Thursday, November 15, 2012

Working with Numbers - Part 2

Part 2 of Anupriya's 3 part series! As always, thanks a lot :)

For Part 1 click here.

My first post covered the various sources of data that we have access to or use as marketers. Now I will dig deeper into 2 sources - Internal Numbers & Nielsen and most importantly how to tie them together.
As discussed earlier on also, internal numbers are the only reality of our lives. We need to live with them and all marketing activities at the end of the day need to culminate into better sales growth. 

For simplicity sake for this entire piece we will assume Primary Sales = Secondary Sales 

Some Key Points to remember while looking at internal numbers:

  • Actual numbers are important but most important metric to look at is growths. What is most important is to chase a growth objective and chase it hard
  • While looking at growths always delink the volume growth and value growth – for e.g. if you took a price increase by 10% and your sales growth is only 11% then it is a cause of worry. One must always set a volume growth and a value growth objective. Ultimately consumers buy 1 unit of your brand – they do not buy Rs 100 worth of your brand. Hence, always try and sell more units
  • Always look for the “BASE EFFECT” – any activity in the previous period which increased/decreased your sales abnormally is a base effect. For e.g. suppose to liquidate old stocks you run a 1+1 offer on your brand – it will surely show as a part of your base. Or if you increased your price by 20% in a particular month and the category is price sensitive it will show a tanking of sales. Or something as simple as a stock out in a particular month which would make your base lower
  • Map the seasonality effect – if you operate in a category which is seasonal then you must always consider it while analyzing numbers. And seasonality is of various types. For e.g. there are some brands like Glucon-D who do more than 60% of their annual turnover in 3 months and then there are brands like Make-up for whom sales doubles during festivals.
  • Accurate Geographical Mapping – as long as you are looking at All India numbers this phenomenon does not come up as an issue. But the moment you start digging deeper and granular it is extremely important to map geographies accurately. Let me explain this further. Internally numbers come in ASM wise which means the sales are for ASM territories. Usually they are according to states. However, there are times when a certain part of an ASM territory may be removed and handed over to another one. So just a word of caution 

Key Metrics to look at in internal numbers are as follows: 

1.       Absolute Volumes 
2.       Absolute Value 
3.       SKU mix i.e. how much of each SKU/Variant sells 
4.       Volume & Value growth

Key Drill downs for each of the above should be:

  • By SKU/Variant e.g.  100 gms, 50 gms, a particular variant like in shampoos or soaps, shades for hair colour, flavours in food….so on and so forth
  • By pack type – bottles vs sachets, wrappers vs cartons, jars vs cartons etc
  • By geographies

o   Urban & Rural
o   By State
o   By Metros, Tier 1 Cities & Rest of India
o   Top 10/20 contributing Cities (ideally this should be more than 60% of your sales) 

AC Nielsen
AC Nielsen is a bitter reality of your life and will always be. So we all as a community can crib about it, can abuse it and wish that we could do without it but sadly we cannot!!!! We have to learn to live with it and at best back co-relate it to the internal numbers.
So what essentially Nielsen does is – takes a sample set of outlets – these are representative of the entire universe of outlets and then extrapolates the data collated at these outlets to an All India number or for a particular state or city. 
So in essence the ACN is your one stop shop for competition benchmarking. This is the closest one can get to market reality. 

Key Nielsen Metrics to look at:
1.       Market Share Value (MS Val)  – this is your sales in any particular market/Category sale in that market
E.g. if you sell Rs 100 worth of soaps in Maharashtra while in totality Rs 1000 worth of soaps are sold in Maharashtra then your Market Share is 10%
2.       Market Share Volume (MS Vol) – this is your volumes sales in any particular market/category sales in that market. Now this measure is important because (as quoted earlier) volume is the consumer reality – rest is only a price game. So you would want to know how good or bad you are on volume shares
a.       Volume share can be calculated at any common volume measure. E.g. Units, Kgs, tons, gms etc depending on what makes the most sense for your category. For instance in Hair Colour since the sub categories have different formats hence looking at Unit share makes sense while in Soaps volume share in tons makes sense as all soaps are measured in grams
3.       Numeric Distribution (ND) – this is a representation of your distribution. This is number of your outlets/total number of outlets the category is present in. E.g. if you are present in total 100 outlets and the category outlets are 200 then your numeric distribution is 50%
4.       Weighted Distribution (WtD) – this measures the quality of distribution i.e. in your distribution what is the category sale.  So for e.g. if your weighted distribution is 80% it means that 80% of the category sales happens in the outlets you are present in which basically means that you are present in the right kind of outlets
a.       The higher the weighted distribution the better it is and one should always chase this measure. This is not to say that you shouldn’t chase numeric distribution but weighted is more important. Hypothetically speaking if your numeric distribution was say 80% while your weighted was only 50% it means that while you are present widely, you are not present in the outlets where the chance of getting picked up is higher
5.       Share amongst Handlers (SAH) – this is a measure of your strength within your distribution. This is a measure of your market share in the outlets that you are available in. ideally for strong brands this should be higher than your overall share substantially. Else, it means that your brand strength is not good and you need to chase marketing measures than availability. Eg. If your overall market share is 20% then your SAH should ideally be around 28-30% unless of course your ND is >85% because then your distribution is almost the category universe
There are a lot of other measures in AC Nielsen which can be looked at and analyzed and there is usually never an end to analysis. I have however, chosen these 5 metrics because these are (according to me) most important and also the best to start analyzing the business with.
These measures when analysed thoroughly will throw up question which can then be answered using other measures. And I will be more than happy to tell you which ones if you can revert with specific questions. 

