What's my online Size of the Prize?
Mmm. Good question. Anyone got a crystal ball?
Well I don't think you need a crystal ball actually, just some decent data (a robust panel that splits out online is ok in CPG) and a mediocre-ly whizzy spreadsheet.
Here's how we do it:
1) Plot a baseline to get the shape of your online category performance over last couple of years.
2) Overlay your company sales and work out share (if you don't get it in a nicely packaged summary already of course).
But hang on doesn't panel overstate share?
(Yes it does but don't worry about that for approximately thirty more seconds until you start reading the second list below).
3) Break down customer/ channel performance as far as the data will go and repeat steps 1 and 2 above.
4) Add in key shopper measures (penetration, frequency, Weight of Purchase) and rinse.
(Wait patiently until cycle has finished and check your formulae a couple of times).
5) Ask your finance colleagues (sometimes repeatedly) for your customer revenue numbers and apply the panel in store / online ratio to get approx revenue going through your customers' online 'stores'.
6) Make some assumptions using Amazon PCOGs if you can and chuck that in.
7) Add some pretty colours, fonts and cell borders.
8) Model what happens at customer level over next 1 to 3 years by tweaking those shopper measures.
9) Add a big dollop of common sense.
10) Sit back and talk confidently about the number that's just dropped out.
But, but, but, but, but.......
1) But you can't do all that with panel data!
Actually panel data is fine at this level, and if you calibrate if v customer EPOS which I recently did for a client, then as long as you have the same category definition the numbers are actually v. close.
2) But panel can overstate (branded) share.
Yes it can. So just talk about share PP growth when you turn it all into customer targets, ok?
3) But panel isn't EPOS.
I know. Read 1) above again, and then just accept that it's the only way you can compare apples with apples in your business, and really, it's fine.
4) But the online channel is growing anyhow so you haven't really identified an incremental number.
Well we have, that's why we started off with the baseline so we can strip it out...
5) But won't any growth we see online just cannibalise in store anyhow?
Possibly. But wouldn't a bit of share steal be just as beneficial in your business? Especially if your Cat Vision isn't quite working and bringing in that new category growth just yet (see future blog or website for Scrum based solution if needed here).
6) But I want to keep my head in the sand and not really admit that I know what online's all about and it's only a small part of my business; and oh look a pretty robin.
Ok. Here's what the 'do nothing' scenario looks like...
7) But I don't know what to do to get behind the number we've just called out.
Well, you know how it's been built up based on shopper measures? Fortunately a decent playbook will show you exactly what to do and where to invest to drive those very measures in your customers.
8) But I don't know how much money to put behind online to win.
6-8% of net rev to 'hold', 10-12% to 'grow'.
Time to just get on with it?
10) Ok then.
So that's how you do it. Now align your business, set up a tracker and get cracking.
(or drop me a line and borrow our crystal ball for a week or two if you're still not sure).