Main presentation from the ISI Network "Sense & Perform" workshop at the LEAD Marketing Conference.

1. Pre-Conference Workshop
V 1.0 2011 VSN strategies Sept. 19, 2011

2. About Today’s Workshop
Agenda/Introductions
ISI Performance Management
Conceptual Framework
Visualize Best Practices
Sense & Perform 2 © Copyright 2011 VSN Strategies

3. Thanks to Our Workshop Sponsor
Sense & Perform 3 © Copyright 2011 VSN Strategies

4. Workshop
Agenda
An ISI Conceptual Framework
• Situation Review
• DIMES: The Five Senses of In-Store
• The Habits of Highly Successful Store Managers
• Compliance in Action – Space Management
• What Constitutes Compliance? [Lunch]
• Planogram Integrity Best Practice
• Culture of Performance [Roundtable]
Sense & Perform 4 © Copyright 2011 VSN Strategies

5. Situation Review
The Retail Performance Challenge
Opportunity for New Practices
Sense & Perform 5 © Copyright 2011 VSN Strategies

6. Situation
Dis-Economies of Scale?
U.S. Grocery Retailing Concentration, 1992-2009
% 80
Top 4 Top 8 Top 20 Grocery retail consolidation
70 has concentrated 64% of
60 U.S. grocery sales within the
50
top 20 chains; 37% within
the top four chains.
40
Along with scale economies
30 and buying
20 clout, however, comes
intensified store operational
10
complexity and remoteness
0 from HQ.
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
How has this combination
affected profits?
Sources: Monthly Retail Trade Survey, Census Bureau; Company annual reports
Note: Sales based on North American Industry Classification System (NAICS)
From: Economic Research Service/USDA, http://www.ers.usda.gov/Briefing/FoodMarketingSystem/foodretailing.htm
Sense & Perform 6 © Copyright 2011 VSN Strategies

7. Situation
Profit Picture Post-ECR
3.00 “The historical mean
Industry Net Profits (% of Sales)
2.50
annual change in return
on investment has been
2.00 insignificant for both
retailers and
1.50 manufacturers since
1.00
the early 1990s.”
Source: Bjornson, B. and
0.50 Kaufman, P. (2004), “Change and
Firm Valuation in U.S. Food
0.00 Retailing and Manufacturing,”
Journal of Food Distribution
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Research 35(2).
Source: “Supermarket Facts,” Food Marketing Institute, 2011
Sense & Perform 7 © Copyright 2011 VSN Strategies

8. Situation
Performance Gaps in Grocery
Out-of-stocks continue to run at 8.2% - unchanged in 15 years,
Yet, within the assortments:
Items sell <1 unit/wk. Items sell <3 units/wk. Unprofitable SKUs
Source: Willard Bishop Consulting (May 2011) Competitive Edge
Sense & Perform 8 © Copyright 2011 VSN Strategies

9. Situation
Global Challenge at Retail
Total Inventory Distortion 2010 - $778.5B Worldwide
Inability to maintain
consistent in-stock
Out-of- Overstock levels plagues
Stock $343.1B retailers in every
$435.4B 44% category and every
56% country.
Hypothesis: The
problem may be
rooted in the huge
differentials in item
turn rates?
Source: Holman, L. and Buzek, G. (2011), “Inventory Distortion –
Retail’s $800 Billion Global Problem,” IHL Group
Sense & Perform 9 © Copyright 2011 VSN Strategies

10. Situation
Taking Off The Blinders
• Despite retail industry consolidation…
– Industry earnings and ROI remain flat
– Operating complexity is increasing
• Despite notable progress in supply chain
effectiveness since 1996…
– Store-level inventory performance is unimproved
• Store-level performance may be slipping…
– But we can’t really be certain, because we don’t yet have
the tools or practices in place to assert control over In-
Store Implementation
Sense & Perform 10 © Copyright 2011 VSN Strategies

11. Situation
Industry Demands Improvement
Which of the following In-Store Implementation practice areas is
of highest importance within your organization today?
Plan-O-Grams Promotions Displays
Source: ISI Network
ISI 30-Sec Polls: 35% indicated no process to track
compliance, the remainder rely on spot-checks and manager
Sense & Perform sign-offs
11 © Copyright 2011 VSN Strategies

