As a food manufacturer, do you have a significant investment in equipment or merchandising in the marketplace? Do you have a robust operator purchase history — either in your trade payment data, direct operator purchases, or from incentives and loyalty programs? If so, you already have the information you need to evaluate the R.O.I. and effectiveness of your program and identify your target customer profile. Here's how:
Determine the Sales Lift from Equipment
Quantifying the actual sales lift you get from an equipment placement is a fairly straightforward process. Here are the steps:
- Generate a list of equipment placements and shipment/install dates.
- Identify the products that generally flow through that equipment.
- Match those customers to your trade, sales, and/or incentive data.
- From the available data, set up a pre-period (past 2–4 quarters before installation) and post-period (available quarters after installation) and compare purchases to determine the change in sales for the affected products after the equipment is in place.
- The difference will represent the amount of sales change you are seeing from the equipment placement.
Be sure to keep in mind two important factors. If your products have significant seasonality, be sure to select periods that even out seasonal influences. Also, exclude the quarter the equipment is placed as it can be affected by the timing of the placement and initial product load.
Payout Analysis
Once you have determined the sales lift per month, that information can be compared to the equipment cost to determine how long it takes to recapture your investment and start turning a profit. Different manufacturers have different benchmarks. Some measure against top-line sales, while others measure against gross margin on the key products. Either way, remember that an equipment placement is a long-term investment in the operator and profitability needs to be measured against the projected lifetime value of the customer or the equipment.
Target Identification
As you analyze the results you will notice that operators with shorter payouts have some things in common. You can look at prior purchase size, location, segment, product mix, GPO group, and many other variables to determine the ideal targets for equipment placement. You can also look for common features for those underperforming operators with a longer payout period. That information is invaluable in helping avoid operators who are not likely to meet the program goals.
Placing operator equipment can be a big help in growing your business and locking in customers. But knowing the real ROI and identifying the appropriate customers can help maximize profits. Interested in learning more about how to get a real ROI on your equipment program? Call us at 877-424-8725 or fill out our contact us form with any questions and to learn more.