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“Plan Through Impact”: Dialog with Dawson

May 31, 2022August 14, 2009 by James Tenser

Tenser’s Tirades recently sat down with Warren Dawson, President of consultancy Dawson Thoughtware, for a conversation about his vision for a comprehensive framework for what he calls Merchandising Resource Management, designed to support superior store-level compliance and effective measurement methods, from initial plans to their ultimate impact on business. The MRM process allows retailers and suppliers to set objectives, measure performance at each process stage, and gauge the impact these have on the overall business.

Dawson was instrumental in organizing the In-Store Implementation Sharegroup and a contributor to its 2008 working paper. He is preparing a new paper, “Plan Through Impact,” that outlines his point of view regarding the next wave of innovation in supermarket store operations, one he believes opens up great opportunities to improve both shopper experience and financial performance.

TT: Warren, you’ve earned a long-standing reputation as one of the visionaries in supermarket merchandising, especially space and assortment management. What’s driving you to speak out again about merchandising compliance?

WD: It’s no secret that I’ve been an advocate along these lines for many years. I started working on the core issues of store-level item distribution in the 1980s. I’ve had the opportunity to help many supermarket and CPG companies tackle space and assortment issues since then. The idea behind the ISI group was to bring together a credible group of companies and industry people to debunk the myth that all is well with In-Store Implementation.

While we’ve seen improvement in supply chain methods, category planning and demand-based insights, the in-store opportunity remains vast – tens of billions of dollars in missed sales, billions in profits. As the ISI Sharegroup working paper showed in 2008, we have barely budged in 20 years on core issues like item availability, promotion compliance, speed to shelf and planogram integrity. I think we have the means to fix those things today.

TT: What do you mean by “Plan Through Impact”?

WD: Well, besides persistent irritants like out-of-stocks and poor promotion compliance, two areas of change in merchandising planning in the grocery industry have brought this need to a higher urgency: The first is Shopper Marketing, which has led to a much greater degree of segmentation and targeting around in-store merchandising and messaging. The second is the adoption of planogram automation tools, which permit retailers to vary merchandising plans down to the store level, if justified by shopper insights.

TT: Those sound like positive developments. Are you skeptical about their value?

WD: Not at all. It’s great, must-do stuff. The challenge is that they introduce an enormous amount of additional intricacy that the industry is not well-prepared to manage. Retailers and CPGs are getting a lot better at formulating subtle and insightful plans, but they lack the know-how and every-day practices to carry those plans out effectively in the stores. There’s a huge risk of wasted spending.

TT: Isn’t that what Workforce Management and Store Execution Management software is supposed to address?

WD: Yes in theory. And these types of tools are likely to be parts of the Merchandising Resource Management solution I envision. They let us formulate a compliance plan and push it out to people in the field. But organizing and communicating tasks is just the first step in the process. There has to be a process for confirming that the tasks get done, measuring them and comparing them to expectation. And you have to be able to share the results to all participants in the process, so they can manage their own performance.

TT: Sounds a lot like the “Plan-Do-Measure” concept advanced by the ISI Network.

WD: Exactly right, although MRM goes further. You need an embedded feedback loop to monitor compliance. Regularity in the information will ultimately help trading partners make better, more realistic merchandising and promotion plans. It’s foolish and costly to plan work that doesn’t get done, and yet that’s what we do every day, because without measurement tools we can’t visualize how our unrealistic plans damage our business outcomes.

TT: So how does “Plan Through Impact” extend this thought process?

WD: By adding three more levels of measurement. Its core is what I call a Compliance Index that synthesizes several store-level metrics into a score that can be rolled up from the item level all the way to the category, cluster or account level. Then compliance must be linked to what we all care about – sales performance results. Finally, we need to connect the dots to measures of business impact – customer experience and loyalty, competitive position, and shareholder value. I sometimes like to call this “Plan-Do-Measure-Measure-Measure-Measure.”

TT: Are you suggesting that we establish a chain of causality connecting a company’s shareholder value all the way back to its merchandising competency?

WD: I believe it’s an achievable goal. Merely tracking merchandising outcomes doesn’t provide a reliable proxy for business performance. We feel intuitively that compliance must have an impact, but we can’t use it to support strategic decisions unless we establish a Plan Through Impact framework.

