The Smart Shelf

THE SMART SHELF:
YOUR PATHWAY TO WINNING IN RETAIL

A GUIDE ON HOW CAN YOU AS MANUFACTURER WIN AT THE SHELF
Copyright © 2020 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
WELCOME
In retail, the store shelf is where the rubber meets the road. If manufacturers and
retailers have done their jobs right, the consumer journey ends with a full basket—or
maybe two. But the shelf is rife with competition, and consumers notice less than
40% of the products in a specific category1. And what’s more, they spend less than 15
seconds in front of any given shelf1.
These stats don’t inspire tons of optimism among manufacturers, who spend huge
Ankush Patodi
sums promoting and marketing their products. Those efforts, however, often don’t
Planogram Hub garner the desired results. Sometimes that’s because a product gets lost on the shelf,
Lead, Nielsen reminding us of that old adage, “Out of sight, out of mind.” The plain truth is this:
Global Markets Product placement on the shelf has a direct impact on sales of that product. Said
differently, poor placement will translate into poor sales. But placement on the shelf
isn’t out of the manufacturer’s hands. In fact, they can avoid poor shelf placement and
lackluster sales if they:
• Collaborate with retailers and help them manage the retail shelf;
• Speak the language of “category management;” and
• Bring more resources and knowledge to the table to help the retailer manage the
shelves better.
So what are the key principles of micro space management, known as

planogramming, and how can manufacturers start using it to maximize sales and
avoid out-of-stocks? You’ve come to the right place.
1
Nielsen Shopper Study, Latin America, 2016
Copyright © 2020 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 2
INTRODUCTION TO THE WORLD
OF PLANOGRAMMING
Like many words, “planogram” can be defined in a number of ways. For example, the
Oxford English Dictionary defines planogram as a “diagram or model that indicates
the placement of retail products on shelves in order to maximize sales.”
That covers the basics, but today’s retail world needs a broader definition. Let’s
define it as a canvas where you can visualize a merchandising strategy and optimize
it to increase sales and reduce instances where consumers want to buy something
that has sold out (i.e., out-of-stocks). The retail shelf is one place where retailer,
manufacturer and shopper meet every day. It’s one of the most important pieces
of real estate in the retail world. Planograms help both retailers and manufacturers
convert their individual knowledge sets about shoppers into a practical and profitable
shelf layout.
Planograms are a mix of art and science. Retailers want different things from what
manufacturers want, and shoppers want something different as well. A planogram
has to appease each of these parties—each of which has a different objective:
Shoppers want an efficient and good in-store experience. A planogram should

assist them.
Manufacturers and retailers want to maximize sales and profit. A planogram

should influence shoppers.
Retailers want to minimize operating costs. A planogram needs to manage

operations efficiently.
PLANOGRAM – A MIX OF ART AND SCIENCE
LOGISTIC
RETAILER MANUFACTURER
FINANCE VISUAL
SHOPPER
A planogram has two parts:
a) Visual: Art makes stores and categories attractive and easy to shop.
b) Finance and Logistics: Science makes stores efficient.
A planogram will generate a “SMART” shelf only if it has the right balance of art and
science. A SMART shelf is Shopper friendly, Maximizes sales and profits, Avoids out-of-
stocks, Reduces operational inefficiencies and Triggers experimentation.
The SMART shelf will help shoppers, manufacturers and retailers.
In a retail store, the shopper is overexposed to

advertising messages. Hundreds of brands are calling and
enticing the shopper, which makes the decision process
more cumbersome. The SMART shelf should:
• Make it easy for shoppers to navigate and to find

the product.
• Assist the shopper in making the product

comparison easier.
SHOPPERS
• Make the overall shopping experience enjoyable
and efficient.
In an uber-competitive retail store, where thousands

of products fight for a place in the retail shelf,
manufacturers face extreme competition. The SMART
shelf should:
• Maximize brand visibility.
• Ensure a fair share of space; each product should get
MANUFACTURERS enough facings on the shelf to prevent out-of-stocks.
• Increase category sales and customer satisfaction.
With finite space and infinite assortment, the SMART shelf

helps retailers:
• Avoid out-of-stocks and bring uniformity of

merchandising in all the stores.
• Optimize the shelf space to increase the overall

category sales and profitability.
RETAILERS
• Increase the shopping experience for their customers
so that they come often.
With an optimized planogram, a SMART shelf helps you translate your category
vision into reality on the shop floor. Building a SMART shelf is a journey where both
manufacturers and retailers will have to work together. Let’s examine what you need
to build your SMART shelf.
HOW CAN YOU START YOUR
JOURNEY?
At the start of your journey, it’s important to have the right mindset. At the onset, you
are convinced that you want to use your category expertise and knowledge, and you
have a fair understanding of the shopper. You are all eager to use this information in
space management, but you know that the retailer owns the point of sale, the most
important piece of real estate in the store. So how can you play a key influencer role?
You will be successful only if:
• You think about the growth of the category rather than your brand. Retailers
don’t cooperate with manufacturers that are only focused on their own brands.
• Your top management is aligned with the retailer’s top management and is
committed to grow the overall category sales. Both companies are ready to
dedicate the resources and capabilities needed to make this a success.
• You win the trust of the retailer so that they can share the data and work with
you to optimize the space and assortment. To win the trust, you should have
a dedicated team that works with the retailer. Ensure the retailer that you are
not sharing their data with key account managers, as retailers believe it will be
misused while the key account manager sign trade of terms.
• The most important criteria is to partner with the right retailer that is willing to
take your advice and implement it at the store. The retailer should be a strategic
fit for your brand. Prioritise which retailer you want to work with by considering
the actual dollar opportunity, as well as the retailer’s openness and commitment
to collaborate.
SELECTING YOUR RETAIL PARTNER:

