Sales velocity is crucial for the survival of any emerging Consumer Packaged Goods (CPG) brand, and in-store demos are a vital investment in achieving that velocity. While managing demos may feel like a burden after investing significant financial, intellectual, and emotional resources into getting your product on the shelf, they serve as the most reliable predictive indicator of your product's success.
The conversion ratio during a demo provides clear insights into whether your product and the retailer's velocity targets can be met. Additionally, shopper feedback during these events can guide how to communicate your product's story more effectively through shelf talkers.
Using actual data collected from in-store demos of a Specialty Meats category product, we can develop a sales velocity model that can be applied to your own products. The analysis of demo reports revealed an average conversion rate of 18.1% at an average price per unit of $10.58. This analysis is typically done automatically with Demo Wizard software, but can also be produced manually using any spreadsheet tools.
To predict monthly sales per store, you can use the following formula:
Predicted Monthly Sales Per Store = Demo Conversion Rate × Monthly Store Traffic × Shelf Reality Factor
1. Use Your Average Conversion Rate. Our actual rate is 18.1% (or 0.181) during a four-hour demo.
2. Estimate Monthly Store Traffic. A typical grocery store sees 15,000-25,000 customers per month. Using a medium estimate, we take 20,000 customers per month.
3. Apply Shelf Reality Factor. In a demo environment, advantages include personal interaction, sampling, and education. In contrast, shelf reality means customers discover the product independently. For Specialty Foods, the reality factor is typically 10% of demo performance.
4. Calculate Predicted Monthly Sales:
Monthly Sales = 0.181 × 20,000 × 0.10 = 362 units per month per store
Weekly Sales = 362 ÷ 4.3 = 84 units per week per store
After a few months of your product being introduced in the store, the category manager or buyer will share actual sales numbers. By correlating achieved velocity with demo dates and conversion rates, you can calculate the impact of demos, making it easier and less expensive to introduce your product to new stores. This data-driven approach transforms your sales method from an art to a science, allowing you to craft a compelling story about your product for buyers.
While there is ample data showing significant sales spikes during demos, the long-term impact of these events on average velocity is often overlooked.
Estimating immediate direct sales impact within two weeks is straightforward: multiply the demo conversion rate by the number of customers engaged and a purchase intent score. All these data points can be sourced from post-demo reports.
However, forecasting further requires applying the Memory Fade Factor or Retention Curve, which illustrates how consumers retain information about products, brands, or marketing messages over time. Here’s an example of the retention curve:
- Week 1: 80% retention
- Week 2: 55% retention
- Week 4: 25% retention
Depending on the product replenishment purchase frequency, you can observe the following impact:
- Two weeks after demo: Velocity multiplier 1.5X from demo participants
- Three to four weeks after demo: Velocity multiplier 1.3X due to word-of-mouth and repeat purchases
- Five weeks and beyond: Velocity multiplier 1.1X as the loyal customer base expands
The example of the forecast framework needs to be adapted to a specific product, category, and type of store (demographics) where you plan to sell your products. To build a more robust and accurate model for your products, consider the following actions:
- Create a control group of approximately five store locations without demos to validate the shelf reality factor specific to your products.
- Track actual sales over a representative period to confirm time decay patterns after demos, depending on your product's repeat purchase frequency.
- Compare the velocity of demo-supported store locations against control group locations to assess the true impact.
Many CPG brands underestimate the value of word-of-mouth potential generated by in-store demos and their impact on velocity. Brands that precede their in-store demos with social media announcements and invitations often see immediate sales and sustained velocity at least 12% higher than usual.
By leveraging the insights from demo reports, you can enhance your sales strategy and ensure your product not only survives but thrives in the competitive market.
