consumer insight .pdf

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Ins ight s today for tomorrow s dec i s ions

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

Private Label Grows UpWhat Makes a Good CategoryManagement Partner?

Trend Watch: Business-

to-Business Websites

TheAssortmentChallenge:Marrying Supply Costwith Consumer Demand


2/28

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 Grocercontained two charts on p. 14-15 thatdid not accurately reflect the informationin the text. The corrected charts andtext can be found on our website at

http://acnielsen.com/ci.


3/28

September 1999, Volume 1, No. 3

3A New Year Like No Other

Many clients have asked what ACNielsen

has 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: Marrying

Supply 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 todays marketplace, one needs

to gain an understanding of the dynamics

across retail channels and consumer

demographics. It is also important to see

how U.S. private label use ranks globally

and compare shelf price sensitivity between

private 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.


4/28

In every issue

18 Trend Watch

Business-To-Business

Web Sites

Business Tools20 Consumer Behavior

21 Analytics

22 Merchandising

23 Retail Tracking

24 Retailers

Volume 1, No. 3

PublisherACNielsen

Editors

Mark Chesney

Art Massa

Contributing Writers

Ryan MathewsFuturistFirstMatter

Milton MerlPresident and CEOMilton Merl & Associates

Design & LayoutKathy 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 TechVWatch, Convenience Track,

Homescan, Priceman, SCANTRACK, SPACEMAN

SPACEMAN Enterprise and TechVWatch are trad

marks or registered trademarks of A.C. Nielsen

Company. Other brand, product or service name

are trademarks or registered trademarks of their

respective companies.

Microsoft, Visual Basic, and the Visual Basic log

are either registered trademarks or trademarks o

Microsoft Corporation in the United States and/

other countries.


5/28

As a resultof Y2K,

ACNielsen has

improved its

infrastructure,

applications,

and

collaboration

across

business

segments

and countries.

A New Year like no otherSteve SchmidtACNielsen

President, U.S. No issue has gotten more

attention this year than the

Year 2000 bug. By now we

have all heard the dire predictions of

airplanes dropping from the sky,banks zeroing out everyones per-

sonal accounts, and public utilities

ceasing to function. Some have

taken the contrary viewthat Y2K

is overrated, a minor programming

fix with nothing to worry about.

The truth, as with most things, will

lie somewhere in between. It is clear,

however, that the areas with the

most potential risk are the ones that

are most computer-dependentour

industry, for example.

Many of our clients have asked

what ACNielsen has been doing

to prepare for Y2K. I would like

to share with you the efforts our

company has undertaken.

ACNielsen began preparing for the

millennium in 1997 when we under-

took a process to evaluate all the

systems that could be affected by

Y2K and upgrade or retire those

that 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 its

upgrade of all programs and file

structures to be Year-2000 compli-

ant. We have assessed our infrastruc-

tureincluding our databases,

computer applications, voice/data

communications, and storagespacefor compliance and will

complete any remaining upgrades

by end of third quarter. Weve evalu-

ated, upgraded and retired software

applications.

We have leveraged our Y2K learn-

ings and processes across business

segments and around the world to

speed the transition everywhere in

the company. And we have helped

our clients by completing their

Y2K compliance surveys and

upgrading them to compliant

ACNielsen applications.

Our final step is to evaluate the

interaction between our systems to

ensure there are no hidden effects

of the date change. This will be

completed in September of this year.

Despite all the negative predictions

from many doomsayers, this immov-

able deadline has had some positive

effects on the industry. It hasrequired companies to evaluate and

retire old program codea systems

housecleaning for the millennium.

As the first commercial business to

ever use a computer, ACNielsen has

been in the electronic world for

quite a while. You can imagine the

inventory we needed to evaluate.

In all, we have removed more than

2,500 old program routines and

retired more than eight million

lines of code. This gives us abase 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 by

providing 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 questions

and give us feedback if you have

any additional issues regarding the

Year 2000.


6/28

g

4 Cover Story

The Assortment ChallengeMarrying Supply Cost with Consumer Demand

Milton MerlPresident and CEOMilton Merl & Associates

Marshall WhiteVice President, AnalyticsACNielsen


7/28

The more we learn about how consumers shop

through panel data, loyalty card data and

advanced modeling routinesthe 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 industrys 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 items 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 items 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 products

profit after all costs, including the resources required to

offer the product for salesuch 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 3050 percent of

the market variety from most categories wouldnt likely

put a dent in overall market volume. It is the manufac-turers attempt to leverage share away from competition

that has driven up variety. Were 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 BenefitsOne 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 ofitems 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 ROIIn business, return on investment is king. Increasingly,assortment and space decisions drive return on invest-

ment in all areas of businessmanufacturing 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.


