The Beginner’s Guide to Trade Merchandising Measurement

Trade Promotion EvaluationTrade promotion evaluation is one of the primary reasons CPG companies buy IRI and Nielsen data. At 10-20% of gross sales, trade funds are a big investment for most manufacturers. And even companies that don’t have direct-to-consumer marketing will still often have retailer driven in-store merchandising.

IRI and Nielsen databases can include literally hundreds of measures related to trade promotion. This volume of measures can be overwhelming, but they all boil down to a few basic concepts. In this post, I’ll explain what types of promotion Nielsen and IRI measure, and how they report it.

3 Types of Merchandising

Standard databases from IRI/Nielsen track three types of merchandising:

  1. Secondary displays
  2. Retailer features
  3. Shelf price reductions

Collectively, these three types are referred to as “merchandising” or “promotion” (commonly shortened to “Merch” and “Promo”). In the world of IRI/Nielsen databases, Merch and Promo are used interchangeably.

Why do IRI and Nielsen cover only these merchandising activities? First, they are controlled by the retailer. Nielsen/IRI have chosen to limit their databases to retailer activities. Second, these stimuli are short in duration and are directed at and available to any shopper who comes into the store. Because of these characteristics, displays, features, and price reductions can be evaluated with the automated processing Nielsen and IRI use for their tracking databases. IRI/Nielsen do offer custom analysis and advanced modeling if you want to evaluate trickier-to-measure marketing tactics such as advertising, coupons and online programs.

Defining the 3 Types of Merchandising

To use Nielsen and IRI’s measures, you need to understand how they define their terms. In IRI/Nielsen databases, “secondary display,” “retailer feature” and “temporary price reduction” may have a different meaning than in your organization.

Secondary Display

According to IRI and Nielsen, a secondary display must be situated in a secondary selling location and contain actual product that consumers can pick up and purchase. Nielsen has the additional criteria that a display must be temporary; IRI includes permanent displays. During their weekly visits to a sample of stores, field auditors will note both the location and selling price of the products on display. Some databases will not differentiate display location but some will have different measures for a front of store display, end aisle display, etc.

Retailer Feature

IRI and Nielsen define features as print ads and coupons distributed by the retailer. For most retailers, these are primarily newspaper inserts and in-store circulars.  Some retailers also mail coupon books, which are coded and tracked. IRI/Nielsen do not include manufacturer coupons like FSIs or Catalina in retailer features.

Temporary Price Reduction (TPR)

To be considered a TPR, the promoted price must be more than 5% lower than the historic regular price. If the reduced price stays in place for a set number of weeks, IRI and Nielsen will consider the reduced price to be a new regular price, and it will no longer be counted as a promotion. In Nielsen, this occurs after 7 weeks and in IRI after 6 weeks.

So if the retailer has a regular price of $2.99 but offers a “promoted” price of 2/$5.00 week in and week out, IRI and Nielsen will report your regular price as $2.50. From a consumer standpoint, this makes sense: regular category shoppers know the price isn’t temporary, and they don’t expect it to change.

How 3 Merchandising Types Become 6+ Merchandising Conditions

Here’s where things get a little complicated. Each merchandising type can combine with the other two types. As a result, most databases have measures for the following merchandising conditions:

  1. Any Promo/Merch – the most general condition, indicating any one or more of the 3 merchandising types
  2. No Promo/Merch – no merchandising activity
  3. Feature and Display – both retailer feature and secondary display happening at the same time – the Holy Grail of merchandising!
  4. Feature Only – no display; may or may not have price reduction
  5. Display Only – no feature; may or may not have price reduction
  6. Price Reduction/TPR Only – no display or feature

You may also see a “Quality Merch” measure. This measure includes Feature Only, Display Only, and Feature and Display. In other words, it excludes promotions where the only merchandising is a temporary shelf price reduction.

How 6+ Merchandising Conditions Become Hundreds of Measures

You may have noticed that IRI and Nielsen report every fact (dollars, units, price, etc.) for every merchandising condition. Consequently, you don’t just have “Dollar Sales” as a measure.  You can also have:

–          Dollar Sales – Any Promo
–          Dollar Sales – No Promo
–          Dollar Sales – Feature and Display
–          Dollar Sales – Feature Only
–          Dollar Sales – Display Only
–          Dollar Sales – Price Reduction

Since there are at least six different merchandising conditions, you can easily end up with hundreds of measures depending on the level of database detail you’ve purchased.  But now that you understand how merchandising conditions are defined and reported, you can skim through these measures to find those most relevant to you. Most importantly, you’ll be able to evaluate your company’s trade promotions to make sure you’re maximizing the return on your merchandising investment.

Need help getting started with trade promotion evaluation?  Contact us to learn more about our services. We provide analytic support, hands-on analysis, and syndicated data training for individuals and groups.

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Comments

  1. Great tip sheet and nice idea. Just wanted to bring up that a display is in fact counted if it is permanent.

    • Sally Martin says:

      Tom, Thanks for calling this to my attention. I’ve edited the post to reflect the fact that IRI’s display measure includes permanent displays (Nielsen defines displays as temporary).

  2. Just discovered your site and think its great. Just got my feet wet with retail and understanding the zillion metrics has been a challenge to say the least!! Thanks for putting this together!!

  3. Sally Martin says:

    Glad you found it helpful! Let us know what we’re not covering that would be helpful to you. We would love to know more about what resources our readers are coveting.

