Need to get up to speed on household panel data? Wondering where to start? If you’re not sure where Nielsen and IRI panel data comes from, start with our panel overview post. If you’re ready to dig into the data, read on. Here’s what you’ll learn in this post:
- Definitions for four key panel data facts: Penetration, Buying Rate, Purchase Frequency and Purchase Size
- How they relate to each other and to your products’ sales
- How they are calculated
Penetration is the % of households that have purchased a product, or shopped in a certain channel or retailer. Higher is better and 100% penetration is as good as it gets. If annual penetration of Brand X in the New York market is 56%, it means that 56% of all households in the New York market purchased Brand X at least once during the year.
Buying Rate is the total amount of product purchased by the average buying household over an entire analysis period. It can be expressed in dollars, units or EQ volume. This fact is also known as Sales per Buyer. If annual buying rate for Brand X is $15.53, it means that each household who bought Brand X spent, on average, a total of $15.53 on it over the course of the year.
Purchase Frequency is the number of times your average buying household purchases your product over a whole time period (usually a year). Purchase Frequency remains the same regardless of which sales measure is used (dollars, units or EQ volume). Purchase Frequency can also be called Trips per Buyer. If annual purchase frequency for Brand X is 4.2, it means that each household who bought Brand X, on average, bought it 4.2 times over the course of the year.
Purchase Size is the average amount of product purchased on a single shopping trip by your average buyer. Like Buying Rate, Purchase Size can be calculated in terms of dollars, units or EQ volume. This fact is sometimes referred to as Sales per Trip. If annual purchase size for Brand X is 1.1 units, it means that Brand X buyers purchased an average of 1.1 units each time they bought Brand X during that year.
How do these four measures work together to influence sales?
Sales = (Total Number of Households Out There x Penetration) x Buying Rate
Buying Rate = Purchase Frequency x Purchase Size
Here’s a simple example of how these facts are calculated. You will probably never need to do these calculations – you’ll get a nice report that does that for you. But I think knowing how something is calculated helps you understand (and troubleshoot) your data.
In the last 52 weeks, a store had 100,000 shoppers.
10,000 of them bought your product.
Each of your 10,000 buyers purchased your product five times over the course of the year.
At each of those five purchase occasions, they bought two 8-oz units at a price of $3.00 per unit.
Penetration = 10,000 / 100,000 = 10%
Purchase Frequency = 5
Purchase Size (Dollars) = 2 * $3 = $6
Purchase Size (Units) = 2
Purchase Size (Oz) = 2 * 8 = 16 oz
Buying Rate (Dollars) = 5 * $6 = $30
Total Sales (Dollars) = 10,000 * $30 = $300,000
Want to see these four measures in action? Read about the Sales Driver Analysis, an approach that can not only be be applied to the Nielsen/IRI household panel but is also common among retailers when analyzing loyalty card data.
Can you help me understand Trip Conversion and Share of Trips?
Are they the same thing?
Cathy,
Conversion measures (buyer conversion, trip conversion) look at the retailer relative to the market. So Trip Conversion would be: RetailerX Trips Including ProductX / All Trips Including ProductX.
Share of Trips could be the same measure. Trip Conversion is a share measure. Share of Trips could also be calculated from the *product* perspective: Trips Including ProductX / All Trips.
If you aren’t sure how Share of Trips is calculated, I recommend looking at the component numbers for one data point and calculating the ratio manually. Then you can see whether the numbers line up.
Hi,
Trying to understand the Nielsen’s HH Panel definition of “Dollar Loyalty”. I google the term and your site comes up, but I can’t find the discussion your site. Feels like a proxy for Share of Wallet, but not sure. Any help would be appreciated.
Great site.
Thanks.
In Nielsen and IRI panel data, Loyalty is another name for Share of Requirements. It’s the share of a panelists’ category dollars going to a particular brand. When this measure is calculated, panelists who only purchased the category one time are removed (since how could their “brand loyalty” be estimated if they only purchased the category once). So it’s a similar idea to Share of Wallet but, in panel data, the Share of Wallet typically refers to loyalty to a retailer rather than a brand.
what does Avg NOB, Avg NOP, Avg POC mean in Nielsen report?
Sorry, I’m not familiar with those abbreviations.