8/28

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, retailersophistication increased as retailers improved their ability

to market and sell their own itemsall in the context of

finite warehouse, shelf and floor space.

g

Cover StoryTo 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 availablesomewherefor 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 VarietyObviously, shelf space is a critical enabler to salesif

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 facingin product inventory and labor to stock and

manage the facing. The key to maximizing shelf ROIis 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-makers 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 byintroducing 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/week

Incremental ABC Profits/Added SKU

Incremental ABC Profits/Deleted SKU

DOUGH CHEESE DESSERT BUTTER/MARG

Increasingly, assortment

and space decisions drive

return on investment in

all areas of business.


9/28

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

constrained, then it probably pays to invest in higher

replenishment cost to meet demand.

Everybody WinsHowever, 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 assortmentboth cannibal-

ization and incremental profitabilitywhen 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.


10/28

g

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

brandscolorful graphics, mainstream packaging, high-

quality ingredients. And consumers have taken note.

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

todays 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 areperforming 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

60100% share. On a dollar basis, the relative impor-

tance of private label sales within the grocery channel is

even more pronounced17 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

dollargrowth in grocery stores has come from non-food

categories, such as Bath Accessories, Family Planning

products, and Womens Fragrances. It is no surprise thatsmaller-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 groupsMilk and

Eggstaking shares of more than 50%.

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

Feature

PrivateLabel

Grows UpBy Gail Geisler


11/28

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-sensitiveperhaps

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, Womens Fragrances, Bath Accessories,

Desserts/Gels/Syrups and Shelf Stable Juice Drinks. Themass 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 channeldefinition includes Supercenters. Share levelswithin Supercenters may be quite different thanregular mass formats, but are not separatedhere 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

NutsFirst 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

393

280210

105

9778

7868

6562

575656

44

41

Tobacco, Womens Fragrances and Bath Accessories Show

Strong Growth in MassPL Dollar Growth %

Tobacco & Accessories

FragrancesWomen

Buckets/Bin/Bath Accessories

Desserts/Gels/Syrups

Juices DrinksShelf Stbl

Grooming Aids

SeafoodCanned

Household Supplies

Cereal

Baking Supplies

Prepared FoodsReady Serve

Pasta

Personal Soap/Bath Needs

Fresheners/Deodorizers

Cookies/Ice Cream Cones

Chart 1

Chart 4

$ Market Share Grocery Drug Mass

2

1

4

18

23

65

0

1

2

7

14

89

60100%

4060%

3040%

2030%

1020%

less than 10%

0

2

4

9

17

81

PL Shares Are Stronger in the Grocery Channel

Grocery Drug Mass

5

12

1232

14

38

0

0

25

6

100

$1b+

$500mm$1b

$300mm$500mm$100mm$300mm

$50mm$100mm

less than $50mm

0

1

19

9

93

Grocery PL Group Sales Outpace Drug and Mass

Chart 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.


12/28

g

Feature

Private LabelA 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 largerpro-

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 ofproduct 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

199598, including Food, Drink, Personal Care and

Household product categories. More information on this

studycan be found on our websiteat 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 lightprivate label shoppers because of a varietyof factorsproduct quality, product availability,household finances, personal preference, and

attractive pricing. Through ACNielsen Homescan

consumer panel data, we have determined a fewkey 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 (34 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 andsuper-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 canbe further delineated into over 1,000 individual categories. An example product groupwould be Salty Snacks (which is then categorized into product categories like Potato Chips,

Pretzels, etc.).


13/28

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Norw

ay

Mexic

o

Mexic

o

Japa

n

Japa

n

A

ustri

a

Aust

ria

Chile

Chile

Fran

ce

Fran

ce

Gree

ce

Gree

ce

Irel

and

Irela

nd

Italy

Italy

Germ

any

Germ

any

South

Afri

ca

South

Afric

a

Brazil

Spai

n

Colo

mbi

a

Colo

mbi

a

NewZe

alan

d

New

Zea

land

Can

ada

Cana

da

Sw

eden

Swed

en

Portu

gal

Portu

gal

Fin

land

Finl

and

Denm

ark

Denm

ark

Puert

oRi

co

Puer

toRic

o

USA

Bel

gium

Belg

ium

Nethe

rland

s

Neth

erla

nds

Switze

rland

Switz

erla

nd

Great

Brita

in

Grea

tBr

itain

Austra

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Aust

ralia

+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

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, manynot surpris-

inglyhad 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, lets 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 productwill 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, lets 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 Supe r Heavy

