Assortment optimization for targeted customer marketing

Client

A leading packaged foods brand

Business objective

  • Our client had large-format, directly serviced stores, located on the outskirts of the cities they operated in. The client was not able to cater to a significant segment of customers based within the city limits.
  • Our client wanted to venture into small store “lite” category outlets that could cater to such customers within city limits
  • The client wanted to optimize the assortment mix including product bundles for its new stores and offer personalized and targeted customer engagement

Benefits & outcomes of our engagement

  • 15-20% increase in sales in the new stores within the first 6 months due to higher consumption of the assortment mix
  • 1/4th of incremental sales in the stores delivered via customized product bundling of two product lines
  • An independent customer survey launched by the client validated brand-switch of in-store customers on account based on assortment mix and product bundling tactics

SGA approach

  • SGA worked closely with the client to come up with a methodology for clustering similar stores using a clustering technique
  • We created store clusters based on store profile differentiators such as geographic location, population density, premium shoppers (affluent localities), overall size of the store (class A/B/C), loyalty programs provided through retailer, assortment mix purchased in the past, servicing frequency, store layout, history of in-store promotions, retailer margins, assortment mix inventory trends, etc.
  • For each store cluster, we identified a benchmark store. We identified assortment mix gaps for all stores by comparing the assortment range available / sold to the benchmark store(s)
  • Additionally, we determined a must-have top selling SKU list within each category for each of the store clusters, using market-basket analysis (cross- product affinity analysis) that leveraged apriori algorithm
  • Based on our recommendations, clients’ sales teams were provided the revised must-have assortment for their outlets, as an essential ‘product line’ target during their beat plans

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