### Numeric distribution - Management By The Numbers

```Distribution Measures
This module covers the concepts of numeric
distribution, all commodity volume (ACV), product
category volume (PCV) and out-of-stocks.
Author: Paul Farris
Marketing Metrics Reference: Chapter 6
© 2010-14 Paul Farris and Management by the Numbers, Inc.
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 outof-stock on net PCV.
MEASURES OF DISTRIBUTION
Measures of Distribution
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.
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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)
NUMERIC DISTRIBUTION
Numeric Distribution
Insight
The number of physical
chain has implications for
delivery systems, cost of
servicing, and market share.
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Outlet
All sales
All tortilla
sales
SKUs stocked
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
CALCULATING NUMERIC DISTRIBUTION
Calculating Numeric Distribution
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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Outlet
All sales
All
tortilla
sales
SKUs stocked
SKUs stocked
12 ct, 24 ct
12 ct, 24 ct
Store 1
\$100,000
\$1000
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
2
stores
CALCULATING NUMERIC DISTRIBUTION (SOLUTION)
Calculating Numeric Distribution (Solution)
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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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)
ALL COMMODITY VOLUME (ACV)
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.
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Outlet
All sales
All tortilla
sales
SKUs stocked
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
CALCULATING % ACV
Calculating % ACV
ACV Example
The % 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?
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Outlet
All sales
All
tortilla
sales
SKUs stocked
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
these
stores
CALCULATING % ACV (SOLUTION)
Calculating % ACV (Solution)
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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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)
PRODUCT CATEGORY VOLUME (PCV)
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.
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Outlet
All sales
All
tortilla
sales
SKUs stocked
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
CALCULATING % PCV
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?
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Outlet
All sales
All
tortilla
sales
SKUs stocked
SKUs stocked
Store 1
\$100,000
\$1000
12 ct, 24 ct
12 ct, 24 ct
Store 2
\$75,000
\$500
12 ct
24 ct
these
stores
Store 3
\$50,000
\$300
12 ct, 24 ct
none
Store 4
\$40,000
\$400
none
12 ct, 24 ct
CALCULATING % PCV (SOLUTION)
Calculating % PCV (Solution)
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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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.
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.
STORE VERSUS BRAND MEASURES
Store versus Brand or SKU Measures
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.
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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
Question 4
What is the numeric distribution for Chain 1 of stores carrying tortillas?
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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
25
stores
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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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
Question 5
What is the % ACV for Chain 1?
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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
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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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
Question 6
What is the % PCV of Chain 1?
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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
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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# of
Stores
All chain
sales
All
tortilla
sales
Tortillas SKUs
stocked
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
Outlet
WORKING WITH CHAINS (EXAMPLES)
Working with Chains (Examples)
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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“authorized” distribution of the brand/SKU at the store level.
OUT-OF-STOCKS
Out-of-Stocks
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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Outlet
Tortillas SKUs
stocked
Avg. Out-ofStocks for
\$10,000
12 ct, 24 ct
5%
\$750,000
\$5,000
12 ct
10%
10
\$500,000
\$3,000
12 ct, 24 ct
12%
20
\$300,000
\$4,000
none
none
# of
Stores
All chain
sales
Chain 1
25
\$1,000,000
Chain 2
12
Chain 3
Chain 4
All
tortilla
sales
Definition
CALCULATING PCV NET OF OUT-OF-STOCKS
Calculating PCV Net of Out-of-Stocks
PCV Net of Out-of-Stocks:
the sum of the % PCV of each chain multiplied by (1-% OOS)
Question 7
What is the PCV Net of Out-of-Stocks of Madre’s Tortillas?
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SKUs stocked
Avg. Out-ofStocks for
\$10,000
12 ct, 24 ct
5%
\$750,000
\$5,000
12 ct
10%
10
\$500,000
\$3,000
12 ct, 24 ct
12%
20
\$300,000
\$4,000
none
none
# of
Stores
All chain
sales
All
tortilla
sales
Chain 1
25
\$1,000,000
Chain 2
12
Chain 3
Chain 4
Outlet
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%
CALCULATING PCV NET OF OUT-OF-STOCKS (CONTINUED)
Calculating PCV Net of Out-of-Stocks (cont.)
PCV Net of OOS of Madre’s Tortilla’s = 43.2% + 20.5% + 12.0% = 75.7%
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Marketing Metrics by Farris, Bendle, Pfeifer
and Reibstein, 2nd edition, chapter 6.
MBTN | Management by the Numbers
FURTHER REFERENCE
Further Reference
23
```