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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.

Six Dimensions of Shopping Time

May 31, 2022January 30, 2009 by James Tenser

When retailers seek to optimize the shopping experience and understand channel choice, much consideration is given to aspects of convenience. The literature generally breaks this down into two core elements: effort and time. For brick and mortar stores, the goal is to make shopping as easy as possible, and attractively quick, but not so fast that sales opportunities are missed during the shopping trip. In a multichannel environment, the puzzle gets more intricate.
Shopping time covers multiple factors, including hours of operation, travel time, search time, time to check out, delivery time, and time to return. So time-saving convenience is highly conditional:

A mother will drive across town to a 24-hour drug store at midnight when she has a sick child, but she may leave a convenience store when faced with a long checkout line during the morning coffee rush.
An electronics shopper may spend hours researching flat screen TV prices online but grow impatient when forced to wait 10 minutes for sales help at the local electronics superstore.
A discount store shopper may watch TV at home four hours a day, but will attend to an in-store digital screen for exactly eight seconds before moving on to the next purchase task.
An online shopper will gladly wait three days for free delivery of a purchase from a multi-channel retailer, but grow agitated waiting five minutes to return the same item at a local branch store.

These examples are illustrations of what I observe to be six dimensions of shopping time. The academic literature generally identifies four of these:

1) Time to access (i.e. to reach the store or shopping site)
2) Time to search (i.e. to identify and select product to buy)
3) Time to transact (i.e. to complete the purchase transaction)
4) Time to possess (i.e. to physically obtain the purchased merchandise)

This classification may not reflect a complete picture of the influence of time on consumers’ retail channel choices however. I would add two additional time elements to the list:

5) Time of operation (i.e. days and hours that the retailer may be patronized)
6) Time of return (i.e. to return an item for refund or credit).

Considering these time factors is especially important as we reason about the choices shoppers make between options in a multichannel environment. It takes minutes to find and order a book on Amazon.com – even at midnight – versus an hour or more to stop by Borders during business hours and search the shelves, but the Borders shopper may leave with the book in hand, while the Amazon.com shopper waits days for delivery. Which is more convenient? Well, it depends…what did the shopper need most at that moment?

Leading multichannel retailers give deep thought to understanding this complex of time-saving behaviors. The best evidence that I’ve seen is the growth of “order online, pick up in store” service offerings at some consumer electronics retailers. Instant gratification is still a motivation, but shoppers like the protection from stress that comes with pre-shopping on line in the calm safety of the family den.

Shoppers’ time-related behaviors, I think, are relatively independent of current economic conditions. In general they will choose the options that suit their need states of the moment. At the same time, we may observe that some shoppers will devote more time and effort to planned shopping trips by clipping coupons, preparing lists, and advance online price comparisons, especially as retailers continue to make these activities as time-efficient and easy as possible.

But the general rule (and its inverse) still applies in retailing: Time is more valuable than money for shoppers who have more money than time.

It’s NOT TV!

May 31, 2022October 14, 2008 by James Tenser

SHOPPER MEDIA – digital and not – are one class of tools for shopper marketing. Almost any in-store message, measured in isolation in a controlled test, can deliver a sales lift. In this mode, the message does its magic by “activating” shoppers’ pre-existing propensity to select an item or a brand. Or to put it in crude terms–it helps them to notice the product, then buy it.

Not rocket science. Retailers today can use very simple and low-cost digital display systems to promote their higher-margin store brands this way. They can measure the success of this activity at the POS and prove ROI. It’s a very valid and easily attainable use for digital shopper media.

Walmart’s network provides a channel for brands. With 140 million shoppers per week, it claims network-sized audience numbers. No doubt it sells some incremental product, but it is profitable up front because what it really sells is audience access to advertisers. It’s got impressions by the megaton, which may seem attractive and familiar to advertisers, but not so much to promoters.

For 2009 I foresee a rise in awareness of shopper media for promotional purposes – with applications that will slash technology and content production costs and deliver a higher, clearer return on investment: Small screens, not large. Locations at the point of decision, not in lobbies or power aisles. Store brand focus on par with national brands. And tailored to shopper experience – not an assault on the senses.

The new in-store audience measurement methods are designed to help agency media buyers feel better about spending their client’s ad dollars on a media environment they really don’t understand. “Customization” in this context seems to mean playing different messages in different areas of the store or during different dayparts. I suppose breaking a large store up into virtual “channels” this way holds some validity, but it feels forced to me.

Despite the glowing screens, this is not TV. It’s a mistake to carry the metaphor too far in the retail environment. And there are marvelous opportunities ahead for retailers to deploy shopper media as integral elements of their selling machinery and shopper experience.