by Nielsen IQ
Getting on store shelves has never been more challenging. With shoppers cutting back on nonessentials to cope with inflation, retailers have in turn cut back on the number and variety of products offered, preferring established brands with track records of strong sales.
So how can you compete?
Beyond raw sales, velocity and contribution to category growth are two key quantitative measures that category managers look for when considering new brands. We’ll explain both terms today—and how they can make your pitch stand out to retailers.
Put simply, velocity shows a retailer how quickly your product sells. The faster it sells, the more money they make and the more appealing your brand is.
Velocity helps you measure your performance in a more balanced way against established brands, taking into account that bigger brands already have a wide distribution network. If your velocity is on par with bigger brands, it can signal to retailers that your product is punching above its weight.
There are many different ways to define velocity, but one of the most common measures is dollars per distribution point.
As the name suggests, dollars per distribution point indicates how many dollars per distribution point your product drives. For example, if your product sells $1,000 while reaching 10% of the market, the sales per distribution point would be $1,000 ÷ 10 = a velocity of $100.
For another example, a larger brand selling $10,000 at 75 points of distribution (reaching 75% of the market) has a velocity of $133. That means that for every point of distribution, the larger brand’s item is only selling at a velocity 33% higher than the smaller item, despite the total sales being ten times higher.
If you can show retailers that your velocity is comparable to competitors—or outpacing the category’s growth—you can make a strong case for adding your product to their shelves.
Dollars per distribution point can also be used to project your performance if distribution is increased. Let’s look back at the first example. If the smaller brand’s distribution was increased by 10 points, from 10% to 20%, the potential sales would increase from $1,000 to 2,000.
Small brands—especially new ones— typically have a lower velocity than their category.
Other common ways of measuring velocity include:
To show retailers why you’re their best bet for growth in a challenging economic climate, you’ll need to know more than just your product’s performance: you’ll need to know how your product compares to all the others in its category.
You’ll want to explore questions such as:
It’s important to know how your brand measures up against the competition. If your category is ruled by a handful of high-share brands, it could be a difficult category to grow market share in.
As a member of Foodbevy’s community, you can sign up for a free subscription of NIQ’s Byzzer, a platform making business intelligence accessible to small businesses. You’ll get three free reports, plus a weekly email alert with actions you can take to grow your brand.
Byzzer acts like your own personal team of data analysts. Rather than handing you a wall of numbers to interpret, this platform tells you what the data means and provides clear recommendations for the best course of action. With powerful insights, an easy-to-use interface, and affordable subscriptions designed for small businesses, Byzzer is made to help you evolve into a national brand.
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