Cross-Category Effects of Aisle and Display Placements: A Spatial Modeling Approach and Insights

Abstract

Amid growing competition, retailers are increasingly interested in more effective aisle and display management strategies. These strategies involve placements of product categories in aisles and displays within each store to facilitate greater sales affinity (demand attraction) between categories to improve the store's share of customer wallet. The authors investigate the effects of aisle and display placements on the sales affinities between categories. They develop a spatial model of brand sales that allows for asymmetric store-specific affinity effects between two or more categories, while controlling for the effects of traditional merchandising and marketing-mix variables, such as price, feature, and display. They estimate the model on aggregate store-level data for regular cola and regular potato chip categories for a major retail chain, using hierarchical Bayesian methods. They show the usefulness and extension potential of the model through simulation of aisle placements for a third category. The results show that aisle and display placements have significant and sizable asymmetric effects on cross-category sales affinities comparable to those influenced by marketing-mix variables. Retail managers can use this detailed store-level model and subsequent insights to develop customized aisle and display management for their individual stores.