Retail KPI

Summary: Key Performance Indicators (KPIs) help consumer packaged goods (CPG) manufacturers measure their effectiveness and progress towards achieving their growth goals.

What is a retail KPI?

Key performance indicators (KPI) are valuable tools for business owners. A KPI is a metric to show how well a product or product line is doing. Typically, KPIs measure performance in sales, such as dollar amounts and units sold. However, companies can develop their own KPIs to suit unique needs and situations.

How are retail KPIs created?

Essentially, these KPIs can be customized to fit specific objectives to tell you where your business and products are at any given time. For example, small to medium-sized companies need to focus on their growth stage and budget. Since these brands compete against major players, they need to be strategic to build brand awareness without shrinking their bottom line too much. Two examples of SMB KPIs are Growth Stage and Budget. Here’s a quick breakdown of each:

  • Growth Stage – This metric looks at how well your products are expanding in different markets, aka your distribution.
  • Budget – Your budget is always important, but measuring it can get tricky when doing any promotions. Larger brands can typically absorb losses, but SMBs have to be as efficient as possible. When measuring your budget KPI, you have to weigh the value of brand awareness against dollar value losses so that you don’t “spend yourself off the shelf” because of too many promotions.

Why are KPIs important for CPG brands?

With so much data at your fingertips, it’s easy to get overwhelmed. KPIs allow you to narrow your focus and invest in strategies that move the needle forward. As a small or mid-size business, locking down your KPIs early can help you grow faster and more efficiently. These metrics help ensure that you don’t waste time or money based on irrelevant or misleading information.

Benefits of setting KPIs

The primary reason to set KPIs for your company is to align all the different departments toward a single goal. Without metrics, each group, from marketing to sales to production, can be disjointed and lead to wasted resources. For example, if you have laser-focused KPIs, you can create a cohesive growth strategy where:

  • The sales team knows where to focus their efforts on getting your products into new stores. They can target high-volume sales outlets or companies that have a broader reach.
  • The marketing team knows where to spend money on ads to reach the right people. For example, if you’re trying to break into a new market, you can deliver ads to create demand and use that to make the sales team’s job easier.
  • The design team knows which niche you’re selling to, meaning that they can figure out how to appeal to that demographic with packaging and product features.

Examples of retail KPIs to track

The top three metrics for any CPG business to measure are its sales, distribution, and velocity. Here’s how they operate:

  • Sales – The total number of units sold in a specific market.
  • Distribution – The total number of outlets where your products are sold.
  • Velocity – The rate at which you sell products when they’re available.

There’s an equation that can help you visualize each metric:

Sales = Distribution x Velocity

So, if you sell 5000 products in a month across 40 stores, you can determine that your velocity is 125 products per store. From there, you can break down your KPIs further to understand the factors that are driving your sales velocity. For example, if you added another 10 stores, that doesn’t mean each one will sell 125 products. If you add those retailers and your overall sales stay even, you have to figure out why.

How to use KPIs for your brand or business

To put KPIs into perspective, let’s look at a real-world example from a Byzzer customer, Raybern’s Sandwiches.

  • The Objective: Raybern’s wanted to increase its share of the frozen sandwich market.
  • The Plan: The sales and marketing teams looked at the competition for frozen sandwiches to see how well Raybern’s could stack up. They discovered that they couldn’t compete on pricing, but they could deliver better taste and value for customers. The product team broke down the attributes that consumers liked most about frozen sandwiches to see how they could capitalize on those trends.
  • The Execution: With KPIs in place, all three teams could work cohesively to deliver a better product than the bigger brands. After six months, the teams got back together to see how much their KPIs improved to determine if they were on track.
  • The Result: Raybern’s was able to capture a substantial piece of the market by focusing on product qualities and attributes that other companies weren’t including.

 

Byzzer is a self-serve business intelligence platform that gives small CPG manufacturers the power of NielsenIQ data.

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