TT: Sounds challenging. Aren’t you asking for too much?

WD: At one time this might have seemed beyond us, or at least prohibitively costly, but today we have all the elements within our grasp. There’s no shortage of tools to support store level measurement and communications. In fact, many merchandising field organizations are already heavily invested in portable technology with verifiable self-reporting that would support a viable compliance index. Then there are the point solutions for digital image analysis, out-of-stock detection, spot audits, and demand signal analysis to name a few.

TT: If those software and hardware tools are already available, why isn’t the industry already enjoying greater success?

WD: Because they are being put into use ad hoc, and in the absence of a crucial thoughtware layer. Merchandising Resource Management is a business process, not a technology. It requires some changes in business practices at the store level, as well as for decision-makers and administrators. Also, because it creates greater transparency of compliance performance, it has potential to change the way trading partners collaborate for success. Most companies are going to need a little help putting this into practice.

TT: How can companies educate themselves further about this?

WD: Interested parties are welcome to email me at WarrenDawson@gmail.com for a copy of the paper or to discuss a consultation. A good place to begin reading is the In-Store Implementation Network site. Many downloads are available with free registration.

Curing Performance Anxiety

May 31, 2022July 7, 2009 by James Tenser

Sure, you can plan alright, but how well can you implement?

I imagine this question keeps truly conscious merchants and consumer product marketers awake nights with what amounts to performance anxiety.

Those of you who follow the work of the In-Store Implementation Network may be well aware that members regard the pursuit of retail compliance as nothing less than an industry imperative. Our latest work on Merchandising Performance Management drives the point further. Our not-so-hidden agenda: Shift the dialog from hand-wringing about our challenges to identifying and implementing practical solutions.

You see, we are standing at the threshold of the next (maybe the last) great opportunity for retail financial performance gains – the stores themselves.

The past two decades of industry consolidation, supply chain advances and category management have failed to move the needle on basic merchandising performance indicators such as out-of-stock rates, promotion compliance and planogram compliance and decay. The numbers remain so disheartening that we routinely plan not to measure them. This despite their obvious causal link to GMROII and profits.

Here is evidence of what I call “dis-economies of scale.” It should be a source of more than a little vexation across the retail consumer products industry. Top executives know with certainty that buying clout and elimination of redundant processes are competitive necessities, but they prefer not to call attention to the fact that larger strings of larger stores are also much harder to steer.

Today’s fast-moving consumer goods chains teeter along the precipice of the “big middle” – the cold, dark place of persistent merchandising mediocrity ruled by a mythical, but non-existent, average shopper. Never fear – we’ve got Shopper Marketing to keep us from the abyss. We segment and target our customer base, and we study our targets, so we derive insights about our shoppers and make plans to reach them on their terms.

Those shopper insights let us design offers tailored to specific shopper groups. They are also inputs for automated planogram tools that let us design tailored merchandising plans for each category in each store. We can layer on store-specific pricing, using the latest optimization technologies, and before long we’ve defined thousands of store-specific matrices of space, mix, price points and deals.

Yes we have some impressively intricate plans, but can we implement them? Well, there’s a dizzying amount of detail to cover, but realistic solutions may finally be at hand.

Retailers, manufacturers, brokers and merchandising services organizations have recognized for some time that they need a systematic way to parcel out the tasks to their minions in the field. That has led to a proliferation of home-grown and commercial Work Force Management (WFM) software solutions that permit headquarters to push instructions out to the individuals tasked with performing them.

WFM solutions are generally one-way (HQ to the field) and intra-organizational with an emphasis on employee management. That is, they permit managers to send instructions to their own people in the field without provision for feedback. Often those instructions arrive in the form of an email or memo.

Expanding the WFM principles more specifically to the retail environment has led to shift in focus from managing people to managing activities. Solutions of this type are called Store Execution Management (SEM), and they are oriented toward field force automation and task or process efficiency. A number of third-party MSOs and direct store delivery organizations deploy SEM solutions today. As a rule these too are intra-organizational, with limited feedback possible for the host retailer.

Now we are seeing a new class of solutions reach the market, of a type I like to call Merchandising Performance Management (MPM). They are distinct from legacy WFM and SEM solutions in several important ways. First, they are engineered to manage outcomes, not just tasks or people. Because they incorporate a two-way platform for feedback and reporting, they support capture of performance metrics in real time.

