Merchandising and Metrics: A route to Achieving Marketing and Sales KPIs

Facilitating a Merchandiser Workshop

Managing sales and marketing departments today takes a lot of work. It is no longer enough to use marketing effort and support product with extensive advertising and promotional budgets to win in the marketplace.

This is the age of managing marketing and sales through metrics that are done in the “pre-selling season” and deliberately give direction as to what needs to be done to deliver sales and at a  profit.

Today I look at how merchandising teams can help Marketing and Sales achieve some selected KPIs.

Sales and Gross margins-The understanding of these KPIs and converting them to metrics is key to organisational success. Sales can be set in volumes and revenues for merchandising teams to run with. I normally use a Drill down technique which works very well with specific metrics.

Sales-Achieving the right sales revenues is a science of knowing how much volume is needed at a set price. So merchandisers can be given their specific volume. At the merchandiser level you don’t need to give them a revenue budget as this will confuse them. Just give them a volume target and your pricing will do the revenue numbers trick.

Gross Margin-When it comes to the overall gross margin, it depends on the range of product you have in your portfolio.Some product have high margins and some low margin and therefore getting the right mix will  get you to the desired gross margin. I have always used product mix ratios and average price  and develop metrics to manage towards and beyond the targeted gross margins. When you have that in place you just communicate to merchandisers on the ground to fight for shelf space or forward share of particular products giving them the mix to achieve in volume sales at each particular outlet knowing well how all these will add up to the gross margin.

Stock Turnover rate- For any firm wishing to return superior profits the rate of stock turnover must be as high as possible. Once this metric is determined communication to merchandiser must be such that their goal is to push product out of the shelf as fast as they can and get repeat orders in a single outlet as much times as the stock turnover metric requires. This requires the merchandiser to do a lot of brand advocacy and field marketing to even touting. I normally give them a specific target per store and equip them to track sales in that outlets daily.

Average price- I am a fanatic of average price as it allows me to know how much product I need to push to get to my revenue targets. There is always a danger of calculating breakeven volumes based on margins of a certain mix. Once that metric of the margin of a preferred mix is done .It will be cumbersome to calculate the mix ratios on a daily basis. I then use average price achieved which I can quickly compare with target average price. For example if 100 tons  sales of mixed product  is projected  to give us $200,000 then the average price  targeted will be $2000 per ton and if sales on a particular day of 100 tons gives us $150,000 then the average price for that day will be $1500 way below our target.This then forces one to look in detail at what was sold that caused this drop.Merchandisers in stores then can be actioned to push more of the product that has more than $2000 per ton price to bring back the average price to target.If you think sitting in an office will skew sales in the favour of what you want you must be joking.Merchandisers must be activated to correct the problems brought out by these closely monitoring these metrics.

If properly managed merchandisers can be a key factor in marketing and sales departments achieving most of their KPIs simple by using metrics.

In the coming articles we will look at more KPIs and show how merchandising can help organisations achieve those indicators.

About the Author: Phillip Phiri is a certified Marketing Practictioner and a holder of an MBA ,BCom Marketing  (honours) and various retail,food certificationHe has over 15 years experience in heading marketing and sales departments in large and medium sized organisation.He writes his own opinions and not of the organisations he is attached too.