Less is More: Eliminating SKUs and Increasing Sales
While Innovation is a major growth driver today across all manufacturers, the question for today’s reduced Assortment and Space retail world is: How do I provide the Innovation shoppers want without eliminating the base products they still buy?
According to one recent Decision Insight client, a CPG Consumer and Customer Insights Manager, “We have so many package sizes and types. We had to make the options simpler. The benefits pushed us over the edge to look for effective solutions.”
The client had been offering three kinds of packaging types in multiple sizes that often confused the consumer and resulted in increased production costs – not to mention the push from retailers to reduce shelf space. The challenge for the company was to rationalize the various package types and sizes and produce an optimal assortment that would be a win for shoppers and retailers alike.
Using Decision Insight’s ShopperIQ-Assortment virtual shopping solution, the client was able to cost-effectively test multiple assortment scenarios – which resulted in two particularly significant conclusions against the three package designs:
- First, when a particularly innovative package type was removed, there was a loss in buyers, volume and overall sales.
- Second, removing the smallest size posed a risk, as a few shoppers switched to a national competitor rather than purchasing a larger size.
Ultimately, it was determined that the manufacturer could reduce packaging types from three to two, reduce SKUs by 25%, and introduce a smaller-sized version of the innovative package design to satisfy even more shoppers. The optimized line-up maintained brand buyers and maximized revenue and profitability.
According to the client’s Market Research Manager, virtual assortment was very powerful: “You are observing real shopper behavior rather than asking what they would do. Asking questions is not enough. What people say is not what they do. And this methodology is more reliable, faster and much more economical than in-market testing.”
If you need to develop effective assortment solutions, or need help creating alternative assortments to test, DI’s shopper experts can help.
See our recent newsletter for more on assortment and the shrinking retail footprint: Urban Assault on Aisle Assortment