IRI offers strategies, solutions for upselling

One more thing. At the end of the day, that’s really what it’s all about — convincing the consumer to put one more thing in their shopping cart. For retailers, it’s about optimizing price, merchandising and marketing in an effort to capture more than their fair share of the market in any particular category. IRI has recently enhanced its category management tools, including its Leakage Tree analytics, to help suppliers and retailers capture greater share of wallet.

Applying a leakage tree breakdown can help inform a category manager’s strategy for how to convert shoppers who are shopping a particular retailer, but not buying a particular product from that retailer. Part of the appeal to leakage tree analysis is its flexibility. It can provide a 30,000-ft. view on category performance, or it can be broken down to the SKU level for a brand analysis. Other variables that can be manipulated include the geography and the demographics. A leakage tree can help determine how a particular category is indexing across low-income purchasers in the Southeast, for example, or Hispanic shoppers in Texas.

IRI walked Drug Store News through a typical Leakage Tree category analysis.

“Leakage tree provides rich macro-level diagnostics for the retailer and the manufacturer,” said Amruta Gupta, IRI’s principal, consumer and shopper marketing, healthcare practice. “These metrics really provide a status on the health of a brand. And because you trend or do them on a regular basis, it provides an early flag if you need to go deeper.”

“It’s really fine-tuning a strategy in order to help our manufacturer/retail partners figure out how to bring potential new buyers in and convert them to their particular chain and/ or their particular product within that chain,” said Kristin Hornberger, principal and team leader, client insights healthcare at IRI.

First, a leakage tree analysis gives a category manager insight into a consumer’s interest in a particular category or product. In the example chart (see page 8), of the 68 million households who shop in Retailer X, only 40.6% buy a product from Category A anywhere.

Second, it defines shopper penetration — how many shoppers are actually buying that category in Retailer X? In the example chart, 16.8% of shoppers who shop Category A are buying that product in Retailer X. And the trend is moving in the wrong direction — Retailer X lost 1.2 percentage points in this category for the 52 weeks ended July 12.

The next two metrics are associated with leakage, Gupta said. “It’s like a share of wallet,” she said, where a retailer can determine not only how many dollars they are capturing in a category, but also can track which channels or competitors the dollars they are not capturing are “leaking” into.

For example, for the 83.2% of Retailer X shoppers who are not buying Category A from that retailer, most of them are turning to retail pharmacy or Walmart — Walmart Supercenter is capturing 22.9% of the dollar volume, CVS 13.7% and Walgreens 9.8%.

Of those 4.6 million households who have shopped Category A and made that purchase through Retailer X in the past, 60% of that customer’s annual spend went to a competing retailer — 12.4% of that spend was captured by Walmart Supercenter, 8.2% by CVS and 7% by Walgreens.

The opportunity is in preventing that leakage and convincing the shopper to take that “one more thing” to the check stand instead of buying it at a competitor. Moving the metric just one percentage point to the positive equates to a $4.5 million opportunity.

Click here to view the full Leakage Tree example.