Second, they are inter-organizational by design. That is, they support interaction from all the parties who plan merchandising and who touch the merchandise in stores – retailers, manufacturers, MSOs, brokers. This is most commonly accomplished through establishment of a secure, Web-based portal that is accessible as an online service. As a result, all parties in the merchandising ecosystem view relevant performance data and contribute required feedback to the greater information flow.

Presently there are at least eight solution providers who offer MPM software and services to the retail market. Several are early-stage companies and relatively untested. None are perfect. All hold out the promise of a practical, every-day, plan-do-measure store compliance discipline that can find hidden profit in the stores – where it all started.

Intricacy is the enemy. Most of what we try to do is not that hard. But there is so much detail to cover and those details are so … relentless. Performance anxiety must inevitably follow.

Unless… We adopt sound Merchandising Performance Management practices. ISI Network has assembled a report that outlines some tools and options for senior executives. I encourage you to take a look. It’s good for what ails us.

RFID’s Widening Gyre

May 31, 2022March 7, 2009 by James Tenser

TWO RECENT NEWS ITEMS about retail giants, radio-frequency ID tags and promotional displays have pundits punning and some market vultures vultching:

When Procter & Gamble declared it would no longer apply EPC/RFID tags to promotional displays built for Walmart stores, it triggered critiques of the technology and its underlying economics. Observers circling above the decaying carcass of the program sniffed that just maybe, Walmart wasn’t delivering a measurable benefit from the solution.

Within days Walgreen Drug Stores delivered a more positive spin, stating that the very same sort of radio-frequency tags had helped it improve its in‐store execution in the past year “to nearly double the industry average.”

Never mind that the industry average stinks like carrion.

David Van Howe, vice president of purchasing for Walgreens, called the information captured from the tagged displays a “game changer” for the chain, and at least one partner, Revlon, said the program delivered “unprecedented insight into what works and what doesn’t with consumers.”

So what are we to take away from all this? The vultures in our midst keep trying to declare retail RFID dead on arrival. The tech pundits claim they have seen a glorious future in those tiny transponders. I say the misdirected focus on RFID technology threatens to derail an important initiative.

It’s not the tech, it’s the practice! RFID has been ascribed with magical status by some, but I’m here to tell you – it’s no tri-corder, not even a silver bullet.

When it comes to at-retail compliance – potentially the largest business improvement opportunity presently facing the retail consumer products industry – point solutions are pointless. The system of practices is everything.

P&G’s decision exemplifies the frustration held by many manufacturers with In-Store Implementation of promotions. There is no routine, repeatable, measured and collaborative practice to execute planned promotions in stores. Data on compliance, if available at all, arrives weeks or months after the fact and it reveals that roughly half the spending is ineffective.

Even the mighty Walmart, it seems, has so far been unable to master this challenge on behalf of its trading partners. It means that billions of dollars in trade and promotional funds are badly spent while we debate which brand of ID code to attach to the display headers.

When it comes to optimizing In-Store Implementation, grease pencils and clipboards may be plenty of tech if the process is right. The retailer that formulates a compliance plan, enables it with appropriate solutions, and measures its outcome relentlessly will always achieve better performance on in-store programs. This is equally true for off-shelf display compliance, resets, planogram maintenance, new-product cut-ins, sampling programs, or floor polishing.

Of course large chains like the two Wals require some tools to help manage scale and stabilize best practices. For fixtures and displays, RFID may in fact be a useful input to the process. But it works at Walgreens because it has also instituted the in-store practices to make it work.

For the past two years, the In-Store Implementation Network has advocated establishment of a fully collaborative “plan-do-measure” retail compliance discipline that would ensure real-time visibility and accountability. We cannot improve what we do not measure. Retailers – and that includes even the likes of Walmart and Walgreens – must step forward on this issue if we are to see real progress on retail effectiveness and shopper experience.

