Distribution Measures This module covers the concepts of numeric distribution, all commodity volume (ACV), product category volume (PCV) and out-of-stocks

Distribution Measures

This module covers the concepts of numeric distribution, all commodity volume (ACV), product category volume (PCV) and out-of-stocks.

Author: Paul FarrisMarketing Metrics Reference: Chapter 6

© 2010-14 Paul Farris and Management by the Numbers, Inc.

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NMeasures of Distribution

Measures of distribution help managers understand the sales dynamics in the retail channel and improve their decisions for expansion

and growth strategies.

This overview explores three measures of distribution coverage:• Numeric Distribution• All Commodity Volume (ACV)• Product Category Volume (PCV), including the impact of out-

of-stock on net PCV.

Definition

Stock Keeping Unit (SKU) is a unique identifier for each distinct product or service that can be purchased. You will see SKU referenced throughout this presentation. A brand will typically include many unique SKUs.

MBTN | Management by the Numbers

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NNumeric Distribution

Definition

Numeric Distribution: a percentage measure of stores that stock a given SKU or brand compared to the universe of stores in the relevant market.

= (# stores that stock a brand or SKU) / (total stores in relevant market)

InsightThe number of physical stores involved in your supply chain has implications for delivery systems, cost of servicing, and market share.


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Calculating Numeric Distribution

Outlet All sales All tortilla sales

Madre’s Tortillas SKUs stocked

Padre’s Tortillas SKUs stocked

Store 1 $100,000 $1000 12 ct, 24 ct 12 ct, 24 ct

Store 2 $75,000 $500 12 ct 24 ct

Store 3 $50,000 $300 12 ct, 24 ct none

Store 4 $40,000 $400 none 12 ct, 24 ct

Numeric Distribution Example: The numeric distribution of Madre’s brand tortillas is calculated as follows:

Numeric distribution = (stores carrying Madre’s) / (total # of stores) Numeric distribution = (3) / (4) = 75%

Question 1:What is the numeric distribution of the 12 ct pack of Padre’s Tortillas?

Numeric Distribution Example: The numeric distribution of Madre’s brand tortillas is calculated as follows:

Numeric distribution = (stores carrying Madre’s) / (total # of stores) Numeric distribution = (3) / (4) = 75%

Question 1:What is the numeric distribution of the 12 ct pack of Padre’s Tortillas?


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Store 1 $100,000 $1000 12 ct, 24 ct 12 ct, 24 ct

Store 2 $75,000 $500 12 ct 24 ct

Store 3 $50,000 $300 12 ct, 24 ct none

Store 4 $40,000 $400 none 12 ct, 24 ct

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Calculating Numeric Distribution (Solution)

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Answer:

The numeric distribution of the 12 ct pack of Padre’s brand tortillas =

(stores carrying 12 ct Padre’s) / (total # of stores)

Numeric distribution = (2) / (4) = 50%

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All Commodity Volume (ACV)

ACV is a better measure of the total traffic that goes through the stores that stock your product or brand than numeric distribution. However, it does not say anything directly about how well those stores merchandise and compete in the relevant product category.

Definition

All Commodity Volume (ACV): a percentage measure of the total dollar volume of retail sales of stores stocking an SKU or brand versus total dollar volume sales in all categories.

ACV (%) = (total sales of stores carrying a brand) / (total sales all stores)


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% A

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Calculating % ACV

ACV ExampleThe % ACV of Madre’s brand tortillas is calculated as follows:

% ACV = (total sales of stores carrying Madre’s) / (total sales all stores) % ACV = ($100k + $75k + $50k) / ($100k + $75k + $50k + $40k) = 84.9%

Question 2: What is the % ACV of the 12 ct pack of Padre’s Tortillas?

ACV ExampleThe % ACV of Madre’s brand tortillas is calculated as follows:

% ACV = (total sales of stores carrying Madre’s) / (total sales all stores) % ACV = ($100k + $75k + $50k) / ($100k + $75k + $50k + $40k) = 84.9%

Question 2: What is the % ACV of the 12 ct pack of Padre’s Tortillas?




