The A C Nielsen Company provides a variety of fact finding services. One of these is the Nielsen Retail Index. This Index measures consumer sales continuously (every 60 days) by personally conducting audits of invoices and inventories in 1,300 typical chain and independent food stores. The consumer sales figures obtained from the sample are expanded to a total for the United States. These stores are selected in such a manner that their sales furnish a representative cross section of the sales of all stores. Contracts are signed with each store and with chain headquarters under which Nielsen auditors have the privilege of taking inventories, and auditing the invoices for all goods coming into the store. Cooperating stores are compensated with cash and general marketing information.
The Nielsen Company uses a highly trained, permanent full time auditing staff. Most of the auditors are college graduates, and their average length of service with the firm is approximately eight years. Essentially the same stores are included in the bimonthly audits; thus, trend data show the long term direction of the total market for a product class / type as well as for each important brand within the product class.
The basic data obtained as a result of these audits are shown in Exhibit B –1 below.
These data are charted every two months, and a presentation is made to the client. The company maintains a trained group of client service personnel who analyze and interpret the data regularly. The annual cost of this basic service could range from $50,000 to $250,000 per year, depending upon the client brand’s sales volume, the number of items the client has in product category of interest, and the number of different analyses and reports desired. The cost runs much higher for clients with large sales in many product categories.
The Nielsen service determines the consumer sales of competitions and provides an index of a client’s a competitive progress expressed as a percentage of the total market.
The service is valuable in noting the difference between factory and consumer sales. As manufacturers may be spending large sums of money for various advertising and merchandising efforts to increase the flow of their goods at the point of consumption, they need to know promptly the volume of their consumer sales. They cannot use factory sales as a measure of the success or failure of their efforts since the trend of such sales is generally slow in reflecting the ups and downs of consumer sales trends.
A client can use the service to detect profitable and unprofitable promotional methods. Since the index measures consumer sales of a product (and its share of total consumer sales) both before and after any change in promotional effort, it is felt that much can be learned about the company’s promotional activities. If factory sales had been used to judge the success of an advertising switch, a serious mistake would have been made.
The Nielsen Index can separate the consumer take-away of regular merchandize from that purchased during the various promotions, such as one-cent sales and two-for-one. Some clients make frequent use of such promotions. Use of the Nielsen Index can identify whether a promotion is successful or unsuccessful. Exhibit B-4 illustrates how the index can be used in this manner.
Exhibit B – 1 Complete List of Data Secured every day in food Stores:
1) Sales to consumers
2) Purchase by retailers
3) Retail inventories
4) Average monthly sales
5) Store count distribution
6) All commodity distribution
7) Out of stock stores
8) Prices ( wholesale and retail)
9) Special factory packs
10) Dealer support (displays, local advertising, coupon redemption)
11) Total food store sales (all commodities)
12) Major media advertising (from other sources). —