The Value Pyramid of Shopper Media

May 31, 2022November 22, 2008 by James Tenser

Measurement schemes are coming thick and fast from various groups claiming to have the last word on measurement of shopper media. At last count at least three groups were competing over this:

The P.R.I.S.M. (Pioneering Research for an In-Store Metric) project, originally organized by the In-Store Marketing Institute (www.instoremarketer.org) in 2006, has been an important catalyst for the marketplace. Now in phase II, a 26-week market test, the stated goal is to develop an “in-store GRP” or gross rating point, aimed at a identifying a comfortable metric for the media buying establishment. With strong support from Nielsen In-Store and numerous large brand marketers and ad agencies, P.R.I.S.M. is a leadership voice in establishing a standard for store-level data.

Not to be outdone, OVAB, the Out-of-home Video Advertising Bureau, (www.ovab.org) released its Audience Metrics Guidelines report in August. The report advocates an “average unit audience” principle for measuring digital media in various physical settings that incorporates both opportunities to see and variable units of viewing time appropriate to each viewing context.

POPAI, the Point-of-Purchase Advertising Institute, which bills itself as the “global association for marketing at retail,” (www.popai.com), released its report, Digital Signage. The Global Study. Opportunities and Risks in August in conjunction with the German association, GIM (Gesellschaft für innovative Martkforschung). The scope is broad – on the global digital out-of-home (DOOH) marketplace, and the focus is again largely on audience measurement.

In addition, Digital Signage Today (www.digitalsignagetoday.com) released a sponsored report, Measurement and analysis for digital signage, that explores audience measurement and proposes a multi-tier way of looking at in-store ad value, encompassing proof of ad delivery, proof of audience delivery and sales uplift. There’s promise in this approach, I think.

All these measurement studies attempt to bring welcome rigor to the realm of shopper media metrics. It’s widely understood now that simply counting the number of people who walk in the front door of a store does not adequately document an audience. Nor does it come close to reflecting its value to advertisers using an in-store network. P.R.I.S.M. has introduced a useful scheme for dividing a retail store into messaging “zones” or channels corresponding to merchandise departments and high-traffic power alleys. This is a welcome refinement versus a people-counter at the front door, but I think it’s only a step toward the ultimate requirement, a sales and ROI sensitive measurement system.

Audience metrics are necessary, but not sufficient. The Shopper Media ROI Pyramid, pictured here, presents a conceptual framework for a more robust value metric:

O2C: At the base are “opportunities to see” – communications that have reach and frequency only. This is what the PRISM initiative has learned how to measure in Cost Per Thousand Impressions. This is a metric best expressed in some analog to gross rating points (GRP). It reflects how many messages are sent and the theoretical size of their audience. O2Cs are cheap and plentiful – and, like “traditional” media, linked tenuously to actual sales lift.

View: Next up are views that can be actually proved. Some current shopper media are capable of metering actual views through use of electric-eye people counters, embedded cameras, shopping carts with embedded RFID tags, digital image analyses, etc. This is a “page view” metric, to use a Web metaphor – greater in number than O2C but still relatively low in individual value.

Do: Next up the scale are communications that stimulate some kind of interaction that might precede a sale. This may include pressing a touch screen for further information, taking a coupon or “take-one”, trying a sample. This is a “click-through” metric, fewer in number but of greater value to marketers.

Buy: Next up the pyramid are communications that may be directly related to product trial or sale. This “purchase” metric will be more scarce, but even more valuable.

Loyal Behavior: At the pinnacle are in-store communications that contribute not just to a single purchase but to enduring affective and behavioral change. We call this loyalty, and it is rarest and dearest of all. Loyalty may only be detected by a marketer with a plan – a frequent shopper card program or other longitudinal tracking mechanism capable of linking together multiple purchase events by the same shopper.

As a marketer, I would require that all these layers be measured and modeled so that I can truly understand the ROI of my in-store communications. As a retailer hosting these messages, I would require that I get paid in accordance to the value delivered at each of these levels. As an in-store network operator, I would seek a way to justify compensation at each level as well. As a brand marketer, I would pay almost any price for provable sales ROI metrics and probably donate a vital organ for reliable proof of loyal purchase behavior.

My opinion? Opportunities to see are a poor proxy for measuring sales lift and repeat purchase behavior. I’m unimpressed by in-store GRPs and believe shopper marketers will require direct ROI measures. If this prospect makes the media buying establishment feel a bit queasy, I say get over it. It’s a digital world. Sampling and averages reflect outdated, analog thinking.