Having a strong distribution is highly correlated with sales because having the product on shelves helps to sell it. I will discuss analytic distribution measures and how to interpret them to make data-driven decisions for your business.
Think about it. We all remember a time when we were walking in the supermarket, maybe watched a bag of chips or chocolates, and bought it. It was not your plan initially, but after seeing the product, you bought it. Lets begin.
Market share and numeric distribution
To begin our discussion lets look at two basic concepts:
- Market share: The measurement sales of a product or service with regards to its relative market size. It can be measured by units or value, in our case, US dollars.
- Numeric distribution: Percentage of stores that have stock of your product available in a relative market.
The higher numeric distribution you control, the higher probability your product will result in a higher market share. If you are a major brand, you will try to reach the highest number of relevant stores to place your product. However, you may ask what if I have limited resources? Let’s take a look at two additional measures
All Commodity Volume and Product Category Volume distribution measures
If you are competing for the market share in Miami as a brewery in the category beer, you might be interested in having your product in grocery stores, bars, restaurants, and liquor stores. Nonetheless, you might have a small sales team, and having all the locations is not possible.
Where to focus? Here comes the ACV or all commodity volume measurement calculated as the percentage of total dollar sales a certain number of stores makes relative to the whole market.
Using ACV, you should distribute your products to the places that make the most sales. Sounds great, but there is an even better measurement for decision making.
A liquor store certainly has lower sales than a Publix, but in your category, they might be better. Hence the product category volume measurement or PCV has more insight than ACV. If you have data regarding how the beer sales in each location are, you should focus your efforts on those locations.
The Pareto principle applied to sales and distribution
The Pareto principle is born the fact that the distribution of inputs or outputs is uneven. Creating the famous 80/20 rule that states that usually the 80% of income comes from 20% of the locations.
Building on the 80/20 rule using market research to build PCV report and subsequently focusing the efforts in the locations that bring the majority of the income on your category.
Executing this strategy will allow you to be highly competitive in the market share without needing the biggest sales team. This could also result in a competitive advantage in terms of cost efficiency in your product distribution.
Conclusion on distribution measures
Understanding the players, their relative importance, and your overall market by analyzing your marketing analytics will provide you with the optimal view to make strategical decisions to impact your business. Remember reviewing the data before choosing who you will golf next weekend!
I hope you enjoyed this week’s article! if you want to learn more about how marketing analytics can improve your business please visit my last week’s post. If you have any questions, please feel free to reach out in the comment section below.