Store 1 $100,000 $1000 12 ct, 24 ct 12 ct, 24 ct

Store 2 $75,000 $500 12 ct 24 ct

Store 3 $50,000 $300 12 ct, 24 ct none

Store 4 $40,000 $400 none 12 ct, 24 ct


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Store 1 $100,000 $1000 12 ct, 24 ct 12 ct, 24 ct

Store 2 $75,000 $500 12 ct 24 ct

Store 3 $50,000 $300 12 ct, 24 ct none

Store 4 $40,000 $400 none 12 ct, 24 ct

these

stores


Answer:

The % ACV of the 12ct pack of Padre’s brand tortillas is:

% ACV = (total sales of stores carrying 12ct Padre’s) / (total sales all stores)% ACV = ($100k + $40k) / ($100k + $75k + $50k + $40k) = 52.8%

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Product Category Volume (PCV)

Insight

When PCV is available, it is a better indicator of where consumers look to buy a particular category of product or service. Often marketers use ACV as a rough surrogate for PCV, but the risk of using ACV alone is over-emphasizing high traffic stores where a product category may be available, but not purchased at a rate indicative of the store’s overall volume.


Definition

Product Category Volume (PCV) represents the share of category sales by the stores that stock your brand. Note that the term, Product Category Volume, is not an industry standard.

PCV (%) = (category sales of stores carrying a brand) / (total category sales for all stores)

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% P

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Calculating % PCV

PCV Example: The % PCV of Madre’s brand tortillas is:

% PCV = (tortilla sales of stores carrying Madre’s) / (tortilla sales all stores)% PCV = ($1000 + $500 + $300) / ($1000 + $500 + $300 + $400) = 81.8%

Question 3: What is the % PCV of the 12 ct pack of Padre’s Tortillas?

PCV Example: The % PCV of Madre’s brand tortillas is:

% PCV = (tortilla sales of stores carrying Madre’s) / (tortilla sales all stores)% PCV = ($1000 + $500 + $300) / ($1000 + $500 + $300 + $400) = 81.8%

Question 3: What is the % PCV of the 12 ct pack of Padre’s Tortillas?




Store 1 $100,000 $1000 12 ct, 24 ct 12 ct, 24 ct

Store 2 $75,000 $500 12 ct 24 ct

Store 3 $50,000 $300 12 ct, 24 ct none

Store 4 $40,000 $400 none 12 ct, 24 ct


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Store 1 $100,000 $1000 12 ct, 24 ct 12 ct, 24 ct

Store 2 $75,000 $500 12 ct 24 ct

Store 3 $50,000 $300 12 ct, 24 ct none

Store 4 $40,000 $400 none 12 ct, 24 ct

these

stores


Answer:

The % PCV of the 12ct pack of Padre’s brand tortillas would be:

% PCV = (tortilla sales of stores carrying Padre’s 12ct) / (tortilla sales all stores)

% PCV = ($1000 + $400) / ($1000 + $500 + $300 + $400) = 63.6%

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Store versus Brand or SKU Measures

Marketers often refer to a grocery chain’s ACV. This may be either a dollar number (the chain’s total sales of all categories in the relevant geographic market) or a percentage (their share of those dollar sales).

Finally, marketers sometimes refer to a chain’s share of a specific category’s sales in a market. This is equivalent to the chain’s % PCV, as defined earlier.

Insight:Comparing the ratio of a specific chain’s % PCV with its % ACV provides insight into whether the chain is performing above or below average in selling a particular category as compared to other stores or chains in the relevant market. If the ratio of (PCV / ACV) > 1 that means that chain is performing comparatively better in the particular product category in question than the other chains.

These metrics can also be applied to particular chains. For example, numeric distribution of a chain would equal the number of stores in a particular chain divided by the total number of stores in the market.


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Outlet # of Stores

All chain sales

All tortilla sales

Madre’s Tortillas SKUs

stocked

Padre’s Tortillas SKUs

stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct

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Working with Chains (Examples)

Question 4

What is the numeric distribution for Chain 1 of stores carrying tortillas?


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Outlet # of Stores

All chain sales

All tortilla sales


stocked


stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct

25stores


Answer:The numeric distribution for chain 1 is calculated as follows:

Numeric distribution = (chain 1 # of stores) / (total # of stores carrying tortillas)

Numeric distribution = (25) / (25 + 12 + 10 + 20) = 37.3%

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Question 5

What is the % ACV for Chain 1?

