels.

Managing private label price to optimize sales must defi-

nitely include understanding the optimal price gap for

every item and its potential volume loss if that price gap

is narrowed.

Not only do price gaps and potential losses differ by

products; they must also be examined within the various

channels—given each channel’s different pricing strate-

gies and product assortments. The same private label

tissue has a different price gap in grocery, drug, and

mass channels. Closing that gap can also result in differ-

ent private label volume losses depending on the channel

being examined [See Chart 13].

Everything is RelativeIt is clear that private label products in the U.S. are here

to stay. This means several things for retailers and manu-

facturers. Retailers should focus on shopper base compo-

sition to determine whether private label products should

be expanded or contracted. Optimum product assort-

ment is the key to success, so there is room for both

private label and branded offerings.

Pricing is of extreme importance for retailers to drive

private label profits. Being priced too close to the nation-

al brand can result in dramatic sales losses; however, too

wide a price gap does not result in incremental sales. The

optimal gap must be found on an item-by-item basis.

Manufacturers should, first and foremost, realize that

private label products are here to stay. This actually may

be an opportunity, if it aligns with your marketing strat-

egy, to consider supplying your retail customers with

private label offerings. Branded marketing does work—

and branded items appeal to some very attractive demo-

graphic segments.

Manufacturers also must understand that pricing gaps

for private label differ by channel. This information can

help marketers understand the pricing sensitivity points

based on outlet type.

Consum

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CI Fall 8/30/99 2:27 PM Page 13

Feature

What Makesa Good Category Management Partner?

Category management is a good deal like marriage. It is generally entered into with thebest of intentions, but early on it becomes clear

that once the initial passion has subsided it takes goodold fashioned work to sustain the relationship overtime. Category management is not an entitlement, auto-matically ceded to the largest manufacturer in a cate-gory. Nor should distributors assume theirs should bethe last voice in a category management decision sim-ply because they own the real estate. The truth is thatall category management decisions should be focusedthrough the bias of the consumer rather than any one

By Ryan Mathews

Futurist

FirstMatter

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CI Fall 8/30/99 2:29 PM Page 14

Consum

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trading partner or multiple trading partners. Branded

manufacturers, for example, must learn how to use pri-

vate label to maximum advantage while retailers need to

assign fully loaded cost to their controlled brands. And

in no case should category management decisions be

made that run contrary to the interests or will of the

consumer.

There is no shortage of interesting category management

templates. Which one works best is a matter best decided

between trading partners. The fact is the choice of trad-

ing partners is significantly more important than the

choice of templates. Pick the wrong partner and the best

system in the world cannot help a category. Superior

partners can always make an inferior system work, but

the most superior system in the world cannot save an

inferior partnership.

So, exactly what do you need to consider when looking

for a category management partner? The requirements,

for both distributors and manufacturers, are essentially

the same. It begins with a willingness to perform the req-

uisite due diligence at the beginning of the partner rela-

tionship. The time for objective analysis and hard deci-

sion making is before—never after—the fact. The road to

hell (and terrible category captaincy) is paved with good

intentions.

Ten Elements of SuccessWhat follows is a blueprint for partner selection. It is not

an outline of how to ‘do’ category management. We will

concentrate on ten critical areas of category management

partnering. The perfect partnership will offer both sides a

perfect score of ten out of ten. Anything less than a per-

fect score does not count. Each of these elements is criti-

cal to the successful launch of an effective category man-

agement program and therefore each must be present in

an effective category management partnership. Since each

element is equally important, they are listed in alphabeti-

cal order.

Communication is more than the ability to agree on a

feature, promotion, shelf set or planogram. It is the abil-

ity to listen to what partners say and genuinely hear

what they mean. Volumes have been written on effective

business communication and yet it remains the most

neglected skill set in most companies. Effective communi-

cation begins internally with each level of an organiza-

tion delivering and receiving a consistent message. It does

little good for a manufacturer’s sales agent or direct sales

force to commit to effective category management princi-

ples if there is a vice president of sales in the home office

prepared to dump product onto the diverter wire simply

to make the quarterly numbers. Such practices, all too

often, stabilize stock prices while at the same time they

destabilize categories. By the same token, a distributor

who separates buying and selling into two essentially

unrelated profit centers risks the possibility of sacrificing

net profits at the front end for the sake of ‘gross margin’

at the point of the buy. Only when there is vertical align-

ment inside a company can it effectively hope to commu-

nicate externally. Obviously, effective communication

between trading partners is a minimum requirement for

building business together.

