Negotiating Better In-Store Product Placement

Location, location, location. It's a common mantra of the real estate market, but it also rings true for in-store product placement. Where your item sits in a retail store is just as important to your bottom line as your neighborhood is to the value of your home. So when it comes time to stock your product, you'll want it to be in the best place possible.

Why Is In-Store Product Placement So Important?

Product managers work hard to build their brands and get the word out, whether through traditional advertising in papers, TV spots, ads on social media, or a combination of these. But they also know that product placement plays just as big a role in promoting brand awareness. In fact, it may be even more important. Whether you're selling small consumer packaged goods (CPG) or oversized appliances, you can't maximize sales if people can't find — or don't notice — your product.

How Do You Decide Where Your Product Should Go?

You may not have the final say, but you should have a pretty good idea of where you would like your product placed inside the retail setup. Even if your product is already in the store, is it where it should be? You've probably thought about improving sales by putting your product in a more prime location.

Where a retailer allows your item to be stocked is critical for turnover, particularly if your brand is still relatively new. If the public at large is not already actively seeking your product, it’s essential that they notice it as they shop for other things. You must have a strategy for getting merchandise to the most profitable location possible. Start thinking about the layout of store you're targeting and what path people will traverse once inside.

Some retailers put popular items in the back of the store because they know these are the goods that people regularly buy. For example, people will always come in to shop for items like toilet paper and milk. What the retailer stores hope for is that consumers will notice other interesting items on the way to what they seek and toss a few unplanned things into their cart.

So, until your product is one that people sprint toward the back of the store to nab, you'll want to get it on a shelf or floor space where people will notice it. Ideally, for CPG, this would be an eye-level shelf next to similar products that consumers will already look at or on that path leading back to the milk. Customers often make “impulse” purchases — picking up items they did not intend to buy when they first set foot in the store.

A perfect example of impulse purchases are the gums, mints, candies, and magazines housed smack at the front of checkout lines in every major supermarket. People standing in line practically have to look at these items. And when they look, some will buy. However, unless your product is in one of these categories, your chances of landing one of these spots are almost nada. But BRAVO if you do! In either case, you get the idea. You want your product to stand out by any available means.

You may also draw attention with a display, whether it is a freestanding cardboard shipper for CPG or designated floor space for a kitchen range and accessories. End caps are another possibility. These are the shelves at the ends of the store’s aisles as you turn the corners. Because they are perpendicular to the numbered aisles, they are along the perimeter and enjoy major foot traffic.

If you can get floor space for your display near the entrance of the store, that’s even better for shopper awareness. Almost every visitor to that store will see it. Shoppers make a lot of impulse purchases via a strategically placed product display.

So, how can you get the product placement you want? Well, if you're trying to score prime real estate in one of the major chain retail stores, you may have to pay up.

How Big Retailers Make Bank from Product Placement Fees

If you’re vying to get your product onto the shelf of a major chain store, you might have to fork over the dough. Because new items come to market every day and will continue to do so, there is an infinite number of brands clamoring for attention. But a single store has only a finite amount of shelf space. A retailer simply can’t sell every item that exists.

Because of this, the competition among vendors is fierce, especially for coveted spots. Some big retailers will charge you a high fee for placing your product in their store, and they will charge even more for a prime location. These slotting fees can be tens of thousands of dollars for a new product spread over multiple stores, depending on the market.

Of course the premium positions will cost even more. Remember those items placed by the checkout, at the ends of aisles, and the floor displays near the front doors? Those locations are high-end real estate in the world of retail. A tie-in location, which would place your product next to a complementary one (like chips and salsa), could also require you to pony up.

Can You Negotiate for Better Product Placement?

You bet you can. The name brands do it every day. Not only do they negotiate for desirable product placement, but they might also negotiate for lower slotting fees or more facings. Facings are the number of shelf rows the store provides for your merchandise. Having more facings increases the number of items you can sell before the shelf runs out and someone has to restock.

Discounts are among the most common method of negotiations. Lowering your price for bulk orders can entice retailers to give you better product placement. The more they buy, the less they pay. Everyone loves a bargain, including retail buyers.

Another way to negotiate is to offer to run a promotion that would appeal to the retailer's clientele. This could be a buy one, get one free offer, or maybe a certain percentage off each purchase. Items on sale often receive better product placement. Again, because it's a bargain. You can always raise your prices later if your item does well.

You may also offer to demo your product in-store. Demonstrations of how products work or free samplings of food are great attention-getters. If you have a great CPG that is not already in the store, be sure to bring samples for the buyer when you meet to discuss your merchandise. If you can make them a fan, you'll almost certainly close the deal.

One more thing: Can you offer the buyer an exclusive? Perhaps your item is already at market but you just added another color or flavor. Selling a product that is not available anywhere else is typically very appealing to retail buyers.

The More You Know

During negotiations, be ready to explain your product from every aspect. Just like you want to know that the store will display your product effectively, the retailer wants to know how selling it, or moving it into a more visible area, is going to help them increase sales. You must be able to convince the retailer that your partnership will benefit both of you.

Arm yourself with data. You need to convince retail buyers to carry your brand because it will sell better than that of your competition. The more positive statistics you have, the better positioned you'll be.

Knowledge and the ability to speak intelligently about your product are key at this point. Prepare yourself to speak on a range of topics, including who your competition is, your display and promotion plan, past marketing successes, current sales, and your ability to meet demand. Let them know about your on-time distribution and shipping processes. The goal is to show the retail buyer a proven track record and why you're not a risk.

One essential element of product data to consider is the margins — not only your own margins, but the margins of the retailer as well. Show the buyer how much they can mark up your product to illustrate how they will profit from doing business with you.

A retailer may ask to see purchase orders and future projections. The security of your supply chain is something you might also need to prove, as retailers need to know the likelihood of out-of-stocks. After all, an empty shelf benefits neither party.

In short, you need to gain the buyer's trust. Don’t be afraid to share honest inside information about your product or brand. Be firm but show a willingness to work together. Your ability to finesse negotiations can build an effective partnership between you and the retail buyer.

Measuring Customer Engagement

Measuring the customer engagement of your product elsewhere can help you convince a potential buyer during product placement negotiations. Customer engagement = customer interest. If your merchandise is already in at least one store, you should be measuring customer engagement. Proving that there is already a lot of interest in your product will increase your chances of closing the deal.

How often customers interact with your product from point of entry to point of purchase (POP) demonstrates how much interest there is for your product. Some product managers employ entire teams to measure how customers interact with a product. But doing this manually is a time-and-cost-consuming endeavor, requiring bulk data collection and sifting through lengthy POP reports. Even then, it's hard to get just right. And it's impossible to stay up-to-date.

How Retail Aware Can Help

Hack alert: Here's how you can cut out the team and measure customer engagement in real time. Retail Aware measures customer behavior in-store, providing you with the insights you need to help negotiate product placement and scale your brand.

We use AI and sense technology to measure shopper behavior around product displays. The data streams to our secure cloud platform for you to access.

By measuring overall impressions (shoppers walking by) with engagements (shoppers stopping, picking up, engaging with your product) we calculate a conversion score. From there you can test things to improve that conversion score. Things like:

• TPRs like bogos and other discounts
• Digital advertising
• Signage testing

You can take this information to the retailer to ask for better placement. You can test paid placements to understand if you're really getting your money's worth. When you find what works, you can present the retailer with a case study for expansion, just like one of our customers did as they grew from locations in 4 to 27 states, backed by Retail Aware customer engagement data.

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