More than half of all consumer expenditure is spent on FMCG (fast-moving consumer products). It’s critical for individuals who wish to sell FMCG effectively to focus on the correct key performance indicators and track their progress. In this blog, we’ve explained what is numeric distribution in FMCG and put together a handy list of the most critical KPIs to consider when evaluating your brand’s performance.
What is Numeric Distribution in FMCG?
There are two ways to express the percentage of distribution: numeric and weighted distribution. When we analyze these two variables together, they provide insight into the state of product distribution within a network. Furthermore, it offers insight into a product’s distribution channel placement in comparison to its competitors.
1. Numeric distribution percentage
Retailers that sell FMCG products in a specific area are represented by this percentage. To determine the value, divide the number of retailers distributing the product by the total store counts in the zone. The result is a percentage, which is multiplied by 100.
The higher the numeric distribution %, the more likely a product is to be found in retailers. Nonetheless, for a more in-depth analysis, we should compare this information to the competition. Brands that selectively distribute their products will have lower numeric distribution percentages, but this does not necessarily imply that their sales would be lower—it depends on the approach used.
2. Weighted distribution percentage
To compute this percentage, compare the sales turnover of a product category to that of the stores that sell that product. You can calculate it globally or locally based on a particular area. After multiplying the number by 100, the percentage is calculated.
It is wise for brands to place their products in stores that generate a higher percentage of their sales turnover from the categories in which their products fall. It’s all about smart product placement in the FMCG industry to sell more.
It’s crucial to compare the percentages for both the numeric and weighted distributions once they’ve been determined. To achieve optimal distribution, the weighted distribution percentage must be higher than the numeric distribution percentage. For instance, if you have a weighted distribution of 90% and a numerical distribution of 10%, your product is only available in 10% of the stores in a certain region that carry this specific category of products. Even though your product is currently only available in 10% of the overall product universe, your brand currently has a 90% market penetration rate, making you the market leader in your region. This is the ideal environment for effective FMCG sales.
Investigate whatever market variables are causing certain POS areas to be so successful—are consumer age and type crucial factors? Is it possible that the amount of foot traffic that point-of-sale site receives has something to do with it? With Location Intelligence technology, you can discover all of this and more, then reproduce those precise conditions and locate new POS areas that meet your success criteria in different locations.
Something is wrong if your numeric distribution rate is higher than your rated distribution rate. Consider the following scenario: your product is numerically distributed across 80% of all POS businesses that offer your brand’s type of goods. Your weighted distribution, on the other hand, is 20%. This signifies that your brand distributes to a variety of stores that offer your product category, but your brand’s sales turnover accounts for only 20% of total product category sales in a given location. One of the following factors could be to blame for the distribution plan’s failure:
- Low bargaining power with retailers
- Salesforce mismanagement
- Point-of-sale locations that aren’t profitable
- Sales promotion that is ineffective
Brands may better assess the performance of their distribution strategy by comparing these two KPIs and assigning precise objectives to their sales staff as a way to use resources efficiently and improve revenue by comparing these two KPIs.
3. Product penetration rate
This figure represents the percentage of households, individuals, or customers who purchase a specific item. The number of persons who buy the product divided by the total number of people in a specific location equals this figure. The percentage is calculated by multiplying this number by 100.
The product penetration rate is frequently used to assess the success of a marketing campaign or promotion. It’s also looked at to see how much of a prospective market is still up for grabs.
Market share to sell in FMCG
The market share value of a brand and its products on the market is an important key performance indicator that assesses its overall success. This proportion is calculated by dividing the company’s sales turnover by the sector’s entire turnover. The right percentage is then calculated by multiplying this figure by 100.
4. Distribution of market share
While overall market share is significant, the distribution of market share is more important. This statistic tells you how much of a company’s market share it has at the distribution level. To compute the percentage, convert the market share and weighted distribution percentages to decimals first. Then multiply by 100 to get the percentage by dividing the market share decimal value by the weighted distribution decimal value.
For example, if a brand has a 5% market share but only sells in 10% of the stores that sell the product category, the equation would be:
According to this equation, the product’s distributed market share would be 50%. This signifies that market penetration for those points-of-sale places where my product is available is 50%. Distributed market share is a contextual KPI that may be used to provide an in-depth analysis of a product’s market potential—and drive sales teams to find new POS locations comparable to those in the future to earn more market share.
5. Share of wallet
Share of wallet (SOW) is a metric that allows managers to see how much business they get from specific clients. It’s used to determine how loyal and committed they are to the brand. To obtain this metric, divide the total amount spent by customers on your product by the total amount spent on the product category, then multiply by 100 to obtain the percentage.
When a brand’s wallet share is at 80%, it signifies that customers are four out of five times loyal to the brand’s specific product when the quantities purchased are consistent. This is how many experts in the FMCG business can gauge brand loyalty for their products and sell more consistently.
Distribution, positioning, turnover, and loyalty are all KPIs that may be used to assess if there are any irregularities in an FMCG brand’s product mix and to gauge success. The findings of these analyses might be a good place to start for FMCG executives looking to better understand their product’s performance and optimize their strategy. However, there are new technologies on the market, such as Location Intelligence, that can help to speed up this process.
Location Intelligence solutions can offer you a list of the best performing POS areas your brand has if a difference is found between the numeric and weighted distribution percentages. Then you can figure out whether socioeconomic or economic elements are influencing the success percentages of those point-of-sale locations. This will assist you in identifying issue regions and efficiently deploying your sales force, avoiding spending resources on ineffective POS areas.
Similarly, if product penetration rates for the point-of-sale sites where your product is put are extraordinarily strong, Location Intelligence technology can assist you in identifying additional POS areas that meet those same market characteristics (age, income, footfall traffic, etc.). As a result, your sales teams will have greater tactical direction, allowing them to determine which potential POS regions would yield the biggest returns and grow their distribution networks accordingly.
The advantages of smart big data are numerous, and many FMCG companies are beginning to recognize the lucrative potential of this technology.