USING THE OPPORTUNITY VS. COMMITMENT MATRIX
HIGH $ OPPORTUNITY
2 1
CONVINCE THE DO IT!
RETAILER
LOW RETAILER HIGH RETAILER
COMMITMENT COMMITMENT
3 2
DON’T WASTE DO IT
YOUR TIME. EFFICIENTLY
LOW $ OPPORTUNITY
Source: Nielsen Practical Category Management Workshop
Once you’ve selected your retail partner, let’s talk about the key ingredients of a
SMART shelf.
WHAT DO YOU NEED TO START
THE JOURNEY?
Once you have identified the retailer(s) you’d like to work with, it’s time to create your
first planogram. We can divide the journey toward the SMART shelf into three steps:
STEP 1: STEP 2: STEP 3:

PREPARE BUILD A MERCHANDISING BUILD AND OPTIMIZE
STRATEGY THE PLANOGRAMS
Let’s dig into these steps.
STEP 1: PREPARE
To prepare the foundation for your SMART shelf, you must have:
a) Data: Product and fixture details.
b) Knowledge: How do shoppers shop the category?
c) Tools: Space management software to build the planogram.
Let’s explore these elements in greater detail.
A. DATA
The principle of “Garbage in, garbage out” is appropriate when it comes to the data
required to build any planogram. At a minimum, you need:
1) A list of the products you want on the shelf.
2) Details of the fixtures: size (HxWxD) and the number of shelves you have to
play with.
1) PRODUCT LIST PREPARATION

The very basic requirement is to have a clean product list for building planograms.
Refer to the figure below to understand the planogramming data requirement
hierarchy, which fulfils the different requirements.
PLANOGRAMMING DATA REQUIREMENT HIERARCHY
PROFITABILITY:
PRODUCT COST &
DISCOUNTS / MARK-UP GREAT TO HAVE
SUPPLY CHAIN REQUIREMENT:

DAY WISE DEMAND, REPLENISHMENT AND SUPPLY
INFORMATION
ANALYTICAL REQUIREMENT:
UNIT SALES & PRICE
GOOD TO HAVE
MERCHANDISING REQUIREMENT:
PRODUCT CHARACTERISTICS (SEGMENT, SUB SEGMENT, BRAND NAME, ETC.), PACK SIZE,
PACK TYPE, UNIT CASE & PRODUCT IMAGES
BASIC REQUIREMENT:
PRODUCT ID (BARCODE / UPC / EAN / RETAILER ID), NAME & PRODUCT DIMENSIONS (HEIGHT, WIDTH & DEPTH) MUST HAVE
When you’re building a retailer-specific planogram, the aspiration is to reach the

“Great to have” data-sharing level. To reach that goal, manufacturers need to engage
with the retailer on “category management.” You have to showcase your ability to
grow the category and build trust with the retailer so that the retailer can trust you
with its data.
THE CATEGORY MANAGEMENT JOURNEY

+
JOINT EXTENDED CATEGORY PROJECTS
MANUFACTURER STRATEGY SHARING
MANUFACTURER CAPABILITY
TRUST
TO BE CATEGORY “EXPERT”
FULL CATEGORY MANAGEMENT
SPACE & ASSORTMENT MANAGEMENT
FACT-BASED SELLING
+ RETAILER DATA SHARING

RETAILER COMMITMENT TO CATEGORY MANAGEMENT +
2) FIXTURE INFORMATION
To make sure that the planogram you build is implemented in the store as you
design it, you need the information about the physical shelf fixture. There are several
important things to know about the fixture.
• Playbook: A playbook is a document with several planograms in different “space

breaks” (different sizes of planograms of the same category) that manufacturers
develop. These books show retailers and merchandisers what manufacturers
consider the ideal planogram, based on shopper research, but they are not
retailer specific (yet). There are also retailer custom playbooks.
• Retailer-Specific: Planograms are built to implement at a particular store.

Consequently, retailer-specific planograms need to consider more than just
the fixture information. The planogram should be easy to implement. This will
happen only if you have accurate information.
ILLUSTRATION ON FIXTURE INFORMATION

WIDTH
SEGMENT
SHELF WIDTH
SHELF HEIGHT SEGMENT

HEIGHT
SHELF’S DISTANCE
FROM FLOOR
SHELF DEPTH
BASE HEIGHT
SEGMENT DEPTH
Source: Nielsen Spaceman Software was used to generate the output
B. KNOWLEDGE
The end goal for any manufacturer or retailer is to sell the products they offer. An
array of factors drive purchase intent, such as cultural background, family income,
brand recall value and visibility at the shelf, etc. But when it comes to making the
SMART shelf, let’s focus on “How does a shopper shop?”
Before making a final purchase decision, a shopper has weighed an array of selection
factors. Your shelf layout needs to address those factors. So let’s look at the purchase
decision process.
The product purchase decision can be divided into two steps. First, the shopper
groups the products that can fulfil a similar need/usage. This group becomes the
consideration set that defines ‘what’s in and what’s out?’.
Let’s understand this with an example: Is drinks a category? If yes, then should milk be
next to cola? Is cola a category? If so, then orange soda, a non-cola drink, could be on
the other side of the store and not necessarily next to cola. Of course this is
not logical.
Category is defined by how shoppers group products in a category based on need/

