Total Distribution Points Archives

Hello, and welcome to the knowledge hub that is the CPG Jargon Buster Master Article!

Here you will find direct links to many relevant jargon/concepts in the CPG Industry. Each term is explained in brief below, with a link to the detailed blog at the end of it.

We keep adding more jargon as we write about them, so be sure to bookmark this page and keep learning! We’re also creating a FANTASTIC CPG-specific product for optimal and super-easy data exploration – you might want to check Explorazor out!

Till now, we have covered

ACV

ACV stands for All Commodity Volume. It is used in the calculation of %ACV (obviously, but the term ‘ACV’ is often used interchangeably with %ACV, so one needs to be mindful of that).

ACV is nothing but the total monetary sales of a store. Assessing the ACV of a retailer helps suppliers know which outlet presents the best sales potential based on its business health.

Learn how to calculate ACV using Nielsen data and how ACV relates to %ACV

Read more: What is ACV in CPG?

%ACV

A more comprehensive blog than the ACV blog above, %ACV, or %ACV Distribution, helps managers understand the quality of their distribution networks. You might wonder why a product is not selling well in a region despite being apparently well-distributed there. A deep analysis of metrics such as %ACV will help you resolve that.

Read the blog to understand how to calculate %ACV, and the 5 points to consider when performing the calculations:

Read more: What is %ACV?

Velocity

Velocity is another metric to study distribution. Velocity factors the rate at which products move off the store shelves once they are placed there.

Managers can take charge of sales by utilizing velocity fully, and understanding the two major velocity measures – Sales per Point of Distribution (SPPD) and Sales per Million. Refer to the blog to learn what these measures are, with examples to help. As Sales per Million is a complex concept we’ve also explained it separately in another blog:

Average Items Carried

This is the average number of items that a retailer carries – be it of a segment, brand, category, etc. For example, suppose that Brand X has 5 products/items under its name. Average items Carried would be from a retailer’s perspective – he could be carrying 2 products, or 2.5 products, or 4 products of Brand X, on average.

AIC is one of the 2 components of Total Distribution Points (TDP), the other being %ACV Distribution. The blog explains the relationship between AIC and %ACV with respect to TDP (Total Distribution Points), using examples to simplify.

Learn why AIC and %ACV are called the width and depth in distribution, and how to calculate AIC in Excel:

Total Distribution Points – Basics

Total Distribution Points, or Total Points of Distribution, is again a distribution measure, considering both %ACV and Average items Carried to produce a TDP score that helps Brand Managers understand things like product distribution and store health, and base their future strategies accordingly.

There’s also a method for managers to know whether their brand is being represented in a fair manner on the retailer’s shelf, using TDP. Learn how to calculate TDP and the special case of TDP if %ACV is 95 or above:

Sales per Million

How do you compare two markets where one is many times larger than the other? Does a manager simply say “It’s a smaller market, thus sales are less” and be done with it? Shouldn’t s/he investigate if the products in the smaller market are moving as fast as they are in the larger market?

Sales per million helps compare across markets, while controlling for distribution. It accounts for the varying Market ACVs and stabilizes them, so managers can find how each product is doing in each market, regardless of market size.

Learn how to calculate Sales per Million with a cross-market comparison example following it:

Read More: Sales per Million

Panel Data Measures

Nielsen and IRI provide the numbers for these 4 measures, and even those who do not use Nielsen/IRI need to have an understanding of household-level analysis using these 4 measures.

Here are the one-line introductions:

Household Penetration

How many households are buying my product?

Buying Rate

How much is each household buying?

Purchase Frequency and Purchase Size are sub-components of Buying Rate.

Purchase Frequency (Trips per Buyer)

(For each household) How often do they buy my product?

Purchase Size (Sales per Trip)

(For each household) How much do they buy at one time?

These 4 measures in table format can be used by managers to understand the consumer dynamics that drive the total sales for their product.

Understand these 4 measures in detail, and how they relate to sales:

Read More: Panel Data Measures

Market Basket Analysis

Market Basket Analysis (MBA) is a powerful data mining technique used in the CPG industry to analyze customer purchase behavior and identify relationships between products.