Light Medium Heavy Super Heavy

% of buyers

% of dollars

25 25 25 25

7

16

26

51Not All Private Label Buyers Are the Same

Chart 5

Heavy Buyers Purchase More Frequently and Spenda Lot More than Light Buyers

Private Label Category Penetration Is Quite Deep

% Volume Growth by Country (98 vs.97)

Private LabelVolume Share byCountry

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

Light Medium Heavy Super Heavy

16%

41%

37%

6%

*

0

045

1%

10%

39%

40%

10%

*

054

10 or less

1120

2130

3140

4150

5160

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 Change98 vs. 97

Spai

nUS

A

60

30

0

share98

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 RetailingIndicators 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 RetailingIndicators 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


14/28

g

FeatureIn 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

PLAcetaminophen 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%

PLAcetaminophen $3.50 12%

PL 8 oz. Shredded Cheese $0.20 20%

PLCanned Chicken Noodle Soup $0.15 24%

PL Facial Tissue 150200 ct. $0.40 19%

PL 2% MilkGallon $0.10 31%

Optimal PL Lost PL SalesPrice Gap if Below Gap

PL Facial Tissue uprightFOOD $0.25 17%

PL Facial Tissue uprightDRUG $0.40 16%

PL Facial Tissue uprightMASS $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 sale

Salesper

Million

Optimal Price Gap

Private Label

Leading Brand

Total U.S.; Food Stores



Total U.S.


15/28

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 priceelasticity 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 workleading national

brands 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 byproducts; they must also be examined within the various

channelsgiven each channels 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. Theoptimal 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 gapsfor private label differ by channel. This information can

help marketers understand the pricing sensitivity points

based on outlet type.


16/28

Feature

What Makes

a GoodCategory

Management

Partner?

Category management is a good deal like

marriage. It is generally entered into with the

best of intentions, but early on it becomes clea

that once the initial passion has subsided it takes good

old 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 be

the last voice in a category management decision sim-

ply because they own the real estate. The truth is that

all category management decisions should be focused

through the bias of the consumer rather than any one

By Ryan Mathews

FuturistFirstMatter

g

4


17/28

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 beforenever afterthe fact. The road to

hell (and terrible category captaincy) is paved with goodintentions.

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 manufacturers 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 marginat 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 admitwhen its 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 ones neighbors and ones customers. But

ours is a different age. People live serial livesmoving

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


18/28

When this industry was founded, physical infrastructure

was so valued that now there are redundant infrastruc-

turestrucks, 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 todo category management, or anything else.

Openness is the ability to communicate willingly. Open

trading partners must entertain the possibility that

another persons 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. Its 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-

nersand often their direct and indirect competitors

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 interestsof the suppliers and the distribu-

torsin favor of the consumer. Sometimes there is the

gthe 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 theability to know a customer. The only way to truly

know the majority of customersand gain insight into

what they respond to in a categoryis 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 magicand as Disney has proved, magic is a pow-erful business tool.

Feature

Honesty

Imagination

Intellectual Assets

Openness

Selflessness


19/28

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 ofthe 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 basisnot the resultoftrust 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 endemicnot just

to category management, but to all business activities.

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

Without them, any partnershipincluding category

managementis 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 willbe successfulprovided 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 ofGrocery Headquarters

magazine and is a futurist with FirstMatter, a futuring

consultancy with offices in Detroit, Mich., Westport,

Conn., and London.

Trust

Willingness


20/28

g

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 forone-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

TrendWatchBusiness-To-Business Web Sites


21/28

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 Foodsuses the web site to leverage the companys marketing

programs, category management tools, and ECR

programs with retailers.

Tropicana.com/Biz is Tropicanas 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


22/28

g

for Consumer BehaviorBusiness Tools

Quantify Shopper LoyaltyAn important, but often overlooked, element in the loyalty

equation is knowing not only where your business is

coming from, but also where your business is going.

ACNielsen Homescan Cross OutletVFacts is a syndicated

report 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 OutletVFacts is also an instrumental category devel-

opment tool pinpointing which categories are potential

opportunities and risks.

Cross OutletVFacts gives marketers a competitive advan-

tage by understanding where else retailers core and occa-

sional shoppers are shopping, how they are spending and

what they are buying. Used in conjunction with

ACNielsens other syndicated reports, ConsumerVFacts,

ChannelVFacts and Account Shopper Profiler, you can gain

a complete sales story for key retailers in each market.

And the Survey Says...Human nature begs the question, Why? Scanning and Panel

data provide critical insights into the Who, What, Where

and When, and some of the Why behind the buy.