usage and interchangeability. Therefore, a common definition for cola and non-
cola soda drinks should be “carbonated soft drinks” because shoppers could switch
between cola and orange soda, but would not logically use milk to satisfy the same
need state.
CATEGORY DEFINITION
NEED TO HAVE A REFRESHMENT DRINK
ALL RELATED
PRODUCTS
CLUSTERED
INTO GROUPS
INTERCHANGEABLE
PRODUCTS
SUBSTITUTABLE PRODUCTS
(SEGMENTS)
COLA NON-COLA
Applying a category segmentation that’s based on shopper needs can help you reduce
clutter and improve product findability in any planogram.
The second step a shopper takes is evaluating the importance of attributes like type,
variant, pack size, price, brand, etc., which affect the choice the consumer ultimately
makes within a category. You can determine the importance of these factors by
conducting shopper research, often by developing a shopper decision tree, which
helps you understand:
• The way data is sorted and analysed
• Where new products will be placed on shelf
• Planogram design
You must follow the tree to create corresponding (visual) blocks in the planogram. For
at least the top three levels (see figure below), you should create clean blocks that are
easy to find. Levels dictate how substitutable a product is for a shopper. The higher
the level, the less substitutable the product. For the lower levels of the tree, when the
blocks become increasingly small, you have to make decisions that might not strictly
follow the tree, but are more pleasing to the eye.
Let’s put what we’ve gone over thus far into practice. Let’s imagine we’re a
manufacturer and we want to build a planogram for a retailer. In the shopper decision
tree, our brand is Brand A.
SHOPPER DECISION TREE

PLANOGRAM
BLOCKING CARBONATED
MOST
FLOW BEVERAGES LOYAL
SINGLE LEVEL 1 MULTI
CONSUMPTION CONSUMPTION
LEVEL 2
COLA NON-COLA COLA NON-COLA
LEVEL 3 BRAND A BRAND B FLAVOUR A FLAVOUR B BRAND A BRAND B FLAVOUR A FLAVOUR B
PACK SIZE PACK SIZE BRAND A BRAND B BRAND C PACK SIZE PACK SIZE BRAND A BRAND B BRAND C
PACK SIZE PACK SIZE PACK SIZE PACK SIZE PACK SIZE PACK SIZE
NEED ONE SKU AT LEAST SHOPPERS ARE MOST MORE

IN EVERY NODE TO LIKELY TO SUBSTITUTE AT
SATISFY ALL SHOPPERS THE BOTTOM OF THE TREE VARIETY
KNOWING WHERE ‘BRAND’ FITS IN THE SHOPPER DECISION TREE
In any shopper decision tree, the starting point (level zero) will be category. After
that, there can be different levels by subcategory, consumer usage, needs, occasion,
brand and pack size, etc. Brand isn’t the only purchase driver. A shopper will not buy
toothpaste if they are looking for a toothbrush just because they have a high brand
loyalty. We see that still many manufacturers are trying to create brand blocking
where it doesn’t make sense. Our view is that brand can be high (top three levels) in
the tree, but always after the subcategory level.
In our earlier carbonated beverages shopper decision tree example, you can see that
the brand comes after flavour in non-cola. If Brand B is present in both lemon and
orange soda flavours, then the placement of the lemon flavour of Brand B will be
placed within lemon soda flavour blocks and the orange flavour of Brand B will be
placed in orange soda flavour blocks.
C. TOOLS
When you’re selecting planogramming software, it’s better to seek out a space
planning partner rather than just a software supplier. A space management expert
will provide the right mix of software, support services and skilled recommendations
to foster your success. Having the right partner by your side can ultimately be a
deciding factor in the success or failure of your SMART shelf aspirations. The expert
will make sure that your space management processes are reviewed and analysed
properly, that you’ve got the right software, and that your team has adequate training
and ongoing support to overcome any hiccups.
In any planogramming software, you should look for:
• An easy-to-use software interface;
• Robust analytical capabilities; and
• Customizable reporting capabilities
Avoid falling in the trap of free or cheap online planogramming tool where mostly you
will end up wasting your time and energy.
STEP 2: BUILD A MERCHANDISING STRATEGY
The second step in the journey toward the SMART shelf is building robust
merchandising guidelines that integrate your strategy into space management
principles. You should document the merchandising principles that you want to
follow. These principles will guide you on which products to place and where to place
them. This will remove subjectivity from the planogramming process. It is important
to have a clear guideline so that every time you can produce similar planograms if you
are working on a similar dataset.
In this section, we’ll look at the product placement rule and how to avoid
out-of-stocks.
A. PRODUCT PLACEMENT RULE

Product placement on the shelf is an art. To get consistency in the art, however, you
need to remove the subjectivity and bring clarity on where each product will be placed
on the shelf. You can do this when you define:
I. How to create visual blocks on the shelf?
II. What should the flow of blocks be?
III. Which products should occupy the eye level area on the shelf?
IV. Where should you place the different pack sizes of the products on the shelf?
V. How do you want to treat private-label products and new products?
I. How to create visual blocks on the shelf?
Effective product placement on the shelf centers around blocking, a grouping of highly
similar products on a store shelf. Since these products are highly similar, they fulfil the
same need and directly compete with each other. Placing them together on the shelf
will make the visual block.
To create a visual block on the shelf, you must follow the shopper decision tree
from top to bottom. Each level of the tree should be converted into a block and you
should create sub-blocks within each such block. Blocks can be placed vertically or
horizontally on the shelf, depending on the width of the block and sub-blocks.
When a shopper is standing in front of a shelf, the natural eye span is about 1.5
meters wide. If you make the horizontal block wider than 1.5 meters, the shopper
has to move back and forth through the aisle as they search for the product from left
to right. This will make the shopping experience more cumbersome and increases
the chance the shopper gives up searching and leaves the store without making the
intended purchase.
VISUAL BLOCK ILLUSTRATION
1ST LEVEL OF
SHOPPER BLOCK 1 BLOCK 2 BLOCK 3
DECISION TREE
IDEALLY MAX. 1.5M
SUB-BLOCK 1
2ND LEVEL OF SUB-BLOCK 2
SHOPPER ..3
DECISION TREE
SUB-BLOCK 4
Source: Nielsen Impactful Space Management Workshop
• If a block or a sub-block is more than 1.5 meters wide, you should create
vertical blocks.
• If a block or a sub-block is less than 1.5 meters wide, you should create
horizontal blocks.
II. What should the flow of blocks be?
The placement of the blocks should reflect the tree structure. Interrelated and
substitutable products should be placed close together. This will ease the decision
making process at the shelf.
Block placement is strategic in nature and should be thought through. For the main
block and sub-block, you should have a fixed flow (e.g., subcategory “A” will be placed
first in the customer flow to the aisle, followed by subcategory “B,” and so on). This
will bring consistency across stores. For the blocks further down the tree, you may
decide to vary the flow of the products varying based on your strategy or simply what
looks good. Two possibilities are:
• On the basis of sales value/volume contribution: When you put high-selling

