A planogram (also known as a plan-o-gram) is used in retail to show the placement of products on a shelf. Placement is important in retail to maximize sales and minimize wasted space.
Planograms are sometimes used by manufacturers to suggest optimum display for their merchandise at stores.
Planograms can also serve as a reference when trying to analyze retail performance to identify one of the potential culprits in lower sales.
How to Create a Planogram
Creating a planogram is a delicate balance of logical organization such as grouping items in the same category and taking advantage of consumer behavior and psychology to expose them to new or highly profitable products, and increasing sales by using cross-selling techniques and triggering impulse buy behaviors. For example, stores will first group all bread-like products in the same aisle and then will often place peanut butter, jelly and other condiments in the same place to help remind shoppers to stock up on those items at the same time.
Products placed at eye-level may sell better than products placed on the bottom shelf. However, products on the bottom shelf may be eye-level for children. Their lower level placement may even make it easier for children to grab products to add to their parents' carts. For example, you'll often find sugary kid-centric cereals on the bottom shelves while healthy, high-fiber ones will be placed higher.
How to Use a Planogram to Increase Revenue
You can combine historical sales data with your planogram to identify high and low selling items and their placement. If you need to nurture some products, you may want to move them to an area with higher sales. And low-selling products in traditionally high-selling placements should probably be replaced.
Planograms can help grow your retail business by:
- Grabbing a consumer's attention using a pleasing layout
- Creating incentives to trade-up to higher margin items
- Emphasizing bestsellers using placement
- Tracking success and failures to offer future improvement
- Monitor inventory and reduce both overstocked and out-of-stock products