The Distribution of Sales in FMCG / Grocery

23 Jun 09

80:20 it is not!

In 1987, I read an article written by Porter Henry, President of Porter Henry & Co. In an article entitled ‘The Important Few – The Unimportant Many’ he mentioned in passing that the 80:20 distribution with which we all are so familiar, does not describe the distribution of things in FMCG. In his original article he used data to construct calling plans for a territory, and to illustrate how easy it is to over-service small customers – and thus by definition under-service the few big ones who count. In fact Porter Henry did not make a big song and dance about the fact that 80:20 does not fit grocery, so I will address that issue now.

The 80:20 rule is so well known because it does describe distributions which fit many situations in business. In fact it describes accurately the distribution of sales in industrial selling, where one or two big customers will dominate your orders. But wherever consumers play a large part, there is a different distribution. In this situation the sales are far more evenly spread.

So if you are looking to:

• optimise your sales territories, and ensure your merchandisers or sales reps allocate their time efficiently
• determine if your sales are adequately distributed across a territory
• find out if your product range is too deep
• find out if you should expand your product range

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