If you are a Founder/CEO or a Sales Head of a CPG company you already know how painful it is to get your product assortment right across all the stores. And if you happen to have a high number of SKUs- where many remain unsold- then the struggle intensifies many-fold.
I remember what happened to the iconic Dalda Vanaspati ghee when it didn’t pivot its product mix to cater to the changing consumer demands. At its peak, Dalda held more than 70% market share. A few years later refined oils started getting recognized as a healthier option and began gaining market share. Dalda didn’t have other products to retain leadership and was eventually replaced by groundnut (Postman), sunflower (Sundrop) and others.
So why is the depth of distribution important?
Observe the overall consumer market and you’ll discover most customers are brand-loyal. Which means if they like your product, they will continue to buy it. But what if your product isn’t available? Or what if they want to try a different brand? To ensure consumers stay loyal to your brand, you need to be able to offer them a variety of options. Here, the basic rule of thumb to remember is, the more the number of SKUs the more fine-tuned your depth of distribution should be.
For e.g. When Amul launched its processed cheese, the taste of that cheese became familiar for thousands of Indians. In the past decade or so, Amul has expanded its cheese category to include processed cheese slices, blocks, cubes, spreads, shredded mozzarella and cheddar and even Emmental and Gouda cheese. Today, even though there are many Indian and international options to choose from, I still buy Amul cheese, because that’s the taste I prefer.
So if I go to buy cheese slices, and there is a scheme on the new flavours of Amul Cheese Spreads, I will most probably try them. That’s how customers usually are. Because they have faith in the company and its products. This strategy of extending depth of distribution helps to retain leadership on your high-performing categories and also ensures sustained patronage from the customers.
Challenges around the depth of distribution
Have you identified the product lines you want in large-format stores versus small mom-and-pop stores? How do you retain the shelf share amid the aggressive undercutting by competition? Is your Sales Team aware of the targeted categories for each store profile?
Unfortunately, when companies have a large array of SKUs, salesmen try and eventually struggle to sell all product lines and SKUs equally. These companies don’t know if their salespeople are selling on the basis of customer profiles or only jotting the orders that retailers need. They don’t know if the right schemes are being communicated to the retailer, or whether the salesman is even aware that a relevant scheme exists.
Not surprisingly in such cases, 20% of the product range tends to contribute to nearly 80% of the revenue, because if one category is the cash cow, the sales team would rather milk the existing one than create new ones.
Increasing your Depth of Distribution
A 2019 study from Deloitte and Google states that product assortment should not be stagnant, but change over time in accordance with customer behaviour. To hit the sweet spot, your product mix should ideally be defined for every retail outlet. But is that even possible?
We say it is. But with the right kind of automation solution. FieldAssist’s end-to-end automation platform assists your on-field sales team to smartly book orders with features like:
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