products first in the customer flow to the aisle, then you make it easier for
shoppers to make a purchase decision.
• On the basis of profitability: When you put highly profitable products first in
the customer flow to the aisle, then you push those products and increase the
profitability of the shelf.
III. Which products should occupy the eye level area on the shelf?
In-store product location directly affects sales, which amplifies the need to
strategically place products on the shelf. Understanding product placement requires
an understanding of how the human eye moves when standing in front of the shelf.
UNDERSTANDING ‘EYE LEVEL’
In a recent Nielsen Shopper

Observation Study, we found that:
• Eye level is not the level of the eye,

as the natural eye level is 15-30
15°
degrees below natural eye level.
30°
• Eye level is not the natural buy
level. Buy level is waist level. If we
put a wall of cola cans, shoppers
will mostly buy from the waist level.
The best location is between eye level and

grab level (the middle area of the shelf).
But every product can’t be placed in the
best location, so you need a strategy for
product placement.
We recommend:
PREMIUM PRICED PRODUCTS a) Top Area: Use this zone to push

“CURIOSITY” PRODUCTS “curiosity” products that are generally
niche and expensive or smaller/
regional brands.
HIGH PROFIT “STRATEGIC” b) Middle Area: Use this area to push
PRODUCTS “strategic” products to maximize

sales/profit.
c) Bottom Area: This area doesn’t fall

HIGH ROTATION into the vision of a shopper when she
is walking through the aisle. Use this
“MASS/POPULAR” PRODUCT area for high rotating “mass/popular”
products, as most bottom shelves
have more depth than other shelves,
which often allows them to hold
greater amounts of inventory.
IV. Where should you place the different pack sizes of the products on the shelf?
It’s important to have a well-defined strategy for the placement of different sized
products. It should help you:
• Increase the operational efficiency of the retail store
• Improve the shopping experience
• Prevent injury to the shopper and prevent products from being damaged
In a vertical block, you should place the small to large pack size from top to bottom.
The bottom shelf has more depth than the rest of the shelves and can hold
more units.
In a horizontal block, you have to decide between placing small to large packs from
either left to right or vice versa. In most countries, shoppers are right handed and
read left to right, and therefore, will look for alternatives/comparison toward the right
hand side.
PACK SIZE EXPLANATION

BRAND A VARIANT 2
BRAND A VARIANT 1 OR
BRAND B VARIANT 1
Shopper sees left first, then look toward the right for alternatives, hence, you should
place the small to large pack from left to right to Influence shoppers’ perception about
the affordability of the retailer or products and leading shoppers to consider a larger
pack size.
V. How do you want to treat private-label products and new products?
Private label, or store-brand, products are the retailer’s own brand that can be either
a look-alike of leading brand or a unique premium offerings. Private-label products
should be considered the same as branded products within a category and should
not get any preferential treatment. All brands should be treated according to their
contribution to the sales of the category. If a retailer asks for any special treatment,
then the manufacturer will do the same to their own brand and it will hamper overall
category sales.
Securing a coveted place on the shelf is a golden ticket on the path to success. Since
new products are in the early stage of their product lifecycle, they should be viewed in
terms of potential rather than previous sales.
If a new product is innovative and has the potential to grow, you should do
the following:
• Have a rule for how many units of the same product can be placed next to one
another where the front of the product is facing the customer (e.g., at least two
facings per SKU). This is a minimum facing rule
• Place them at eye level
• Educate your customer about the new products
• Use bay dividers and/or shelf strips to remind and educate customers about
a brand
B. AVOIDING OUT OF STOCKS

Out-of-stocks are still the biggest driver of sales loss in retail. To solve this, you need
to work with an inventory management model.
Inventory management in planogramming is like walking a tightrope. You need to

balance between out-of-stocks and having too much stock. Both situations are costly
to retailers and suppliers.
Let’s take an example. I sell 100 units of cola a week and cola gets replenished once
a day. However, I sell 25% of my weekly sales on Saturday, which means I need to
ensure I can fit 25% of weekly sales on the shelf for that day. That’s 25 units, which is
my target inventory (not taking into account any demand variances on sunny days).
Space management software will automatically calculate this for you and give you a
recommended number of facings per SKU.
Alternatively, you could calculate the needed stock by number of days of supply or
target facings, which is a bit more rudimentary.
Having the right inventory model helps you calculate the right space for each SKU.
Your space allocation strategy should:
• Avoid out-of-stocks at all cost
• Ensure a predefined minimum number of cases/units of a product can go on the

shelf at all times to increase efficiency at store operations side. If not, personnel
in store will have to go to the backroom with the leftover stock time and again:
very expensive.
• Give leftover space to strategically important products.
STEP 3: BUILD AND OPTIMIZE THE PLANOGRAMS
With a well-documented approach that helps you reduce subjectivity and delivers
output consistency, you’re now ready to build your planograms.
Nielsen recommends this approach:
a) Build the mud map
b) Create the planogram
c) Optimize the planogram
d) Generate the output for implementation
Let’s explore these steps to better understand them.
A. BUILDING THE MUD MAP