Category management requires that both suppliers and

distributors possess maximum competency in a given

category. This means being competent enough to admit

when it’s time to augment existing skill sets or bring in

another partner. Early category management efforts

migrated toward a category captain model, but in some

cases, a category consortium model might be more

appropriate. This is particularly true when one is trying

to move from traditional category definitions such as

analgesics and vitamins/supplements to broader solution-

based approaches to categories such as ‘Wellness

Centers’ or ‘Breakfast Food’ departments.

If this industry was birthed in art, it will mature in sci-

ence. The supermarket is a retail artifact of a more gen-

teel age, an age when it was possible and even desirable

to know all of one’s neighbors and one’s customers. But

ours is a different age. People live serial lives—moving

constantly through adulthood, changing careers often. As

a society we lack the stable roots enjoyed by the genera-

tions that built American retailing. We no longer have

Communication

Competency

Data

CI Fall 8/30/99 2:29 PM Page 15

When this industry was founded, physical infrastructure

was so valued that now there are redundant infrastruc-

tures—trucks, warehouses, inventory and systems—

which actually constrain our ability to make a profit and

operate efficiently. The world of business is rapidly

migrating to an alternative asset model, one based on

intellectual property or ‘intellectual capital.’ Future suc-

cess in category management, and in business in general,

will be based less on the physical infrastructure one

brings to a shared enterprise and more on the scope of

intellectual assets offered by two or more trading part-

ners. Trying to combine (and preserve) discrete physical

infrastructures reduces potential profits. Combining

intellectual assets geometrically improves the ability to

do category management, or anything else.

Openness is the ability to communicate willingly. Open

trading partners must entertain the possibility that

another person’s well being and profitability may be

more important than their own. Partners must be alert

to thinking from external sources. All too often many

people believe the only valuable thinking is that which

agrees with their own. And even more common in this

industry is the feeling that no one else can bring quality

thinking to bear on a problem. It’s due to this reasoning

the supermarket industry has translated a virtual

monopoly on disposable income spent on food into a

48 percent share. Equally important is openness to bad

news. Not all category management plans work the first

time out of the gate. Error is a critical component to the

trial and error equation, and both trading partners must

realize they do not have all the answers.

Manufacturers who really want to execute effective cate-

gory management skills must learn to place their part-

ner’s—and often their direct and indirect competitor’s—

interests ahead of their own, if serving those interests

serves the greater good of the category. At its heart,

successful category management involves setting aside

the vested interests—of the suppliers and the distribu-

tors—in favor of the consumer. Sometimes there is the

Con

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the luxury of selling to our lifelong friends and neigh-

bors. In such a climate, nothing is more critical than

data. Good data is the fuel that drives effective category

management. Given the customer count of the average

Kroger or Wal-Mart, the ability to sell depends on the

ability to ‘know’ a customer. The only way to truly

‘know’ the majority of customers—and gain insight into

what they respond to in a category—is through the

effective capture, analysis and communication of clean,

accurate and timely data.

Just a brief note here: self-service is a brilliant principle

in retail but a lousy principle in partnership. If category

partners are not honest with each other, then effective

category management is impossible.

As scientific as retailing has become, there is still no sub-

stitute for imagination at retail. Category management

must be more than a formulaic presentation of related

SKUs. Knowing what has sold is simply not a substitute

for knowing what might sell. Imagination is the basis of

retail magic—and as Disney has proved, magic is a pow-

erful business tool.

Feature

Honesty

Imagination

Intellectual Assets

Openness

Selflessness

CI Fall 8/30/99 2:30 PM Page 16

Consum

er Insight17

proverbial, ‘win/win/win’ scenario in which everyone

benefits equally, but in reality those scenarios are few

and far between. If category management does nothing

more than advance the self-interest of one or more

trading partners, consumers will quickly migrate

toward a retailer who has their best interests at heart.

Items should not be on sale simply because a retailer

received a great price on them. Manufacturers should

not add line extensions in order to defend shelf space at

the expense of offering consumers real alternatives and

choices. It is possible to ‘do’ category management

from a selfish point of view; it is just not possible to

do it right.

Trust lies at the heart of every true partnership. One of

the profound ironies in the early years of ECR was the

insistence by people who had spent their entire business

lives mistrusting each other that all of a sudden, those

old war wounds were healed and they were now pre-

pared to join forces to support a common cause. Old

wounds do not disappear; they scar over, generally

impairing feeling as they heal. So, what does this have

to do with category management? Simply put, nothing

builds trust like shared success. Category management

has the potential of being the basis—not the result—of

trust between trading partners. Unless both trading

partners are open to the possibility of trusting each

other, any plans they launch are doomed to fail.