Learn how Market Basket Analysis can help you gain valuable insights into consumer behavior in the CPG industry.

Read more on: Market Basket Analysis

Point of Sale

The consumer packaged goods (CPG) industry is a highly competitive market, and companies need to make informed decisions to stay ahead.

One tool that CPG companies use to make data-driven decisions is Point of Sale (POS) data.

Learn how CPG and Pharma companies optimize their performance using Point of Sale

Customer Segmentation

Customer segmentation, is a technique that helps you divide your audience into distinct groups based on their characteristics, behavior, or preferences.

By doing so, enterprises can tailor your strategies to each segment’s specific needs, improving your chances of success.

Read more on: Customer Segmentation

Price Elasticity of Demand

Price elasticity of demand is calculated by dividing the percentage change in the quantity demanded of a product by the percentage change in the price of that product.

The resulting number is a measure of how sensitive the quantity of the product demanded is to changes in its price.

The formula for calculation Price of Elasticity is:

Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)

Check out our blog on how CPG companies take decision on the basis of Price Elasticity.

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PRODUCT TOUR

We previously discussed ACV and %ACV as part of our CPG Jargon Buster Series. Let’s focus on TDP, Total Distribution Points, also sometimes known as TPD or Total Points of Distribution.

TDP numbers reflect the overall health of your brand from a distribution perspective. The higher the TDP numbers rise, the better your brand’s overall health.

CALCULATING TDP

TDP is closely related to %ACV – for distribution width, and Average Items Carried – for distribution depth. In fact, Nielsen states the method for calculating TDP as follows:

“You can find it by calculating the number of retailers your products are in (breadth) and the number of products you’re selling in those stores (depth).”

TDP is generally part of your Nielsen database, so you will have it ready at your table. However, if you have to calculate it yourself, here’s how it goes:

Suppose a Brand has 5 items/SKUs in its portfolio. TDP would be applicable at the item level of the Brand, meaning the 5 items/SKUs, and is calculated simply as the sum of the %ACV distribution of all these items. It is not necessary that these items be part of a brand; they can be clubbed under a category, segment, or any other similar product aggregations as well.

Example:

	%ACV Distribution
Total Brand A	80
Item A	50
Item B	60
Item C	65
Item D	75

TDP = 250 (50 + 60 + 65 + 75).

The maximum TDP score one can achieve here is 400, where %ACV distribution for all items is 100. One cannot set a partition and say that a certain TDP score and above is good, and below it is concerning. It all depends on the unique set of circumstances that surround your company, brand, category, etc.

Note: Avoid double-counting by excluding Total Brand from the calculation.

IF %ACV DISTRIBUTION IS 95% OR ABOVE

If we were to calculate the TDP of Brands with %ACV Distribution of 95% or more, the TDP score and the Average Items Carried would be almost the same, provided that we shift the decimal point two places to the left.

Look at the table below:

	%ACV Distribution
Total Brand X	98
Item 1	66
Item 1	64
Item 1	78
Item 1	82
Item 1	80

TDP = 370

Average Items Carried = 370 ÷ 98 = 3.77

Notice how if we would have moved the decimal two places in the TDP, we would have arrived at 3.70 of Brand X’s items carried by a retailer, on average.

A MASTER MEASURE – TDP

By allowing data analysts to look at both how widely the product items are being distributed and how well they are performing once they are in the store, TDP provides a solid base for managers to base their next strategies and objectives on.

TDP further helps Managers in CPG understand Volume vs Brand Distribution. The item-level scrutiny ensures that managers know when their product is off the retailer’s shelf, as would be reflected in the total volume reduction.

TDP also lets managers know whether their brand is being represented in a fair manner on the retailer’s shelf. The method to do that is to find out your TDP percentage as against competition ÷ the in-store volume percentage. The volume percentage should not be higher than the TDP percentage.

Finally, TDP also allows you to gain intel on whether the product category has expanded, and find ways to bypass competition in securing shelf space to increase velocity.

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PRODUCT TOUR

Category: Total Distribution Points

CPG Jargon Buster Master Article

Basics of Total Distribution Points (TDP) in CPG