A mud map shows how products can be merchandised in line with a shopper decision
tree. In this step, decide how the blocking will appear in the planogram in accordance
with your merchandising strategy. You can decide the size of each block by evaluating
value/volume sales contribution.
To build the mud map, you should follow these steps:
• Prepare an overview of the sales contribution for at least the top three levels
of the shopper decision tree. Make sure that the total of each level is 100%
accumulated at all times.
• Keep an eye on big differences in the number of SKUs in the current assortment
and/or size differences between the different segments, as you may have
to allocate disproportionate space to the segment with large assortment
irrespective of the sales contribution.
SAMPLE MUD MAP FOR THE CARBONATED BEVERAGE CATEGORY

CARBONATED
LEVEL 0 BEVERAGES
100%
-
SINGLE MULTI
LEVEL 1 CONSUMPTION CONSUMPTION
48% 52%
- -
LEVEL 2 COLA NON-COLA COLA NON-COLA

13% 35% 11% 41%
- - - -
LEVEL 3 BRAND A BRAND B FLAVOUR A FLAVOUR B FLAVOUR C BRAND A BRAND C FLAVOUR A FLAVOUR B FLAVOUR D
5% 8% 15% 12% 8% 4% 7% 18% 16% 7%
SINGLE CONSUMPTION MULTI CONSUMPTION

COLA
COLA
NON-COLA NON-COLA
B. CREATING THE PLANOGRAM
To build a planogram, you need a specialized planogramming tool. These tools enable
you to build a planogram which is ready for in-store implementation.
Follow the below process to build your planogram:
• Build the fixture
• Drag and drop the products onto the fixture
The Art of Merchandising
Planogram creation is similar to solving a puzzle. It’s an art, and different people can
have a different take on the same input data. There is no single or unique correct
strategy to build a planogram. See the below example of carbonated beverages
category where planogram is highlighted on consumption usage: single vs.
multi consumption.
Horizontal blocking of single vs multi consumption: The shelf layout looks pleasing
to the eye; however, it’s not easy for a person to shop, as they have to move back and
forth, left to right, within the aisle to find out the single or multi consumption pack
they want.
HORIZONTAL BLOCKING
GROUP ANALYSIS MULTIPLE CONSUMPTION

GROUP FIELD: SEGMENT SINGLE CONSUMPTION
Vertical blocking of single vs multi consumption: This shelf layout is easy to shop
because consumers can compare related products within their direct line of vision
when they’re standing in front of the shelf.
VERTICAL BLOCKING

It’s important to document your strategy and follow your guidelines so your vision for
the category doesn’t depend on the person who is designing the planogram.
C. OPTIMIZING THE PLANOGRAM

Building a planogram is easy if you have the required input data. The difficult task is
optimizing the planogram to make sure you are using every centimeter of shelf space.
Planogramming tools, such as Spaceman, are equipped with performance analytics
features that help you visualize space optimization opportunities.
There are endless ways to analyse a planogram. However, you should keep it simple
and run a basic analysis to optimize your planogram:
I. Blocking Analysis - Let’s analyse the planogram to see if you have followed the
shopper decision tree. This analysis will help you identify any misplaced products.
Let’s see the outcome of blocking analysis in our carbonated beverages

planogram example.
• Level 1 of Shopper Decision Tree: Single vs. Multi Consumption
SINGLE VS MULTI CONSUMPTION BLOCKING ANALYSIS

To avoid any confusion, all the further levels of blocking analysis have been performed on
the multi consumption segment. All single consumption products are highlighted in white.
• Level 2 of Shopper Decision Tree: Cola vs Non-Cola (in Multi

Consumption segment)
COLA VS NON-COLA BLOCKING ANALYSIS
GROUP ANALYSIS COLA

FILTER SET: MULTIPLE CONSUMPTION NON-COLA
GROUP FIELD: SEGMENT
• Level 3 of Shopper Decision Tree: Flavour (in Multi Consumption segment)
FLAVOUR BLOCKING ANALYSIS
GROUP ANALYSIS COLA LEMON

FILTER SET: MULTIPLE CONSUMPTION CREAM ORANGE
GROUP FIELD: DESC_A GINGER SODA
• Level 4 of Shopper Decision Tree: Brand (in Multi Consumption segment)
BRAND BLOCKING ANALYSIS
GROUP ANALYSIS BRAND A BRAND D BRAND G BRAND J

FILTER SET: MULTIPLE CONSUMPTION BRAND B BRAND E BRAND H
GROUP FIELD: BRAND BRAND C BRAND F BRAND I
Based on these four highlights, we can confirm that the shopper decision tree and
mud map have been followed correctly. That’s because we see nice clean blocks.
You can take any product characteristic and analyse the planogram; however, we
recommend that you keep it simple and analyse your planogram up to the top four
levels of a shopper decision tree.
Note: Brand C and H are present in multiple spots due to the fact that they play in multiple
flavor segments. Hence, they are blocked within their respective segments.
II. Inventory Analysis - Use this analysis to highlight the product basis of inventory
level and find out which products are overstocked or understocked.
Let’s see the outcome of inventory analysis for carbonated beverages planogram.
INVENTORY ANALYSIS
UNDER/OVERSTOCKED PRODUCTS UNDERSTOCKED 10% EXTREME UNDERSTOCKED 20%