The final attribute category management partners must

possess is a willingness to make a plan succeed. This

willingness includes sharing costs as well as profits, but

it extends far beyond that. It is a willingness to do

whatever is necessary to make the category the best it

can be. It means sharing ‘secrets’ and making a com-

mon cause. Above all it means seeing the store, not just

through the eyes of the consumer or the trading part-

ner, but also with eyes to the future. Only when you

are willing to commit to the future of the category and

your partnership are you ready to begin category man-

agement work. Anyone can commit to the present, but

few people are willing to take the leap of faith of a

partnership through an unknown future.

These ten qualities are basic and endemic—not just

to category management, but to all business activities.

As rare as these qualities are, they are also basic.

Without them, any partnership—including category

management—is impossible. So before the first

planogram is calculated or the first shelf is reset,

ensure these elements are in place. In his song “Angel

of Sin,” Native American singer/songwriter John

Trudell wrote, “What you weave is what you wear.”

The message is profound for category managers on

either side of the desk.

We must remember the name of the game is to satisfy the

consumer and to grow the category. If you are willing to

do whatever it takes to achieve those two ends, you will

be successful—provided of course, you have done the

necessary partner selection homework. Without that

homework, category management cannot deliver more

than business as usual, which is not good enough to keep

you competitive anymore.

Ryan Mathews is executive editor of Grocery Headquarters

magazine and is a futurist with FirstMatter, a ‘futuring’

consultancy with offices in Detroit, Mich., Westport,

Conn., and London.

Trust

Willingness

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When most people think of Internet web sites,

names of consumer sites like Amazon.com,

eBay, and E*TRADE often come to mind.

However, much of the sales activity on the web is from

business-to-business transactions.

In 1997, business-to-business activity accounted for

one-third of all web-based sales. By the end of 2000,

business-to-business sales are expected to account for

two-thirds of all web business.1 And by 2002, business-

to-business e-commerce is forecasted to increase to $1.3

trillion, up from $28 billion in 1998.2

Businesses are using the Internet to sell products, gener-

ate new business leads, provide customer service and

raise company awareness about their company. Quality

business-to-business Internet marketing is a major factor

in increasing salesforce productivity.

In the consumer packaged goods industry, a number of

industry leaders are finding innovative ways to use the

Internet to sell products, provide ongoing service to loyal

customers, and support the sales team.

Coca-Cola USA Fountain has established a business-

to-business web site (www.customer.coke.com) that

supports the Coca-Cola salesforce by providing

customers with a wide range of product and program

information. The web site features success stories,

brand information, and promotion information.

The Coca-Cola customer success stories are mini case

studies highlighting how Coca-Cola account teams,

working with their customers, have developed and

executed successful marketing and sales programs. The

“Brands” section of the site provides target consumer,

category/rank, and marketing support information for

individual Coca-Cola brands. The “Upcoming Promotions”

Hot Trends

Trend WatchBusiness-To-Business Web Sites

CI Fall 8/30/99 2:30 PM Page 18

section of the site provides customers with the latest

information on Coca-Cola promotion opportunities.

Every section of the web site has a strong call to action

urging customers to contact their local Coca-Cola sales

representative. Visitors are required to register, which

allows Coca-Cola to capture valuable customer

database information.

The Dean Foods Company has a dedicated

retailer web site (http://retail.deanfoods.com) called

“The Dean Advantage: On-line Resources For Our

Valued Retail Customers.” The site has a wide range

of relevant information for retailers. Dean Foods

uses the web site to leverage the company’s marketing

programs, category management tools, and ECR

programs with retailers.

Consum

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Tropicana.com/Biz is Tropicana’s business-to-business

web site (www.tropicana.com/biz). This site provides

retailers and distributors with information on Tropicana

products, marketing programs, nutritional information,

international operations, and Tropicana news.

Tropicana.com/Biz visitors can even view television

commercials on the site.

The Internet is a powerful

business-to-business marketing tool. Packaged

goods companies can and should make Internet market-

ing a key element of their business-to-business marketing

strategy. The Internet will never take the place of a sales-

person or the one-to-one relationships between buyer

and seller that are so important to business development,

but the Internet can play a major role in enhancing cus-

tomer service and increasing sales force effectiveness.