Marriage b/w Reality & the Bitter Truth
This is the section where I explain how both the internal numbers and the Nielsen numbers need to be looked at in conjunction to each other.
Within internal numbers you need to look at only secondary sales because this is what goes into the retail environment. However, again for simplicity I am going to consider primary = secondary sales
While marrying the two sources of information please only look for trends and not absolutes – it will only throw up nothing
So things one must correlate:
·         Growths – one must look for a similar growth trend in CAN & internal secondary numbers. Now a gap of 2/3% is absolutely normal but it should be in the same zone for eg b/w a 8% internal growth and 10% Nielsen growth then its fine. However, it is always helpful to draw a 2X2 matrix for markets where the axis cut each other as All India secondary growth and All India Nielsen growth. Then each market is mapped according to these 2 growths.

 X Axis- Nielsen Growth and Y Axis – Secondary Growth The 4 quadrants of this will be:
·         Right Top– Doing Well – Continue Efforts – these will be markets which are growing faster than All India both internally and in Nielsen
·         Right Bottom – Strong Brand – Push Sales  - these are markets where in Nielsen you are growing faster than All India however your internal growth is not so fast. Here strong sales plans help
·         Left Bottom – Immediate Action Plan  - the brand is not growing well either in Nielsen nor in internal sales. These geographies need a full understanding of what is happening
·         Left Top – increase Investment – these are geographies where your brands has a strong trade pull however, the consumers are not buying as much of you as they should. This means these geographies need incremental inputs on media or consumer activation or consumer promos depending on what is the reason for this situation 

·         One must always know the lag in pick up – so is your category the kind where what gets sold in month x gets sold in month x or does it get sold in x+1 or x+2. It is x+2 then you should look for the growths for x+2 period and not x 

·         ACN Pick up – this is an exercise one must do over atleast 24 months period and then take an average. This means take out your volume sales (if you have too many SKUs) or value sales if there is only 1 odd SKU for internal secondary and ACN and then find out the ratio for that. Then average out this ratio. So every time your share movement is not in the right direction as your internal numbers you should first check this ratio – is there a change in pick up. This is especially very important for new brands or brands which are highly mordent trade dependent.
·         Geographical contributions – one must look at the geographical contributions in the internal numbers and Nielsen. For eg if your top 20 cities/ 10 markets do not match in Nielsen and internally it means that the wholesale component is very high internally and the actual consumer is sitting elsewhere. This also means that your marketing activities should be focused on the consumer pick up geographies and not your internal sales geographies. And trust me it is always a very difficult choice
Last Quote: For the 2nd part my last quote is – these all put together give you the answer to WHAT – not WHY. So please don’t look for WHY. The biggest mistake all of us end up making is turning this analysis somehow into diagnostics. It is not. This is only the symptom. Diagnostics we will come to. 

Wait for part 3!!!


  1. Hi Anupriya
    Could you explain the Geographical Contributions part in detail

    1. Geographical contributon means % of sales or offtake which comes from a particular state/city. E.g. Delhi contributes 10% to your internal sales and say 15% to your offtakes. the point i am making is that marketing activities need to focus on consumers buying more of you and hence they should be focussed on geographies which have higher contribution to offtakes than internal sales. internal sales numbers could be high because of high wholesale contribution, a super stockist in the city etc. however, neither will have an impact of offtake

  2. You said, Primary = secondary for simplicity sake

    But are they not equal ? Whatever distributor buy he sells to retailers, so why does these numbers not equal ? :-(

    1. It happens because company can force primary upon distributions but distributor can not force secondary sale to retailers. company officials says- Primary toh honi hi honi he. secondary aapko karwani he. ;)

  3. hi anupriya...first of all thanx for such an exhaustive description of the sales concepts....
    Can u please help me dat...whether the 2x2 matrix u have described is for individual SKU and depicts growth for all markets or what....I am quite confused oh how to map this matrix..

  4. Also, what will be the central coordinates etc etc..I have such questions in my mind..Can u plzz provide us with a chart which depicts this matrix .

  5. Hi Anupriya

    Is it would be helpful if you kindly share an example of ACN Pick Up?

    Regards - amir

  6. Hi anu can u explain benchmarking in secoundery sale.

  7. someone at linkedin copied the same article. Thanks though.