There are many misconceptions as to the real purpose and function of a planogram. Often confused with ‘plano guides’, many believe that a meaningful planogram can be created without sales data. This is, of course, is not true. Attempt to create a data-less planogram and you’re essentially wasting your time and money.
The purpose of a planogram is to increase sales by ensuring that the most popular and profitable products are given the right amount of facings and allocations. Without data, any allocations that you give them will be pure speculation. And even if you do get one or two right by chance, it will still skew the entire shelf, let alone your category.
Reasons why planograms are significant to the retail sales plan
Otherwise known as plano’s, shelf space plans, schematics or POG’s, a planogram is a tool used in visual merchandising. It’s also a model or diagram that indicates the placement of retail products on shelves as well as the number of facings each product should be allocated. And don’t forget the fact that planograms can dictate the layout of your store.
So how do they make such an impact on store performance?
Space elastic demand
The amount of space or facings a product is allocated has a significant impact on the sales of your products. It is thus imperative that the products which are both popular and profitable are given enough space allocation on your shelf. A sure fire way of ensuring this happens is through the use of the right data.
If the space allocation is done right, the shelf space will return the highest profit. On the other hand, when this principle is not fully leveraged, the cost to you as a retailer is significant since it affects everything from your sales to out of stocks.
Considering that planograms can dictate the layout of your store, they also serve as an opportunity for you as a retailer to be consistent in everything you do.
One way of centralising your sales strategy is by dictating product layouts with planograms. The result is that your consumers experience your strategy whenever they visit your store. This is a positive since it gives you the opportunity to build a solid reputation as a go-to retailer for a particular range and product layout.
Product and category performance measurement
After the design and implementation cycle of your first planogram, your next re-designed rollout should be based on your previous results.
In continually re-designing your planograms, it means that your stores space allocations can be repeatedly refined for optimised sales and consumer satisfaction.
When are planograms designed?
Designed a month or two before they are implemented at stores, planograms are never static. That is because your customer demand will always change and planograms are based on customer demand.
That means that your planograms are designed or re-designed when the seasons change, when your assortments are updated, when new store openings are planned, as well as when you need to refine your category management strategy.
What are the interdependencies?
In the past, planograms were manually built using your internal and external sales data. The process also took a couple of hours. Today, while they still use your sales data, it’s much easier to build thanks to planogram automation software, which allows you to go from zero to planogram in only a few minutes.
With the right data, you’re also able to present your shoppers with both a logical and friendly product layout while simultaneously maximising the efficiency of your shelf space. Another great aspect is that you remain in control of how your planograms will be automated.
Your assortment is the range of products that you decide to list at each of your stores.
In order to design a meaningful planogram, you first need a rock solid assortment planning strategy. There is also the case for the implementation of a localised assortment plan since with it, you can improve your in-store experiences, satisfy your consumer’s needs, and provide the right product at the right place at the right time.
If you have many stores, it can prove tiresome to design planograms for each and every one. Doing so is resource heavy and if you don’t have the means to do this, you’re bound to suffer.
That was in the past though. Today, with planogram automation, designing a planogram doesn’t result in a drain on your resources. It should actually ensure you enjoy the process. While you still need to group similar stores together according to size, demographics, sales and so on, the process of building a planogram and applying it to a group of stores is as simple as clicking a few buttons.
What are the benefits?
When it comes to the benefits of planograms, they can be classified into both short-term and long-term.
Let’s unpack the short-term benefits first:
- Your data will be clean and your products classified.
- You’ll have a better grasp of your product and category performance.
- You’ll have better space allocation, which means an immediate increase in sales.
- You’ll have an improved awareness of your space value as well as space return.
- Both your store consistency and retailer brand awareness will be improved.
While your short-term benefits can show you the power that a planogram can bring to your retail business, it’s the long-term benefits should effectively close the deal.
Here they are:
- Planograms maximise the selling potential of your entire shelf space.
- Your sales strategy will be realised at store level.
- You can expect a significant increase in sales and stock rotation.
- Your customers are presented with a well-organised product selection that is also visually appealing.
- Your product replenishment will be both simplified and optimised.
Considering the purpose of a planogram is to increase your sales, it’s hard to argue against implementing them in your store. In doing so, you’re able to please your customers and understand which products are performing and which are not. And that is just the start if you’re a retailer intent on providing the best for your customer.
*Editor’s Note: This blog article was updated on 4 July 2017 for accuracy.