12. Situation
How Well Do You Implement?
How often would you estimate that your in-store
promotions, resets and other merchandising activities are
completely and accurately implemented?
n=176
All the time 4%
75% - 99% of the time 23%
50% - 74% of the time 33%
Less than half the time 38%
Source: Supermarket News (2009)
0% 10% 20% 30% 40%
Sense & Perform 12 © Copyright 2011 VSN Strategies

13. Situation
Shopper Marketing Challenge
One of the reasons why some retail marketers may struggle with converting
insights into effective programs is a lack of internal processes for execution.
76% of shopper marketers report that a process does not exist or is not very effective.
Q. Do you have an internal process
that is used for execution of
12%
shopper marketing programs?
64% 24%
Yes and it's very effective
Yes and it isn't very effective
No
Source: “Retailer-Activated Shopper Marketing Program Survey,” Marketing Lab 2010
Sense & Perform 13 © Copyright 2011 VSN Strategies

14. Situation
How Well Do You Measure?
Four out of five respondents to a prior poll said they expect 90-100%
execution of their in-store programs.
How do you measure execution in-store?
Make assumption that 28%
the job got done
Do not measure in-store 23%
execution
Use an independent 3rd 21%
party firm
Rely on program 17%
vendors' "self audits" Source:
CPGmatters.com
Other 13% (2008)
0% 10% 20% 30%
Sense & Perform 14 © Copyright 2011 VSN Strategies

15. Situation
Shopper Marketing Limitations
What is limiting shopper marketing success? Take your pick.
Execution, compliance and measurement account for 44% of responses.
Q. What are the hurdles in getting a program
9% launched within your organization?
10%
Upper level buy in
10% 13% Merchandising alignment
4% Vendor collaboration
Execution
10% Compliance
15% Measurement
Vendor sell in
9% 20%
Concept development
Obtaining actionable insights
Source: “Retailer-Activated Shopper Marketing Program Survey,” Marketing Lab 2010
Sense & Perform 15 © Copyright 2011 VSN Strategies

16. Situation
Top Store Business Challenges
50% 2011
45% 49%
2010
40%
30% 37% 43%
20% 22%
10%
19%
0%
Need for more consistent store execution
Need to improve customer service while holding the line on payroll costs
Store managers lack information they need on the selling floor - too much time spent in the ba
Source: “The 21st Century Store: the Search for Relevance” RSR Research 2011
Sense & Perform 16 © Copyright 2011 VSN Strategies

17. Situation
Industry Opportunity
“The ISI Sharegroup estimates
that the total cost to the U.S. RCP
industry of sub-optimal
merchandising performance
(actual and opportunity costs) is
approximately 1% of gross
product sales, or $10 - $15 billion
of the $1.5 trillion total annual
sales across the food, drug and
mass channels.”
Source: “In-Store Implementation: Current Status and Future Solutions” (2008)
Sense & Perform 17 © Copyright 2011 VSN Strategies

18. Workshop
Agenda
An ISI Conceptual Framework
• Situation Review
• DIMES: The Five Senses of In-Store
• The Habits of Highly Successful Store Managers
• Compliance in Action – Space Management
• What Constitutes Compliance? [Lunch]
• Planogram Integrity Best Practice
• Culture of Performance [Roundtable]
Sense & Perform 18 © Copyright 2011 VSN Strategies

19. DIMES: The Five Senses of In-Store
“Active Sensing”
A New Metrics Framework
Storecards
Sense & Perform 19 © Copyright 2011 VSN Strategies

20. The Five Senses of In-Store
Sensing = “Ability to Listen”
What Category Management activities will
differentiate companies in the future?
Retailers
100% Manufacturers
80% 88%
68% 81%
60% 73%
71%
40% 58%
20%
0%
Execution
Shopper/ Consumer Insights
Ability to Listen
Source: 2011 Category Leadership Benchmarking Study, Kantar Retail
Sense & Perform 20 © Copyright 2011 VSN Strategies

