Planograms: Definition and importance in visual merchandising

A definition of a planogram is when every centimeter of trade area in retail “works” and makes a profit, generates sales, attracts customers’ attention, and maintains the reputation capital of the trade point.

Customer behavior has been studied and analyzed by marketers a long time ago. Every retailer knows that the visual design of the store and the layout of products play a key role for a customer, who, in 80% of cases, makes an impulsive decision to buy something directly in the store. 

To illustrate this, let’s look at two examples from real life. In the first case, the buyer goes to the store deliberately to buy some hard cheese. In the second case, to buy a bottle of wine. Did you ever notice that if you place dessert ricotta for a discount price near hard cheese and, for example, flour, vanilla, and confectionery diagonally from the customer, they are likely to go to the cash desk with a kit for homemade dessert? Or, in the second case, the buyer will definitely take some olives and nuts if they notice them in close proximity to the stand with wine.

In both cases, these decisions are made for the customer by strategically planned merchandising rules – principles that control the placement of products in the store, on the showcase, and on the rack. Speaking in terms, merchandising is a set of measures aimed at developing and implementing a strategy of placement and layout of products, and visual design of the trade point. 

What are planograms?

Planogram definition: Retail planogram, or in other words, a scheme of the store/ trade equipment, is an image or a scheme that portrays products/product categories/brands/SKUs and is made manually in a graphic editor or in a special design program. 

 

An example planogram grocery store

So there are several questions we need to clarify in this text: how to decide which merchandising strategy to choose for the store, how the manager defines planograms properly, indicates their goals and directions, and how to make store planograms that will work and make sales.

Purposes of creating planogram for retail store  

Aside from the fact that the planogram meaning is a powerful tool for retailers, providing them with the insights they need to create effective displays that resonate with their customers and drive sales, the proper planogram also helps the retailer to: 

• influence customer behavior, attention, and movement trajectory in the store;
• control the store assortment in terms of brand, category, and individual SKUs;
• fixate the adopted and developed strategy of layout and replicate it in onto several trade points/locations;
• consolidate agreements that regulate the location of the products with the supplier and brand manager;
• correctly place perishable products and do not allow their spoilage, discard them;
• control the implementation of merchandising guide or book (inner planograms definition, written instruction, and merchandising strategy) on the trade points of the chain, and avoid deviations in the layout strategy. 

Principles of making merchandising planograms

A correctly made merchandising planogram must correspond to the 5 classic principles of merchandising. These are sufficiency, visibility, systematics, efficiency, and compatibility. Let’s look at each of them individually.  

↳ The principle of sufficient layout implies the availability of the complete product assortment on the racks and showcases, taking into account the level of sales and demand, store area, the size of equipment, customer behavior, seasonality, etc. 

↳The sufficiency principle is not only about putting all the assortment on the shelf but also about correctly defining the number of facings of each SKU within each trade equipment unit.

When you follow the sufficiency principle you need to keep the balance between deficit and overstock of products and react to the slightest fluctuations in demand.

↳ Principle of the visible layout. Customers are led by their eyes. The more visible the product is, the more attractive, appetizing, and appealing it looks, and the more likely the purchase will be made and the buyer will return again. The customer must see the product clearly from every angle of view. When you make a grocery store planogram, sometimes it is important to take into account the angle of view and the attractiveness of each product. 

Do not forget about the connection between the layout and the customer’s view angle. We have written here in more detail about the rule of “hat and eye level.” 

↳ The principle of systematics means grouping the layout of connected products or, in other words, “commodity complexes” – for instance, household chemicals are often located near paper products for home, paper towels. The showcase with tea is located in close proximity to sugary products, chocolate, and cookies. 

Following the principle of systemic layout, you can create commodity complexes of products from one category, use, brand, or even price category (mass market, luxury, premium). 

↳ The principle of efficient layout involves keeping the balance between expenses and profit. The main markers of efficient layout (thus the efficient planogram) are an increase in sale rates along with a decrease in costs for the product, an increase in the turnover of products and customer traffic, a reduction of time spent by the customer on the search of product, etc.  

↳ Principle of compatibility. Using this principle when making a planogram will help you avoid violation of commodity neighborhood, as well as spoilage of products and incorrect visual presentation. 