1. Source: Jupiter Communications

2. Source: Forrester Reports

CI Fall 8/30/99 2:31 PM Page 19

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for Consumer BehaviorBusiness Tools

Quantify Shopper LoyaltyAn important, but often overlooked, element in the loyaltyequation is knowing not only where your business is coming from, but also where your business is going.ACNielsen Homescan Cross Outlet✽Facts is a syndicatedreport which provides a cross-outlet shopping analysis that quantifies shopper loyalty by showing retailers which competitors they lose business to. By revealing which product classes chain shoppers shop the competition for,Cross Outlet✽Facts is also an instrumental category devel-opment tool pinpointing which categories are potentialopportunities and risks.

Cross Outlet✽Facts gives marketers a competitive advan-tage by understanding where else retailers’ core and occa-sional shoppers are shopping, how they are spending andwhat they are buying. Used in conjunction withACNielsen’s other syndicated reports, Consumer✽Facts,Channel✽Facts and Account Shopper Profiler, you can gaina complete sales story for key retailers in each market.

And the Survey Says...Human nature begs the question, Why? Scanning and Paneldata provide critical insights into the Who, What, Whereand When, and some of the Why behind the buy.ACNielsen Homescan Panel✽Views Surveys help answermore of the Why behind the buy. Panel✽Views Surveysoffer the unique ability to integrate actual purchase infor-mation with attitudes and user information collected fromthe Homescan Consumer Panel via barcoded surveys. Fromevaluating the effectiveness of a sponsorship program todeciding whether you should market your product on theInternet, Panel✽Views Surveys provide real-life answers tofactors that influence purchase decisions.

With typical response rates of 85 percent, Panel✽ViewsSurveys are an effective method of identifying consumer target groups and understanding how attitudes impactbehavior.

For more information, visit our web site or call our toll-free hotline.

See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN

In today’s ever-changing world of personal computer tech-nology, staying ‘plugged in’ has become a daunting task

for even the most savvy marketer. ACNielsen Tech✽Watch™ is a unique new

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printers, where they’re buying them and why. Thissubscription-based service allows computer product manu-facturers and retailers to spot trends and changes in themarketplace in time to react, based on facts. With PC pricesplummeting, this information has never been more critical,and it’s available—now—from ACNielsen.

Tech✽Watch combines critical information on the consumermarket for PC hardware. By pinpointing the reasons behinddifferences in personal computer buying, such as amongfirst-time, replacement or supplemental PC buyers, you candetermine how consumers buy—by brand, by price pointand by channel. Importantly, brand-switching behavior andbrand loyalty can now be measured to signify the winningbrands among consumers.

Spotting Personal Computer Trends As They Happen

CI Fall 8/30/99 2:31 PM Page 20

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for AnalyticsBusiness Tools


Efficient assortment today is a $6 billion opportunity. And understanding assortment and Activity Based Costing(ABC) is key to arriving at shelf profitability.

The recent alliance between ACNielsen and Milton Merl & Associates combines powerful Performance Optimizerapplication with ACNielsen’s industry-leading assortmentmodeling capabilities. The combination of these powerfultools fills a major gap in the industry by clearly articulatingthe opportunities for using the most appropriate items tosatisfy store volume at increased profitability.

Performance Optimizer uses an ABC calculator, ABC Now,to optimize category profit as it relates to volume elasticityand cannibalization. It measures changes in volume andprofit at the item, segment and category level that occur as a result of changes in assortment.

ACNielsen’s proprietary assortment model quantifies what percentage of an item’s sales are truly incremental by determining the extent to which each item’s sales arecannibalizing sales of other items in a category.

Gain insight at every level of the assortment decision-making process. By uniting multiple data sources, optimiza-tion logic, activity-based costing and volume elasticities,Performance Optimizer provides a process that allows decision-makers to integrate volume, profit and consumerstrategic objectives into the planning process.

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For more information, please contact your ACNielsen representative, or visit us on the web!

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SPACE PLANNING

FILES

SYNDICATEDDATA

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LOYALTYCARDDATA

PANELDATA

REPORTINGChartsReportsExports

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CI Fall 8/30/99 2:31 PM Page 21

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for Merchandising


Business Tools

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CI Fall 8/30/99 2:31 PM Page 22

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for Retail TrackingBusiness Tools Convenience Track ContinuesTrading Area Expansion ACNielsen is proud to announce retailer account-level data for all categories1. You can receive this information formost top c-store retailers, and we are very close toannouncing additional major retailer offerings as we continue to build and leverage our retailer partnerships.