Outlet # of Stores

All chain sales

All tortilla sales


stocked


stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct


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Outlet # of Stores

All chain sales

All tortilla sales


stocked


stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct


Answer:The % ACV of Chain 1 is calculated as:% ACV = (Chain 1 total sales) / (total sales all chains)% ACV = ($1,000,000) / ($1,000,000 + $750,000 + $500,000 + $300,000)

% ACV = 39.2%

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Question 6

What is the % PCV of Chain 1?

Outlet # of Stores

All chain sales

All tortilla sales


stocked


stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct


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Outlet # of Stores

All chain sales

All tortilla sales


stocked


stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct


Answer:

The % PCV of Chain 1 is calculated as:

% PCV = (Chain 1 tortilla sales) / (total tortilla sales all chains)

% PCV = ($10,000) / ($10,000 + $5,000 + $3,000 + $4,000) = 45.45%

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Working with Chains (Examples)Outlet # of

StoresAll chain

salesAll

tortilla sales


stocked


stocked

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 12 ct, 24 ct

Chain 2 12 $750,000 $5,000 12 ct 24 ct

Chain 3 10 $500,000 $3,000 12 ct, 24 ct none

Chain 4 20 $300,000 $4,000 none 12 ct, 24 ct

Insight:Comparing the ratio of a specific chain’s % PCV with its % ACV provides insights about whether the chain is performing above or below average in selling a particular category as compared to the store or chain’s overall sales.

% PCV Chain 1 = 45.45%

% ACV Chain 1= 39.2%

Chain 1 ratio of PCV to ACV = (45.45%) / (39.2%) = 1.16

The ratio is greater than 1. Thus, Chain 1 is performing comparatively better in the particular product category in question than the other chains.


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Out-of-Stocks

Being “listed” by a chain means that the headquarters buyer has “authorized” distribution of the brand/SKU at the store level.

For various reasons, being listed does not always ensure presence on the shelf. Local managers may not approve distribution or the product may be distributed, but “out-of-stock.”

Out-of-stocks are often expressed as a percentage. Be careful to note whether the percentage is numeric, ACV, PCV, or percentage of distributing stores for a given chain.


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Calculating PCV Net of Out-of-Stocks

Question 7

What is the PCV Net of Out-of-Stocks of Madre’s Tortillas?

Definition

PCV Net of Out-of-Stocks: the sum of the % PCV of each chain multiplied by (1-% OOS)

Outlet # of Stores

All chain sales

All tortilla sales


stocked

Avg. Out-of-Stocks for

Madre’s SKUs

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 5%

Chain 2 12 $750,000 $5,000 12 ct 10%

Chain 3 10 $500,000 $3,000 12 ct, 24 ct 12%

Chain 4 20 $300,000 $4,000 none none


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Calculating PCV Net of Out-of-Stocks (cont.)

Outlet # of Stores

All chain sales

All tortilla sales


Avg. Out-of-Stocks for

Madre’s SKUs

Chain 1 25 $1,000,000 $10,000 12 ct, 24 ct 5%

Chain 2 12 $750,000 $5,000 12 ct 10%

Chain 3 10 $500,000 $3,000 12 ct, 24 ct 12%

Chain 4 20 $300,000 $4,000 none none


Answer:Total all tortilla sales = ($10,000 + $5,000 + $3,000 + $4,000) = $22,000% PCV Chain 1 = (($10,000) / ($22,000)) x (1 - .05) = 43.2%% PCV Chain 2 = (($5,000) / ($22,000)) x (1 - .10) = 20.5%% PCV Chain 3 = (($3,000) / ($22,000)) x (1 - .12) = 12.0%

PCV Net of OOS of Madre’s Tortilla’s = 43.2% + 20.5% + 12.0% = 75.7%

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Further Reference


Marketing Metrics by Farris, Bendle, Pfeifer and Reibstein, 2nd edition, chapter 6.

Documents

Distribution Measures This module covers the concepts of numeric distribution, all commodity volume (ACV), product category volume (PCV) and out-of-stocks