21. The Five Senses of In-Store
What is “Active Sensing”?
• Plan – Put measures and methods in
place with specific intent to monitor the
voice and behaviors of the shopper and
the store
• Do – Methodically capture and track
data on the desired dimensions
• Measure – Use embedded analytics and Source: In-Store Implementation –
Current Status and Future Solutions, In-
collaborative tools to extract insights and Store Implementation Sharegroup (2008)
distribute them to relevant decision
makers
Sense & Perform 21 © Copyright 2011 VSN Strategies

22. The Five Senses of In-Store
DIMES: The Five Senses of In-Store
Effective management of retail performance requires continuous intelligence about
implementation, compliance and conditions. Sensing is needed in five key areas:
DEMAND: Detailed understanding of POS transactions by basket,
shopper and segment and correlation with the other in-store senses
ITEMS: Status, condition and in-stock position of product on display
throughout the store, including planogram compliance
MESSAGES: Delivery, views and responses to digital and traditional
shopper media, signage, promotions and compliance
EMPLOYEES: Direction and task performance of store associates,
brokers, DSD reps, jobbers and third-party merchandisers
SHOPPERS: Detect, track and analyze what shoppers do, including
who, what, where, when, why they shop and buy
Sense & Perform 22 © Copyright 2011 VSN Strategies

23. The Five Senses of In-Store
DIMES: Five Senses Gap Analysis
Demand How Important?
6 How Well?
5
4 4.01
3 3.29
Shoppers 2
4.58
Items
3.14 1 3.66
3.93
0
Source: In-Store Implementation
3.02 Network “30-Sec Poll” 2011
3.22 N=103
3.60
3.90
Employees Messages
Sense & Perform 23 © Copyright 2011 VSN Strategies

24. The Five Senses of In-Store
Why We Need Better Sensing
• At best, most present tools measure outcomes (sales data)
without an understanding of causality
• Time lag on most reports makes them un-actionable;
most/many issues detected are also un-correctable.
• Wild misinterpretations are also possible (i.e. was a non-
selling item out of stock, or out of date?)
• Correlation with demand model (POS T-log) allows for some
useful inference (i.e. promotional lift, ROI)
Sense & Perform 24 © Copyright 2011 VSN Strategies

25. The Five Senses of In-Store
Perilous Crossing
Operating a chain of
retail stores based
only on sensory
information derived
from the POS is a bit
like trying to cross a
street safely based
solely on yesterday’s
traffic reports.
Sense & Perform 25 © Copyright 2011 VSN Strategies

26. The Five Senses of In-Store
DIMES: Demand Sensing
Solutions Providers
Price Optimization and Demand Modeling KSS Retail, Demandtec, Revionics, SAP,
Oracle, etc.
T-Log and Basket Analytics JDA, Teradata, various others
Frequent Shopper Data Analytics dunnhumby, various others
Syndicated Data Nielsen; SymphonyIRI
Coupon Redemptions Processors and Manufacturer Agents
Sense & Perform 26 © Copyright 2011 VSN Strategies

27. The Five Senses of In-Store
DIMES: Items Sensing
Solutions Providers
Digital Image Audits ShelfSnap, NeuralID
POS Demand Signal Monitoring KSS Retail; Standard Analytics; IRI
Manual Audits Multiple vendors, Brokers and MSOs
Shelf Sensors & Product Pushers BVI-RockTenn “Shopper Gauge”
DSD Store Visits Hand-held scanners from various vendors
Sense & Perform 27 © Copyright 2011 VSN Strategies

28. The Five Senses of In-Store
DIMES: Messages Sensing
Solutions Providers
Manual Audits Various custom market research firms
Digital Signage Screens that watch the watchers
Coupon Downloads/ Redemption Data Processors/ Manufacturer agents
Kiosk Interactions Various
In-Store Coupon deliveries Catalina; Acuity AisleCaster; SmartSource
In-store media NewsAmerica /SmartSource
Sense & Perform 28 © Copyright 2011 VSN Strategies