GROUP: BY PRODUCT OVERSTOCKED 10% EXTREME OVERSTOCKED 20%
TARGET: BY UNITS
A product will be coloured based on on-shelf availability of the product against
demand for it:
• White (Optimal): Sufficient inventory
• Light Red (Understock): -10% to -20%
• Dark Red (Extremely Understock): more than -20%
• Light Green (Overstock): +10% to +20%
• Dark Green (Extremely Overstock): more than +20%
A planogram will be fully optimized once all the products are coloured white. In
theory, this looks like a cakewalk. The reality is that you will rarely be able to achieve
this while following all the other merchandising rules. So you should aim to eliminate
understock and reduce overstock.
Above, we can see that almost all the SKUs of single consumption segments (first two
bays from left) are extremely overstocked, whereas many of the multiple consumption
segment (last three bays from left) SKUs are extremely understocked. Both situations
are not good for overall category sales. To optimize the planogram further, some
shelf space from the single consumption segment should be allocated to the multiple
consumption segment.
III. Top/Bottom performer Analysis - Use this analysis to highlight the products
based on performance such as sales or profit. This analysis will help you locate the
best and worst performing products on the shelf so that you can take corrective
measures if required. A sales analysis should always be done at subcategory or
segment level to avoid making apples to oranges comparisons.
Let’s select sales and see the outcome of the analysis. In our example, we are running
this analysis on the multi consumption segment.
TOP/BOTTOM PERFORMER ANALYSIS
TOP/BOTTOM PERFORMING PRODUCTS TOP 10% TOP 25%

FILTER SET: MULTIPLE CONSUMPTION BOTTOM 10% BOTTOM 25%
FIELD: SALES
In this analysis, the products are divided into five colors based on performance. White
means average. In our example, we have selected sales field value and comparing it
only within the multi consumption segment.
When we look at the previous two figures together, we see that the yellow highlighted
product is selling extremely well, but is extremely understocked. Without action, this
product will surely go out-of-stock, which means we need to add more facings to
avoid loss of sales.
IV. Multi Variable Analysis - Until now we’ve only looked at analysing one variable
at a time. You can use this analysis to highlight the performance of products for two
variables such as profit and sales at the same time. This analysis will create a two-by-
two grid similar to the Boston Consulting Group Matrix2 pictured below. As with the
previous analysis, this analysis should also only be done at subcategory or segment
level to avoid making apples to oranges comparisons.
MULTI VARIABLE ANALYSIS

• Stars: High-profit, high-volume sales
products. Put them in the prime location
and avoid out of stock at any cost.
HIGH
• Cash cows: Low-profit, high-volume sales

products. Put them outside of the eye-level
shelves in a gondola with
VOLUME SALE
“mass/popular products.”
• Question marks: High-profit, low-volume

sales products. Put them on the top
shelves with “curiosity products.”
LOW
• Dogs: Low-profit, low-volume sales

products Rationalise the assortment as LOW PROFIT HIGH
much as possible here, and give them
leftover location on the fixture.
The above strategy should be taken only at lower levels of the shopper decision
tree, as shoppers don’t group the products like this when they make their purchase
decision in front of the shelf.
Let’s see the outcome of multiple variable analysis in our example of carbonated
beverages planogram for multi consumption segment.
2
BCG Matrix: The growth-share matrix is a chart that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to
analyze their business units, that is, their product lines
MULTI VARIABLE ANALYSIS
This analysis should be used to identify high profit and fast-moving products (Stars).
When you see this analysis together with the inventory analysis, you can make sure
that Stars are not understocked. In this example, if you can see the yellow highlighted
product is extremely understocked, at the same time it’s a star (which means high
sales and high profit). It’s clear we need to resolve this issue by adding facings to
avoid out-of-stocks.
Don’t complicate the entire process. It’s important to keep the process simple and
easy to follow. You will have to make a few exceptions and make judgement calls. All
of your display decisions should be tailored to the shoppers who use them, not to the
designers who make them.
D. GENERATING THE OUTPUT FOR IMPLEMENTATION

To present the planogram outcome to the retailer team, you should use product
images complemented with sales and space analysis charts. For in-store
implementation of the planogram, the output should be readable in a black and white
print out. Even today, most of the stores use black and white printers. It
should contain:
Page 1:
• A birds-eye view of the category
SAMPLE OUTPUT - PAGE 1

BRAND B BOTTLE BRAND G ORANGE CAN BRAND G ORANGE
BRAND B LIGHT CAN 330ML 400ML 500ML BRAND A BRAND E
250 ML BRAND B PET 2L ORANGE
BRAND B BOTTLE BRAND A 2L BOTTLE BRAND E ORANGE
750ML 750ML PET BOTTLE 750ML PET 2L
BRAND I COLA MY CAN BRAND I 500ML PET BRAND C ORANGE CRUSH 500ML
250 ML BRAND C
ORANGE
BRAND J BRAND C CRUSH 2L
BRAND A LEMON CAN BRAND B PET 2L BRAND J ORANGE
BRAND E ORANGE BOTTLE 400ML PET 2L
BRAND A LEMON CAN 250ML 350ML BOTTLE 750ML CRUSH 1L
BRAND C CREAM BRAND C BRAND E BRAND E