  4. Thank you for explaining it clearly.

  5. Saurabh Gajjar says:

    Hi Sally,

    Thank you for putting this together. Its very helpful.

    Could you also shed some light on discounts? How they are calculated for every promotion? And specially, how is discount different from TPR?

    • Sally Martin says:

      When looking at trade promotion within IRI/Nielsen, the term TPR is usually applied to a condition where there is ONLY a discount and no other merchandising present. So any measures with “TPR” in the name indicate that there was no feature or display.

      However, there can be (and usually is) a discount associated with feature and display conditions. So you will see % discount measures for TPR, Feature Only, Display Only, and Feature & Display and well as Any Promotion (which includes all conditions).

      The size of the discount is calculated as the (base price – promoted price)/base price for stores within that condition.

      One other thing to note is that this % will reflect average discount per unit, even if the promotion required the purchase of multiple units. So the featured price might be “Buy 1 Get 1 Free” but the % discount in Nielsen/IRI will appear as 50%.

  6. hi Sally,

    Thanks for all of your amazing posts. I’ve learned a lot from your site.
    I have a question. If a regular price of an item is $3.99, the items is on $1 TPR for a month (4 weeks), then immediately on BOGO 50% for the next month, then back to regular price $3.99 the following (3rd) month, what will IRI use as the base price on the 3rd month? Is it $3.99? or an average of the previous 2 months? Your post above has an example of after 6 weeks of 2/$5, IRI will use $2.5 as the new base price. So I’m curious if the base price is only based on 6 weeks of the same price, or 6 weeks of any combinations of promoted prices.

    • Sally Martin says:

      Hi Kayla, Thank you for your kind words about the site. Unfortunately, in this case I don’t really have an answer for you. I asked someone from Nielsen and he thought the algorithm would adjust the base price after 7 weeks of promoted pricing, even if the promoted prices were at different levels during those 7 weeks. However, he was not 100% sure because he had never seen a situation where this actually occurred in the data. Sorry I can’t be more definitive. If any readers have experience regarding this situation, please feel free to post a response and enlighten the group.

  7. IS Merchandised dollars the same as Promoted dolllars?

    • Sally Martin says:

      In Nielsen/IRI/SPINS syndicated data, “merchandised” and “promoted” are synonyms. Both refer specifically to three types of retailer trade promotion activity: shelf price reductions, retailer feature ads, and in-store retailer displays. The terms merchandised and promoted may be used in a different marketing context and *not* be referring to the same things so only assume they are substitutes when you are working with syndicated data from the major third-party vendors.

  8. Hi Sally –

    Wondering if you could help here – In Nielsen, if the same display fixture is in stores week to week, but the SKUs are on rotation, does this count as a secondary display? Does it matter the mix of brands on display? Or does the location alone dictate whether the display is “permanent” or “temporary”?

    • Sally Martin says:

      Hi Hannah,

      I assume that the “temporary” part would apply to the presence of the product, not the presence of the fixture. So if the product is in a secondary location for the purpose of promotion, I expect that would be considered a display for that product. But you would need to confirm that with Nielsen. I don’t have a detailed description of their guidelines for coding displays.

  9. Rajendra says:

    Hi Sally,

    Thank you for the wonderful site and all amazing information, I’ve learned a lot from your website.

    I’ve a question about Nielsen data if it has facts like Base Display Support % or Display % ACV Support?

    I can see many facts in Nielsen about % support but could not find these two.

    • Robin Simon says:

      Thanks for the kind words!

      Depending on your contract with Nielsen or IRI, you may or may not get all measures by specific merchandising tactic, which is why you may not see those facts on your database. Please read on for more information on the specific facts you ask about.

      A good place to start (in case you haven’t seen it) is this post which gets into the presence of promotion vs. the impact of promotion:
      http://www.cpgdatainsights.com/pricing-and-promotion/non-promoted-sales-v-base-sales/

      Both of the facts you ask about are measures of the presence of display, or how much display support there was regardless of how much it impacted sales. You can think of “Display % ACV Support” as the % of stores with a display, but weighted for the size of the stores, so that larger stores count for more than smaller stores. See this post for more on %ACV: http://www.cpgdatainsights.com/distribution/all-about-acv/ “Base Display Support %” is a more sophisticated measure of the amount of support received but weighted for the % of base sales for the product in question. If the product is very regional, then the 2 numbers can be quite different otherwise they are usually fairly similar. I have found that retailers (and often Sales) are confused by this measure and prefer seeing merchandising support expressed in %ACV or CWW (cume weight weeks – see definition here: http://www.cpgdatainsights.com/glossary-post/cum-weighted-weeks-cww/)

      Hope that helps!

  10. Jeremy Toms says:

    Hello Sally! Great read, I’ve learned a lot. Curious do you know how Nielsen defines any of the following markets: xAOC, FDMx, Food, Drug, Mass?

    Or possibly, the definition of Base $ Vol, Incr $ Vol, Base U Vol, Incr U Vol?

    Thanks again for all the insight!

  11. Oscar Hinojosa says:

    Hi,
    I came across the following measure in IRI and can’t find how it differs from Weighted ACV Distribution:
    D_Aud – % ACV (Display Audit)
    Thanks,
    Oscar

    • Sally Martin says:

      Our best guess is that the client has a custom store audit and this is the Display measure calculated from that information. IRI does generic audits to obtain their regular display measures but they don’t incorporate the term “Aud” or “Audit” in the measure name. Please confirm this with an IRI client service rep.

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