Category Management Training: There’s Nothing “Fair” About a “Fair Share Index”

by Sue Nicholls, President, Category Management Knowledge Group

In today’s world, there is much emphasis on deriving effective and strategic insights in category management.  With all of the incredible data sources available to both retailers and suppliers, there are certain measures that are consistently used to derive these insights.  For some of these more commonly used measures, there’s a tendency to generalize the interpretation of the numbers, or not scratch below the surface and think about what the numbers really mean.

One example of this is “index”, which is a measure that helps to compare two numbers – for example, index vs year ago is $ sales this year ÷ $ sales last year x 100; index vs target is $ sales ÷ $ target x 100.  The interpretation of an index tends to be that >100 is “good” or “overdeveloped” and <100 is “bad” or “underdeveloped”.  But there are many indices in category management that should be more thoughtfully interpreted.  Let’s review one of these indices – fair share index – in more detail.

Fair Share Index (FSI):

Calculation:  Brand or Segment Tactic Share ÷ Brand or Segment $ Share

The Fair Share Index (VSI) compares the retailer’s share of a tactic (either shelf, promotion, display or items) with their category $ share at a brand or segment level.

A common complaint from a supplier to a retailer when their brand FSI is <100 is “I’m not getting my fair share of <items> or <feature> or <display> or <shelf> in the category”.  And if this number is >100, there is a concern that brand support may be cut back because they are getting too much support.  These generalizations come from the FSI calculation.  An example in this table is that Brand #2 is not getting its fair share of any of the tactics, because all of the indices are below 100.  Retailers need to think beyond the generalizations, and tie in the measure with their overall strategies in the category.  There are some brands and segments that retailers will want to be more developed on based on target consumer and category strategies, and they should have tactical strategies to reflect that.

Category Management IndexFor example, Brand #2 (which is a value brand that competes with their own Private Label brand) has indices below 100 across the tactics.  These indices are higher than the Private Label brand (Brand #6) in feature & display, and higher in all of the tactics than Brand #1, which is a more premium national brand.  This retailer should be concerned that the FSIs are so high on Brand #2.  They should consider allocating more feature, display and shelf to Brand #1, and more display to Brand #6 (obviously this will depend on the store brand strategies as well).

In net, retailers need to be strategic about which brands and segments they want to have the highest fair share index in.  This should be based on their target consumer and category strategies, and what they are trying to accomplish in the category.

Our course on “Category Management on Limited Data” and “Category Assessment” walk you through many of the more common measures in category management and considerations for each of them.  Next week I’ll talk about Category Development Index, another common index in category management.  Have a great day!

Download our “Category Management Glossary” for other common terms and definitions in category management.

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