BRAND J PLASTIC SODA CAN CREAM CREAM SODA CREAM SODA
BRAND J CAN 330ML BOTTLE 500ML 330ML SODA 500ML BOTTLE 400ML BOTTLE 500ML BRAND I MEGA 2L BRAND H COLA BRAND C BRAND
BRAND C BRAND G MEGA 2L D SODA
PET 1.5L LEMONADE 1L LEMONADE 2L
1.5L
BRAND C BRAND D BRAND F
BRAND C LEMONADE 500ML
SODA 500ML SODA 500ML SODA 500ML
BRAND E
BRAND C CREAM BRAND C BRAND C BRAND BRAND C BRAND F
BRAND C BRAND C CREAM BRAND H
CREAM SODA GINGER GINGER C SODA SODA CLUB
BRAND H CAN BRAND H BOTTLE 500ML GINGER BEER BRAND C GINGER BRAND F GINGER SODA 1L BOTTLE 2L
SODA 2L PET 2L BEER 1L BEER 2L 1L PET 1.5L SODA 1.25L
250ML CAN 330ML BEER 500ML BEER 400ML
CARBONATED BEVERAGES PLANOGRAM

Page 2 onward:
• Segmented view of planogram along with the product list
• Product list must contain:
- Location of the product on a shelf
- Shelf number
- Product ID (UPC/EAN/barcode/retailer ID)
- Name
- Count of horizontal facings
SAMPLE OUTPUT - PAGE 2

SEGMENT VIEW SHELF POSITION PRODUCT POSITION REPORT
NAME: BRAND B
BOTTLE 400ML
NAME: BRAND B LIGHT CAN 330ML POSITION ON SHELF: 2
POSITION ON SHELF: 1 FACINGS:10 FACINGS: 7 POSITION UPC NAME FACINGS
180.00CM
45.00CM BAY 1.1 SHELF
NAME: BRAND I 159.00CM 1 10000000000041 BRAND H CAN 250ML 6
500ML PET
NAME: BRAND I COLA MY CAN 250ML POSITION ON SHELF: 2 2 10000000000040 BRAND H BOTTLE 500ML 10
POSITION ON SHELF: 1 FACINGS: 9 FACINGS: 7 45.00CM BAY 1.2 SHELF
134.00CM
1 10000000000017 BRAND C LEMONADE 500ML 15
NAME: BRAND A
LEMON CAN 350ML BAY 1.3 SHELF
NAME: BRAND A LEMON CAN 250ML POSITION ON SHELF: 2 45.00CM 1 10000000000046 BRAND J CAN 330ML 10
POSITION ON SHELF: 1 FACINGS: 12 FACINGS: 10 102.00CM
2 10000000000048 BRAND J PLASTIC BOTTLE 500ML 7
NAME: BRAND J BAY 1.4 SHELF
PLASTIC BOTTLE 500ML 45.00CM
71.00CM 1 10000000000002 BRAND A LEMON CAN 250ML 12
NAME: BRAND J CAN 330ML POSITION ON SHELF: 2
POSITION ON SHELF: 1 FACINGS: 10 FACINGS: 7 2 10000000000002 BRAND A LEMON CAN 350ML 10

43.00CM 1 10000000000043 BRAND I COLA MY CAN 250ML 9
NAME: BRAND C LEMONADE 500ML 2 10000000000042 BRAND I 500ML PET 7
POSITION ON SHELF: 1 FACINGS: 15
14.00CM 1 10000000000005 BRAND B LIGHT CAN 330 ML 10
NAME: BRAND H 10.00CM
CAN 250ML 2 10000000000003 BRAND B BOTTLE 400ML 7
POSITION ON SHELF: 1 NAME: BRAND H BOTTLE 500ML
FACINGS: 6 POSITION ON SHELF: 2 FACINGS: 10
PLAYBOOK VS. RETAILER
SPECIFIC PLANOGRAMS
Whether you are working on a playbook or a retailer-specific planogram, the basic
building approach will be the same. In the playbook concept, the planogram will
be your vision of the category display at any retail store. You should also include a
placeholder for a retailer’s private label offerings. In a retailer-specific planogram, the
shelf display will be the outcome of both retailers and manufacturers vision coming
together keeping shoppers at the centre of all the decisions. You will use store-level
sales information to tweak the planogram and place actual retailer’s private-label
offerings on the shelf.
In both cases, you must assess and rebuild your planogram at least once every three
months. You must use updated sales information and modify the product facings to
meet new demand.
HOW TO MEASURE RETURN ON

INVESTMENT?
From the date of planogram implementation, you will need to wait at least three
months to assess the results. We recommend measuring success by comparing the
sales performance of the test store (where planogram has been implemented) with
the control store (similar store compared to test store but with no layout change). The
ideal sample size should be five to 20 test stores and their corresponding
control stores.
To find out the delta, follow the below methods:
• If it’s a very seasonal category: Compare the sales performance of the same
quarter last year.
• For all other categories: Compare the sales performance of the last quarter.
The positive delta will tell you the sales uplift is probably due to the change in layout.
In the carbonated beverage example, we compared the post-implementation sales

of test store with the results from a control store. The net impact of planogram
implementation in sales growth was 6.85%.
SAMPLE PLANOGRAM IMPACT ANALYSIS