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Convenience Track market-level data allows a retailer tobenchmark key elements such as sales, pricing, and assort-ment to a local convenience market. This helps identify top-selling items carried in the market but not carried bythe retailer. With Convenience Track’s market-level data,manufacturers can help the retailer uncover new opportu-nities for the entire category, which is critical to the NACScategory management process. Local market data includes the convenience channel as well as other key channels.2

ACNielsen Convenience Track account-level data can be a powerful tool if local convenience market-level data is not available for your category. This can lead to a betterunderstanding of any category’s sales, distribution, andmerchandising impact, regardless of whether you manufac-ture toothpaste or tobacco.

Check with your ACNielsen representative or visit our website for the most recent announcements.

1. Account level information now available for most accounts; in some cases will be available for sale shortly.

2. Grocery (all markets), Drug and Mass available in select markets.

A New Analytic Tool for MeasuringDistribution and Merchandising!Have you ever increased your brand’s distribution, to find that it didn’t lead to increased sales? Have item mixchanges gone undetected because your brand’s distributionlevels have not changed? Or have you ever wanted to knowyour brand’s share of category distribution?

Historically, distribution for a brand considers only thebreadth of stores selling the brand, measured by ‘% ACV’or ‘% Stores Selling’. However, to answer questions relatedto item mix, one must understand depth of distribution.Now, ACNielsen offers Cumulative Distribution Points—a new analytic tool that incorporates both your brand’sbreadth (% ACV) and its depth, measured by average number of items carried.

Cumulative Distribution Points helps you better deployyour marketing resources by providing you with a morespecific means for evaluating volume and distribution drivers. This new measure enables you to determinewhether or not new items are adding incremental distri-bution to your brand and allows for comparisons such asshare of distribution. And Cumulative Distribution Points is additive across ACNielsen’s data dimensions, making it a truly flexible and effective measure.

Cumulative Distribution Points is also available for in-storepromotion conditions. This affords you the same analyticbenefits for your merchandising assessments and gives wayto other new insights such as understanding if your brand is getting its fair share of category promotions.

Cumulative Distribution Points will be available for purchase in September and is integrated into your current service. For more information, please contact your ACNielsen representative.

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for RetailersBusiness Tools

Choosing the right category management approach to meetyour specific financial and marketing goals can be a daunting task. That’s why ACNielsen created intuitiveprocesses to help retailers and manufacturers sort throughthe full spectrum of integrated category management solu-tions in order to develop, evaluate and implement categorystrategies that address individual needs.

From initial category analysis all the way to in-store implementation, ACNielsen can help you design a categorymanagement program that best meets your needs and organizational structure. ACNielsen’s Analysis toImplementation approach starts with access to high quality data that directs store decisions. Measuring allretail channels from supercenters to convenience stores,ACNielsen’s syndicated data coupled with consumer paneland retailer data provide consumer-focused results thatyield real opportunities to improve sales and profits.

Management of data is a critical component to categorymanagement success. With products such as ACNielsen’sRetail Warehouse Solution (RWS) and SpacemanProfessional, ACNielsen organizes the data to offer ad-hocreporting and access tools that help you easily mine andanalyze the data.

ACNielsen’s expertise at drawing strategic insights from thedata is unmatched. By leveraging a full-line of analysistools, marketing and sales professionals can develop itemassortment, pricing, promotional and shelf space programsthat optimize category performance, meeting both retailerand manufacturer objectives. Once objectives are defined,ACNielsen can provide the right tools to implement in-storeexecution.

From Analysis to Implementation, ACNielsen provides thepathway that leads you to successful category managementsolutions.

Create Integrated Category Management Solutions—From Analysis to Implementation

Combined with retailer data, ACNielsen systems and information provide solutions:from analysis to implementation.

Data

Trade AreasSuper-

SCANTRACKHomescanProduct

Reference

Store chars.Product chars. Cost, SpaceInventory

CategoryManager

NITRO

SPACEMANSuite

PRICEMAN

SPACEMAN Professional and SPACEMAN Enterprise

SPACEMANConnectivity

RetailWarehouseSolution(RWS)

InformationManagement

InsightDevelopment

In-storeImplementation

InternetDelivery

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Sales and marketing success isn’t aboutdata. It’s about understanding what moti-vates people.

That’s precisely the kind of insight and knowledge ACNielsen brings to your business.

Combined with superior client service, we deliver the highest quality and breadth of information, technology expertise and analytical solutions.

We offer capabilities in consumer man-agement. Price management.Promotions. Assortment management.Category management. Loyalty marketing.And much more.

All so you can make better business deci-sions and get even closer to your cus-tomers.

Contact your ACNielsen representative. Or call 1-800-988-4ACN. The global leader in market research, information and analysis

ACNielsen gives the “why” behind the buy.

There are 6 billion consumers in the world.

What makes yours so special?

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Documents

The Assortment Challenge