ACNielsen Homescan PanelVViews Surveys help answer

more of the Why behind the buy. PanelVViews Surveys

offer the unique ability to integrate actual purchase infor-

mation with attitudes and user information collected from

the Homescan Consumer Panel via barcoded surveys. From

evaluating the effectiveness of a sponsorship program to

deciding whether you should market your product on the

Internet, PanelVViews Surveys provide real-life answers to

factors that influence purchase decisions.

With typical response rates of85 percent, PanelVViews

Surveys are an effective method of identifying consumer

target groups and understanding how attitudes impact

behavior.

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 todays ever-changing world of personal computer tech-

nology, staying plugged in has become a daunting task

for even the most savvy marketer.

ACNielsen TechVWatch is a unique new

service that provides an on-going monitor

of whos buying computers, monitors and

printers, where theyre buying them and why. This

subscription-based service allows computer product manu-

facturers and retailers to spot trends and changes in the

marketplace in time to react, based on facts. With PC prices

plummeting, this information has never been more critical,

and its availablenowfrom ACNielsen.

TechVWatch combines critical information on the consumer

market for PC hardware. By pinpointing the reasons behind

differences in personal computer buying, such as among

first-time, replacement or supplemental PC buyers, you can

determine how consumers buyby brand, by price point

and by channel. Importantly, brand-switching behavior and

brand loyalty can now be measured to signify the winning

brands among consumers.

Spotting Personal Computer Trends As They Happen


23/28

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 Optimizer

application with ACNielsens industry-leading assortment

modeling capabilities. The combination of these powerful

tools fills a major gap in the industry by clearly articulating

the opportunities for using the most appropriate items to

satisfy store volume at increased profitability.

Performance Optimizer uses an ABC calculator, ABC Now,

to optimize category profit as it relates to volume elasticity

and cannibalization. It measures changes in volume and

profit at the item, segment and category level that occuras a result of changes in assortment.

ACNielsens proprietary assortment model quantifies

what percentage of an items sales are truly incremental

by determining the extent to which each items sales are

cannibalizing 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 consumer

strategic objectives into the planning process.

Performance Optimizer can be installed on laptop or

desktop systems, and combined with ACNielsens

advanced analytical models, provides one stop shopping

for maximizing your assortment profitability.

For more information, please contact your ACNielsen

representative, or visit us on the web!

Performance Optimizer Now Available with ACNielsen Analytical Models

SPACEPLANNING

FILES

SYNDICATEDDATA

ACCOUNTSPECIFIC

DATA

LOYALTYCARDDATA

PANELDATA

REPORTINGChartsReportsExports

DATAMART

ABC Now

ABC Now Lite

Logistics Optimizer

Logistics Lite

Space Optimizer

Space Lite

Assortment Optimizer

Assortment Lite

Price Optimizer

Price Lite

Promotion Optimizer

Promotion Lite

VISUAL EDITORData Cleansing

DefaultingUpdating


24/28

g

for Merchandising


Business Tools

Customizable solutions for any environment.

Todays merchandising world is more diverse than ever.

Everyone has different needs, a different environment, dif-

fering skill levels. There is no one size fits all solution.

Thats why we created SPACEMAN Professional

Application Builder. SPACEMAN Professional Application

Builder has the power to automate the production, main-

tenance and analysis of planograms necessary for well-

targeted category plans. SPACEMAN Professional

Application Builder can be customized to fit your specific

needs and interact with your specific data sources.

Base functionality can even be extended to provide the

ultimate, custom solution. No other application offers

this level of adaptability.

SPACEMAN Professional Application Builder has all of themerchandising and analytical capabilities of SPACEMAN

Professional. In addition, weve incorporated Microsoft

Visual Basic for Applications technology to offer unparal-

leled flexibility and customizability. With SPACEMAN

Professional Application Builder, you can customize the

application to work the way you do. Want to automatically

update planograms from any data source with the click of a

button? No problem. Need to export planogram informa-

tion for external analysis? Can do. Only SPACEMAN

Professional Application Builder offers these capabilities

through industry-standard technology and open architec-

turethe same technology found in Microsoft Office.

Leverage the Power of SPACEMAN ProfessionalApplication Builder

Extend base functionality to satisfy your specific

business needs.

Create custom routines to interact with other data

sources, automatically.

Automate routine merchandising tasks to provide

more time for concentrating on competitive

merchandising strategies.

Extend the use of point-of-sale, market-level and

consumer data through custom input/output routines.

Strengthen category management presentations withdetailed, fact-based reports and graphics.

Uses latest Component Object Model (COM) technology

from Microsoft to ensure compatibility with todays

Windows 95/98/NT operating systems and those of

the future.