6.85% TEST STORE
CONTROL STORE
$ 18,000
$ 16,000
$ 14,000
PERIOD A PERIOD B
WHAT DOES IT TAKE, AND WHAT
WILL YOU GET?
To build the SMART shelf and grow the overall category sales, you must bring:
• A few thousand dollars for tools
• A bit of space planning expertise
• The desire to look beyond your own brands
• A lot of commitment to stick to the process
• An In-depth understanding of the shopper
• And last but not least: A collaborative retail partner
You will get3:
Revenue increases of 10% to 20% through reallocation of

space to higher selling items, improved product assortment and
position on the shelf.
Margin improvements of 5% to 15% by identifying higher-

margin items, ensuring their inclusion in the range and
providing the appropriate space allocation
Inventory cost reduction of 5% to 10% through the

identification and removal of inefficient inventory
Note: The ability to achieve any of this will always depend on the quality of shopper
insights and input data, the quality of the developed plans and the retailers’
implementation and compliance capability.
3
Gartner’s ROI study by Mike Griswold on How to Increase Revenue and Strengthen Customer Loyalty
WHAT’S NEXT?
By now, you are aware about the process of creating a planogram. As a next step,
you should:
• Identify a suitable retail partner
• Document your merchandising strategy
• Find a right space management expert
• Start simple, don’t complicate the entire process
You can reach out to Nielsen, we can help you in many ways in your planogramming
journey, such as shopper understanding, category management consultancy and
training, and building the planograms. We have a wide array of software solutions
that cater to different needs of a planogrammer.
Our space management tool, Spaceman™, enables you to quickly arrange products
into visually pleasing and financially sound layouts. It comes with powerful financial
analysis and reporting capabilities to provide insight into the potential success
of planogram.
Our Practical Category Management Workshop lets you discover ways to foster
stronger relationships with your trading partners while developing successful
strategies and tactics to further enhance your business’ category performance. While
our Impactful Space Management Workshop enables you to gain the ability to
create impactful, shopper focused and effective floor and category layouts in line with
retailers’ operations restrictions.
Do reach out to your Nielsen representative if this paper excites you to begin
your journey.
ABOUT NIELSEN
Nielsen Holdings plc (NYSE: NLSN) is a global measurement and data
analytics company that provides the most complete and trusted view
available of consumers and markets worldwide. Nielsen is divided into
two business units. Nielsen Global Media, the arbiter of truth for
mediamarkets, provides media and advertising industries with unbiased
and reliable metrics that create a shared understanding of the industry
required for markets to function. Nielsen Global Connect provides
consumer packaged goods manufacturers and retailers with accurate,
actionable information and insights and a complete picture of the
complex and changing marketplace that companies need to innovate
and grow.
Our approach marries proprietary Nielsen data with other data sources
to help clients around the world understand what’s happening now,
what’s happening next, and how to best act on this knowledge.
An S&P 500 company, Nielsen has operations in over 100 countries,

covering more than 90% of the world’s population. For more information,
visit www.nielsen.com.
SHAPING A SMARTER MARKET™
Copyright © 2020 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 191552 29
SHAPING A SMARTER MARKET™
At Nielsen, data drives everything we do—even art. That’s why we used real data to create this image.

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THE SMART SHELF:

YOUR PATHWAY TO WINNING IN RETAIL

• Speak the language of “category management;” and

So what are the key principles of micro space management, known as

Shoppers want an efficient and good in-store experience. A planogram should

Manufacturers and retailers want to maximize sales and profit. A planogram

Retailers want to minimize operating costs. A planogram needs to manage

PLANOGRAM – A MIX OF ART AND SCIENCE

b) Finance and Logistics: Science makes stores efficient.

The SMART shelf will help shoppers, manufacturers and retailers.

In a retail store, the shopper is overexposed to

• Make it easy for shoppers to navigate and to find

• Assist the shopper in making the product

In an uber-competitive retail store, where thousands

• Maximize brand visibility.

• Ensure a fair share of space; each product should get

MANUFACTURERS enough facings on the shelf to prevent out-of-stocks.

• Increase category sales and customer satisfaction.

With finite space and infinite assortment, the SMART shelf

• Avoid out-of-stocks and bring uniformity of

• Optimize the shelf space to increase the overall

SELECTING YOUR RETAIL PARTNER:

STEP 1: STEP 2: STEP 3:

a) Data: Product and fixture details.

b) Knowledge: How do shoppers shop the category?

c) Tools: Space management software to build the planogram.

Let’s explore these elements in greater detail.

1) A list of the products you want on the shelf.

1) PRODUCT LIST PREPARATION

SUPPLY CHAIN REQUIREMENT:

When you’re building a retailer-specific planogram, the aspiration is to reach the

THE CATEGORY MANAGEMENT JOURNEY

FULL CATEGORY MANAGEMENT

SPACE & ASSORTMENT MANAGEMENT

+ RETAILER DATA SHARING

• Playbook: A playbook is a document with several planograms in different “space

• Retailer-Specific: Planograms are built to implement at a particular store.

ILLUSTRATION ON FIXTURE INFORMATION

SHELF HEIGHT SEGMENT

Source: Nielsen Spaceman Software was used to generate the output

Category is defined by how shoppers group products in a category based on need/

• The way data is sorted and analysed

• Where new products will be placed on shelf

SHOPPER DECISION TREE

LEVEL 3 BRAND A BRAND B FLAVOUR A FLAVOUR B BRAND A BRAND B FLAVOUR A FLAVOUR B

NEED ONE SKU AT LEAST SHOPPERS ARE MOST MORE

In any planogramming software, you should look for:

• An easy-to-use software interface;

• Robust analytical capabilities; and

• Customizable reporting capabilities

A. PRODUCT PLACEMENT RULE

I. How to create visual blocks on the shelf?

II. What should the flow of blocks be?

V. How do you want to treat private-label products and new products?

I. How to create visual blocks on the shelf?

IDEALLY MAX. 1.5M

Source: Nielsen Impactful Space Management Workshop

II. What should the flow of blocks be?

• On the basis of sales value/volume contribution: When you put high-selling

UNDERSTANDING ‘EYE LEVEL’