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Merchandising Best Practices: ROI

Blog / October 18, 2021

Developing effective marketing materials and programs for retail takes research, design activation, resources, and reliable teams. Maximizing program effectiveness and ROI requires a combination of relevant insights, innovation, creativity, a clear understanding of merchandising mechanics, and exceptional supply chain execution of all aspects of the program.

 

Goals. The first step to designing a successful program is to have clearly defined and agreed upon goals. These goals will inform the marketing approach the team will take to execute the program. Goals can be around the shopper, category, product, and/or brand.

Research. Once the marketing goals have been agreed upon, industry and shopper research needs to be conducted. Research yields insights into shopper behaviors, reveals the strengths and weaknesses in a brand or store’s customer experience and brand execution.

Design. Creating effective merchandising materials and promotions that attract consumers to the product and provide sales lift is key to maximizing display or packaging effectiveness and a campaign’s ROI.

Compliance. Finally, effective program execution relies on successful delivery and setup of displays or pack- aging in the correct location and with the right products. Four elements will influence compliance—channel, communications within the project team, program type, and execution method.

 

Factors Influencing Display Performance

While there are many factors that influence display performance, the in-store execution has the most impact. Effective program execution relies on successful delivery and setup of displays or packaging in the correct location and with the right products.

 

To ensure maximum compliance, marketers must adhere to ten simple rules.

  1. Design to target the right audience.
  2. Abide by branding guidelines.
  3. Follow specific retailer’s rules and expectations, along with their brand guidelines.
  4. Ensure ease of assembly and in-store set-up to maximize compliance.
  5. Make the display durable to support product, supply chain and retail environment.
  6. Ensure ease of restocking and ease of access.
  7. Value engineer to reduce production costs and increase recyclability.
  8. Realize one size program does not fit all. Modular structures allows for flexibility.
  9. Ensure on-time delivery to store and ease of display transport within store.
  10. Specify placement within the store or replacement during sell through.

Another key component of display effectiveness is having the correct amount of inventory in-store to continually re-stock the display and the aisle location. This is a major factor, especially if the product is being promoted across other vehicles, in-store and out of store. There is an art (and science) of balancing inventory to support both the primary category and secondary display location. An unstocked display will often times be overlooked, thus losing a potential sale, or chance to inform shoppers of the product.

 

Lastly, on-going promotions of other retailers, other categories and non-category products will distract the shoppers from your product and display. Marketers need to remember their display is not working in a bubble. As Shop! mentions in their white paper, A Display is a Terrible Thing to Waste, the need for innovation to stand out at the shelf is even more important when we consider some challenging statistics that brands need to overcome when trying to win the battle at retail:

  • There are 30,000 new SKUs introduced every year.
  • Consumers are hit with 3,000 messages every day from all marketing channels.
  • It takes just 3 seconds to make an impact in store.

Calculating ROI

Calculating ROI starts with an understanding of three baseline sets of data to build the ROI equation: in-store execution data (on a store-by-store basis), material cost factors, and performance data. The Vanguard Retail Assessment Tool simplifies the process of collecting retail data & photos and completing in-store evaluations by using real-time analytical tools. This data is helpful in determining compliance and collecting ROI.

 

There are a variety of methods and formulas for calculating the ROI of a marketing campaign and in-store materials. A test versus control methodology is the best way to generate statistically significant results. This method compares the sales from the control group vs. campaign test group sales.

 

Promotional Program Value (PPV) offers a valuable method of quickly assessing the fiscal efficiency of display vehicles. PPV is calculated by taking the total topline sales increase per store when a display is properly set up, divided by the unit cost to build the display.

 

The Pure ROI Formula evaluates the costs associated to the production of the display, product, and marketing efforts as compared to product sales.

Finally, turning the data into actionable insights is the key to every successful program. Remember, the truly effective displays enhance the in-store shopper experience and improve the likelihood of product sales and repeat purchases.

Sources:

2017 Shop! ROI Standards: In-Store Marketing Materials. https://shopassociation.org/roi-standards-program/

Shop! A Display is a Terrible Thing to Waste. https://shopassociation.org/compliance-initiative-study/