As a rule of thumb, CPG consumer marketing should account for 10 to 20% that of retail sales, thus the brand is tied to media investments in direct relation to its retail sales. Unless CPG sales are healthy, it is challenging for an agency partner to offer the best in media from a limited media budget, as it takes money to compete in category for share of voice.
One way of boosting sales, in addition to OBM's services, is to increase distribution. Of course this seems obvious if you're on the CPG side, yet highlighting the advantage a few distribuion points can make inside a single retailer is an interesting study. For our clients' sales tools to take to retailers, modeling is offered to illustrate sales potential from a media investment-- a valuable tool for retailer meetings.
Beauty's Bontanical Facial Cleanser (BBFC)
BBFC has annual sales in retailer Sam'sMartCo of $5MM. However, they are only in 60% distribution.
What if, instead of 60% distribution, BBFC had 75 to 95% distribution?
We calculate this using velocity, represented in Dollar Sales Per Point of Distrbution, or $ SPPD.
$ SPPD velocity = $ Sales / %ACV Distribution
$5MM / 60 = $83,333
On average, for every point of ACV distribution at Sam'sMartCo, BBFC achieves $83,333 in sales. BBFC has a $83,333 Value Per Point of Distribution, or VPPD.
Now that the $83,333 VPPD is established, we use the calculated velocity to understand the size of the opportunity as the brand reaches different levels of distribution.
Looking at the % ACV Distribution column in the table above, if the brand reaches 75% ACV Distribution, it is an increase of 15 points above the current distribution (75 – 60 = 15). An extra 15 points of distribution is worth approximately $1,250,000 annually in this retailer (15 x $83,333 = $1,250,000). The sales lift of $6,250,000 is 25% higher than the current annual sales.
If BBFC can get to 95% distribution (shown in the table above), the opportunity is over $2.9MM, a 58% increase over current annual sales. The improved annual sales are $7.9MM.
Now we can quantify the sales we are missing if distribution is incomplete, either at the brand or item level, and at a specific retail customer or across any channel or market.
Convincing the retailer to increase distribution can be achieved many ways. One route we cover comes from OBM predictive modeling, where we showcase returns from stimulating the awareness as shown below. We are able to predict the awarness generated for any campaign with extreme accuracy, (+/-) 1 point.
In row 1, current 60% distribution, sales are $5MM.
In row 2, distribution change applied from 60 to 95%, sales become $7.9MM.
In row 3, OBM servies are applied, modeling an increase in consumer awareness from 30 to 35%, sales grow to $9MM.
Moving from $5MM originally to $9MM achieves an 85% growth, before the application of in store promotion.
Distribution can help the sales help the media, so that the media can help the sales. If at anytime you need service in this department, we will refer you to the best in the business. Partners of OBM have access to distribution, ensuring brands are given the retail attention they deserve.
As added value, we provide predictive modeling to assist our clients in retail meetings. Our modeling accurately projects awarness (+/-) 1 point, with customized models available upon request.