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Exploring my products current opportunity $ in an existing Retailer
Trying to calculate opportunity dollars for a product is at best directional. We need to look at historical and present dollars to try to project forward future dollars.There is no perfect or exact way to do this. The examples are some of the more typical ways of looking at this but other methods can also be applied too.
In the example data pull above, we are looking at current 24 week dollars by items for Retailer X. But what's important is that this would be based on a "Line Extension" strategy, and NOT a "Brand extension".
Methods exploring future opportunity dollars could be:
1. Annualized dollar projections Taking the current 24 weeks in the chart and dividing it by 24 to get weekly dollars, the multiplying it out by 52 weeks to get an annualized dollar volume. This is assuming no changes occur to the product such as trade, pricing or distributions fluctuations.
Formula: (Current 24wk $ / 24) x 52
Let's look at the Flakes 32oz item. Based on the annualized opportunity formula above we see an annualized projection of $2,024,124. Again this assumes all things remian constant based on its current 214wk dollar sales of $934,211.
2A. Another means for calculating opportunity dollars is looking at what its $ per point of ACV distribution and assuming we increasing ACV by certain points. Since it is not at 100% distribution, there is opportunity to expand this products breadth of distribution. This is no an annualized basis, rather it is looking at current performance and seeing what the potential can be by increasing ACV.
Formula: (Current dollars / %ACV) or $934,211 / 90.8 = $10,289
2B. So Flakes 32oz generates $10,289 for every ACV distribution point currently. If we say we want to increase that by 2 points of ACV, then the new potential opportunity will be $20,577 per point of ACV.
2C. By adding this back into Flakes 32oz current dollars, will increase the products dollars to $954,788 or a +2.2% increase in dollars.
3. Another way to look at opportunity dollars based on ACV distribution is to figuse out ist FULL distribution postential if Flakes 32oz achieved 100% ACV distribution.
Formula: (Current dollars / %ACV) x 100
By doing this , we are stating what Flakes 32oz would be if it has 100% ACV distribution. In this case the full opportunity dollars at 100% ACV distribution would be $1,028, 867 which would be a +10.1% increase in dollars from current performance.
4. Another way would be to set a goal in increasing dollars based on percent or share gains. Our example will focus on $ % gains. Assume we want to achieve 7.8% dollar gains for Flakes 32oz, then our projected new dollars based on this assumption will increase dollars to $1,007,079.
Formula: (Current $ x 0.078) = $1.007,079
5. Old fashioned Opportunity Gap analysis (see chart 5 at the bottom of page). The is the old method of category management which may still be in use today. What this analysis tells us is the current dollars vs. expected dollars.
The means to calculate opportunity gaps is defined in the example charts below labeled 5 in the yellow box.
In our example every product including the category has an opportunity to increase dollars to the "Expected" level based on the analysis. If the outcome were negative dollars, then there is no opportunity and the product is considered over-developed or well-developed.
Question is, we have an opportunity dollar gap in our example….so by which means do you intend to close this gap? This is where you will need to use tactics in orsder to shore up the gap. You can look into other retailers or markets to see what successes you used to close gaps there and perhaps implement in retailer X.
6. Opportunity dollar gains based on CRMA Trends - You can calculate an opportunity if the retailer is trending down but the Competitive Marketing area (CRMA) is trending up. This will work great IF the CRMA or Competitive Market is out-trending the Retailer. If this is not the case, then fall back to an alternate opportunity formula. The graph (6) illustrates the examples and formula for calculating the dollar sales opportunity.
This would be an ideal example to see how much dollar sales opportunity there is, and what the competitive market is doing in executing this trends for your product which you could possibly derive tactics to drive your products sales in retailer X. See chart in page below. 6A calculates what the opportunity dollars are in the RMA if current trends persist at the same trended growth rate. 6B is the opportunity dollars for your product based on the CRMA or remaining markets growth trends, and 6C is the opportunity dollar difference of the CRMA - RMA opportunity dollars.The formula for calculating this opportunity is just below chart 6.
Other ways (not depicted in graph above)
A. Increasing promotional frequency - Looking at average product $ and simply stating by increasing products promotional frequency by 1 or 4 additional events will drive "X" dollars potentially.
Problem with this is the buyer may not like this idea because they may allocate ad space to other brands or more importantly towards their Private Label products if trying to achieve a quota. Unless you are a power brand or have high name equity, your chances of increasing promotional frequency is limited.
B. Increase sales velocity to drive increased sales. This is tricky because there are MANY variables that can impact your sales velocity. Increased distribution can at times lower your velocity rate.
So increasing velocity falls back onto promotional conditions. We can look at causal, but digital and other campaigns outside of casual (Features, TPR's, Displays) are hard to measure. We can look towards Base sales as these types of campaigns can impact base sales, but if your brand is highly driven on trade, then base sales will not be stable and be directional at best.You could possible look at an existing competitive item with higher sales velocity but similar ACV distribution to compare sales potential, but again factors need to be determined such as level of promotional support for that competitive product, longivity in the retailer, does it have higher or lower equity? So I would not really look at this as a an alternative means unless absolutely necessary.
C. Average items sold and increasing by 1 or more items to product portfolio. This issue with this is these items may have established distribution and could differ in what we propose to add to the product line-up.This would again, not be ideal to look at in measuring potential dollars.