29. The Five Senses of In-Store
DIMES: Employees Sensing
Solutions Providers
WFM/SEM/MPM Reflexis, RedPrairie (StorePerform);
Natural Insight; Dayforce; Infor
(Workbrain)
Store Check-In/Out Systems Synergy Systems, StorePort
Online Reporting Portals RetailTactics, Driveline, Acosta,
Crossmark, various retailers
Store Manager Systems RedPrairie (StorePerform)
Mobile Devices Quofore, Airwatch, Honeywell,
Sense & Perform 29 © Copyright 2011 VSN Strategies

30. The Five Senses of In-Store
DIMES: Shoppers Sensing
Solutions Providers
People Counters Shopper Gauge, PRISM’s concept
Loyalty Card Programs dunnhumby, Circular Logic, Brick Meets
Click, and many others
Video Videomining; Lighthaus
Path-Tracking TNS Sorenson; 3GTV; Cabco USA
Mobile Media google; comscore
Conversions, shopper movement Euclid elements; T-log analysis
Sense & Perform 30 © Copyright 2011 VSN Strategies

31. The Five Senses of In-Store
DIMES Solution Portfolios
• Each firm will require a set of in-store sensing tools
and associated practices to support its performance
goals – a solution portfolio
• That adds up to a good many players and moving
parts
• How can you keep them straight without a scorecard?
Sense & Perform 31 © Copyright 2011 VSN Strategies

32. The Five Senses of In-Store
ISI “Storecards”
• Industry-wide there are no acknowledged
scorecards for In-Store Implementation
• Scorecard: A tool that defines, records and monitors
performance versus plan
• Storecards drive retail performance dashboards and
benchmarking
• An ISI solution portfolio must develop and
incorporate these to support routine measurement
and evaluation
Sense & Perform 32 © Copyright 2011 VSN Strategies

33. The Five Senses of In-Store
An ISI Sample Storecard
SAMPLE CATEGORY RESET PERFORMANCE STORECARD RESETS
Week 23, 2012 Target Actual Gap This high-level storecard
Number of Projects is designed for tracking
# Store Visits performance across
% On-Time Completions common center-store
Total Linear Feet reset projects.
Total Labor Hours Versions might be created
for each major project, for
Labor Hours Per Linear Foot
each reset provider, etc.,
Reset Accuracy Index to permit post-hoc
% Issue-Free Completions performance
Average # Issues/Reset comparisons, goal-setting
Re-work Hours and benchmarking.
Sense & Perform 33 © Copyright 2011 VSN Strategies

34. The Five Senses of In-Store
Better Stores Sell More Stuff
Persistent disconnect between operations and merchandising
goals continues to plague chain retailers; it limits their
merchandising performance and financial success.
Best practice leaders will incorporate store-to-HQ alignment:
• End-of-day conditions
• Start-of-day conditions
• Marketing/merchandising plan
• Supply chain monitoring
• Strategic financial plan
Source: Dawson Thoughtware
Sense & Perform 34 © Copyright 2011 VSN Strategies

35. The Five Senses of In-Store
A DIMES Sample Storecard
SAMPLE SHOPPER MEDIA PERFORMANCE STORECARD
Promotion Week 23, 2012 Target Actual Gap MESSAGES
Messages delivered/hour This high-level storecard
% system downtime developed to track an in-
Redemptions/store store Shopper Media
# Stores Implemented implementation.
Total weekly store traffic In a Web Service-based
Weekly category/aisle traffic system, the storecard
cycle may be as rapid as
Weekly Category Sales Units
every 15 minutes, with
Weekly Brand Sales Units updates reported via
Weekly Category Baskets dashboards and
Weekly Brand Sales $$ automated alerts
Sense & Perform 35 © Copyright 2011 VSN Strategies

36. The Five Senses of In-Store
Proposed DIMES Index
Demand Chain A
10
9 Chain B
8
7
6
5
4
Shoppers 3 Items
2
1
0
Employees Messages
Sense & Perform 36 © Copyright 2011 VSN Strategies

37. Thank You!
James Tenser, Executive Director
http://instoreimplementation.com
info@instoreimplementation.com
520-797-4314
Sense & Perform 37 © Copyright 2011 VSN Strategies