Loaded with Easy-to-Use Features

Integrated ODBC data manager

Customizable toolbars

Integration with Microsoft Excel for in-depth analysis

and reporting

Built-in batch printing capabilities

User-defined libraries for sections, fixels and products

Full drag-and-drop functionality

Ability to create custom, multi-page schematic layouts

Call your ACNielsen representative to find out more about

how SPACEMAN Professional Application Builders power-

ful automation capabilities can help you do your job more

creatively and efficiently than ever before.

Minimum System RequirementsPersonal computer with a 486/66Mhz or higher processor

(266 MHz Pentium recommended). Windows 95, 98

or NT operating system. 16 MB of RAM (48 MB recom-

mended). 20 MB of available hard disk space required

for installation. A mouse or compatible pointing device.

SPACEMAN Professional Application Builder


25/28


for Retail TrackingBusiness Tools

Convenience Track ContinuesTrading Area ExpansionACNielsen is proud to announce retailer account-level

data for all categories1. You can receive this information for

most top c-store retailers, and we are very close to

announcing additional major retailer offerings as we

continue to build and leverage our retailer partnerships.

ACNielsen Convenience Track now gives you two levels

of measurement, which combine for incredibly powerful

information.

Convenience Track market-level data allows a retailer to

benchmark 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 by

the retailer. With Convenience Tracks market-level data,manufacturers can help the retailer uncover new opportu-

nities for the entire category, which is critical to the NACS

category 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 better

understanding of any categorys sales, distribution, and

merchandising 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 willbe 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 brands distribution, to

find that it didnt lead to increased sales? Have item mix

changes gone undetected because your brands distribution

levels have not changed? Or have you ever wanted to know

your brands share of category distribution?

Historically, distribution for a brand considers only the

breadth of stores selling the brand, measured by % ACV

or % Stores Selling. However, to answer questions related

to item mix, one must understand depth of distribution.

Now, ACNielsen offers Cumulative Distribution Points

a new analytic tool that incorporates both your brands

breadth (% ACV) and its depth, measured by average

number of items carried.

Cumulative Distribution Points helps you better deploy

your marketing resources by providing you with a more

specific means for evaluating volume and distribution

drivers. This new measure enables you to determine

whether or not new items are adding incremental distri-

bution to your brand and allows for comparisons such as

share of distribution. And Cumulative Distribution Points

is additive across ACNielsens data dimensions, making it

a truly flexible and effective measure.

Cumulative Distribution Points is also available for in-store

promotion conditions. This affords you the same analyticbenefits for your merchandising assessments and gives way

to 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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g

4


for RetailersBusiness Tools

Choosing the right category management approach to meet

your specific financial and marketing goals can be

a daunting task. Thats why ACNielsen created intuitive

processes to help retailers and manufacturers sort through

the full spectrum of integrated category management solu-

tions in order to develop, evaluate and implement category

strategies that address individual needs.

From initial category analysis all the way to in-store

implementation, ACNielsen can help you design a category

management program that best meets your needs and

organizational structure. ACNielsens Analysis to

Implementation approach starts with access to high

quality data that directs store decisions. Measuring all

retail channels from supercenters to convenience stores,

ACNielsens syndicated data coupled with consumer panel

and retailer data provide consumer-focused results that

yield real opportunities to improve sales and profits.

Management of data is a critical component to category

management success. With products such as ACNielsens

Retail Warehouse Solution (RWS) and Spaceman

Professional, ACNielsen organizes the data to offer ad-hoc

reporting and access tools that help you easily mine and

analyze the data.

ACNielsens expertise at drawing strategic insights from the

data is unmatched. By leveraging a full-line of analysis

tools, marketing and sales professionals can develop item

assortment, pricing, promotional and shelf space programs

that optimize category performance, meeting both retailer

and manufacturer objectives. Once objectives are defined,

ACNielsen can provide the right tools to implement in-store

execution.

From Analysis to Implementation, ACNielsen provides the

pathway that leads you to successful category management

solutions.

Create Integrated Category Management SolutionsFrom 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 andSPACEMAN Enterprise

SPACEMANConnectivity

Retail

Warehouse

Solution

(RWS)

InformationManagement

InsightDevelopment

In-storeImplementation

InternetDelivery


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Sales and marketing success isnt aboutdata. Its about understanding what moti-

vates people.

Thats precisely the kind of insightand knowledge ACNielsen bringsto your business.

Combined with superior client service,we deliver the highest quality and breadth

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.

ACNielsen gives the why behind the buy.

There are 6 billion consumersin the world.

What makes yours so special?

consumer insight .pdf

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