Let’s take an example from food retail. Placing “sorbent” products with a high level of smell and humidity absorbance (e.g., groats sold by weight) in close proximity to “sorbate” products (fruits, vegetables, meat) will lead to a spoiled look and reduced expiration date of the former.

Elements of a Planogram  

The planogram of the store/trade equipment is a reflection of the merchandising and marketing strategy based on the main merchandising principles which are applied and customized for the goals and tasks of each concrete retailer. When you make a planogram, it is important to take into account two key moments:

1. Planogram is not a static document. A showcase planogram is not a scheme that you can create once and use for many years. It will not be effective as the demand and customers' behavior change very fast and dynamically, assortment gets out of date and rotten, suppliers introduce new products, etc. On average, retailer changes the layout planogram 3 to 4 times a year at least. Experts suggest reviewing and adapting planograms once a month.  
2. Store planogramming should be based on general merchandising principles but at the same time reflect goals of concrete trade point which in turn is based on assortment, financial, pricing, and promotional strategy of the company’s development. Every retailer should understand which product categories and SKUs are the target ones in their assortment and which products should be on top positions in layout, playing the role of sales engines. This data about products can be received by analyzing the consumer demand and sale rates from previous periods or in real-time. We explained how to do it here. 

As soon as the retailer sets and realizes the goals for sales and promotion of their products, you can start the first stage of planogram creation. 

Step 1. Developing a concept of the store/trade point/trade equipment

At this stage, the general direction of the layout style and type is being formed, and for each product category, brand, price category, etc., the trade equipment is being selected. This selection needs to be conducted in such a way that every product is displayed openly and visually appealingly, and it should correspond with the customer’s moving trajectory in the store. The product should be placed in such a way that it will encourage a fast purchase. 

Related: Automated Replenishment System in Grocery

Step 2. Schematic drawing of outlines. Highlight popular, best-selling, or new products.

After dividing the products into categories, calculating sales shares of each product, developing a sale strategy for each category, and choosing the optimal layout, you should schematically depict all these outlines on the planogram.

Merchandising planogram must be very informative and contain all the technical parameters and details such as size, type, and dimensions of trade equipment, store area, number of faces and their type, product identifiers (color, size of the product package, number of SKUs placed on the showcase, prices, possible instructions and guidelines from marketers and brand managers, etc.) With such a large amount of information, the showcase planogram should also be easy to read. Modern planogram constructors present an opportunity to do it easily and effectively. 

 

Making a trade equipment planogram in Leafio

Step 3. Approval and control

One of the planogram examples for liquor products

Mandatory approval of the planogram by the owner/management of the company and replication of it on the trade points with mandatory reporting and execution control. 

Only several years ago, control over layout according to the planogram and its compliance was done manually. Reconciling the layout and fixating the changes on all versions of showcase planograms took a lot of time and effort from the store staff, merchandisers, and category managers. Modern systems of merchandising management allow you to automatically control planogram execution, keep track of layout in real-time and transfer the whole accounting system to your smartphone as well as make instant changes and edits on the planogram. 

Planogram software to maximize sales

The planogram's meaning is essentially a roadmap for retailers that helps them arrange products in a way that optimizes space, promotes certain items, and creates a pleasant shopping experience for customers.

It is obvious that making an efficient layout planogram is not an easy process that requires systematic approaches and solutions. It is especially important for commercial networks with a large number of commodity items and an extensive network of trade points.  

Pioneering software for making and designing planograms was MS PowerPoint and MS Excel. Considering the popularity and availability of these apps, we should not forget that the functionality of their merchandising tools is rather limited. Both apps allow you to perform a basic set of functions like generating formulas to calculate numbers and indicators or designing layout presentations. 

Nowadays, the market offers several specialized planogram software with a more advanced set of functions and tools. These applications help to create a database of SKUs and assortment, enter data about retail space and trade equipment, and make and replicate planograms. 

However, the most technological and modern solution for working with planograms today is automized systems for merchandising management. Leafio is one of those systems. Aside from multifunctional work with planogram constructor, such smart systems allow you to create a single database of product layout and assortment, synchronize all the numbers with the application for storage and accounting management, and conduct an analysis of layout efficiency and how it affects sale rates in real-time. The main thing is that the retailer gets the opportunity to manage the whole merchandising process and act strategically and systematically according to the company’s goals and sales policy.

Merchandising and Planogram Automation: Tips to increase shelf space profitability