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Planogram

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A planogram is a diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases[1][2]. They may also be referred to as plano-grams, plan-o-grams, schematics (archaic) or POGs.

Overview

A planogram is often received before a product reaches a store, and is useful when a retailer wants multiple store displays to have the same look and feel. Often a consumer packaged goods manufacturer will release a new suggested planogram with their new product, to show how it relates to existing products in said category. Today, planograms are used in a variety of retail areas. A planogram defines which product is placed in which area of a shelving unit and with which quantity. The rules and theories for the creation of a planogram are set under the term of merchandising.

Planograms differ significantly by retail sector. Fast-moving consumer goods organizations and supermarkets largely use text and box based planograms that optimise shelf space, inventory turns, and profit margins. Apparel brands and retailers are more focused on presentation and use pictorial planograms that illustrate "the look" and also identify each product.

Primary targets

Primary targets which should be achieved with planograms:

  • creation of an optimal visual product placement
  • creation of an optimal commercial product placement

In short, the primary targets can be summarised with a turnover and profit increase.

The visual product placement is supported from different theories:

  • horizontal product placement: To increase the concentration of a customer for a certain article, a multiple horizontal placement side by side of one product is applied. Different researches found that a minimum placement range between 15-30 cm of one single product is necessary to achieve an increase in customer advertence (depending on the customer distance from the unit).
  • vertical product placement: A different stream with its follower is the vertical product placement. Here one product is placed on more than one shelf level to achieve 15-30 cm placement space.
  • block placement: products which have something in common are placed in a block (brands). This can be done side by side, on top of each other, centred, magnetised.

Next to the visual placement the commercial placement is the other important pillar of a planogram. Here the question has to be answered which products should be placed. Two factors for the decision-making process can be differentiated.

Market share placement – margin placement

Market share placement means the placement of turnover bringers. Different market research institutes like Nielsen, IMS are collecting turnover data of all kind of products and calculate from this data the market share of a certain product in its market segment. With the help of this data products can be selected which should appear in a shelving unit in a “A” location. A simple calculation of turnover data from a single store is better than nothing for this purpose however it would be better to use data from a group of stores.

The margin placement is influenced from the margin a product brings. The higher the margin is of a product the better the location should be where it is placed.

Derivative targets

Derivative targets:

  • To communicate how to set the merchandise .
  • To ensure sufficient inventory levels on the shelf or display.
  • To use space effectively whether floor, page or virtual.
  • To facilitate communication of retailer’s brand identity.

Creation of planograms

Planograms are created with the help of a planograming software. Worldwide only few producers of this kind of software exist (see the link below) which may also be responsible for the hefty price tag of this kind of software during past. Most planograming software were produced during last 15 years. Due to hard- and software limitations at this time this kind of software is based on manual painting of shelving units. This results usually in a high need of human resource to create planograms for stores.

During the last years some software packages got some enhancements to transfer some parts of shelving elements to single store measurements which according to the producers should increase the efficiency (Apollo/Galleria/Spaceman/JDA). Small software packages on a lower price level can be used for a creation / drawing of shelving units with some basic features of planograming (Shelf Logic /Planographics /Smartdraw). Other software producers are concentrating on the visualisation process which heavily increased the nice look of planograms (3D) (ACTISKU 3D / JDA / Intactix). There are also some new developments which primarily have the task to optimise the creation of planograms and the visualisation possibilities of how the product is placed (blocks/magnetic lines) (Quant/ADW:D Apollo Designer Workstation: Desktop).

Leading retailers are beginning to automate the creation of store specific planograms, through use of corporate level business rules and constraints describing best practice product placements. Such planogramming solutions allow these companies to respond with location and language-specific messaging, pricing, and product placements based on business rules derived from location, campaign, and fixture attributes. (RBM Technologies/ADW:E Apollo Designer Workstation: Enterprise)

The future of planograms is to link them to the physical store layouts so that visual representations and reporting of inventory performance can be produced leading to better informed business decisions (RGIS StorPlanner / RBM Technologies). In deed planograming has further evolved to be a truly collaborative process through multi user virtualisation tools such as Dominion from CapturePlan.

References

  1. ^ Bai R., Burke E.K. and Kendall G. Heuristic, Meta-heuristic and Hyper-heuristic Approaches for Fresh Produce Inventory Control and Shelf Space Allocation. Journal of the Operational Research Society, 59(10), pp 1387-1397 (http://dx.doi.org/10.1057/palgrave.jors.2602463)
  2. ^ Bai R. and Kendall G. (2008) A Model for Fresh Produce Shelf Space Allocation and Inventory Management with Freshness Condition Dependent Demand. INFORMS Journal on Computing, 20(1), pp 78-85 (http://dx.doi.org/10.1287/ijoc.1070.0219)

Planogram Examples

Software suppliers

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