2 March 2017
Good manufacturers and retailers around the world are focused on doing a better job, growing categories, growing brands, and creating better collaborative working relationships. Yet there are still some pretty big challenges that exist in Category Management today – namely, knowing what to prioritise to drive results.
In Alice in Wonderland, Alice asks the Cheshire Cat ‘which way is it?’ And he asks ‘well, where do you want to go?’ ‘I don’t know’, she says, and he replies ‘if you don’t know where you’re going, any road will get you there’. But in an increasingly tough retail environment, ‘any road’ is not a path retailers should be following. A solid Category Leadership framework is essential to provide a clear roadmap to guide category strategies to success.
Retailers have the ability to change the range, the promotions, to focus on own label and innovation, and to cut prices. And many are trying to do everything. And where customers’ sentiment may be lacking, or the economy is challenging, then they’re pushing themselves to do more still. But more is not necessarily best.
If you’re a retailer and you’ve got two hundred, three hundred, five hundred categories in store, you need to identify which are the ones that will really help drive your performance where you want to go full steam ahead. Which are the ones that you want to move fast or move forward, but not necessarily at the same pace. And which are the categories where you want to slow down and exercise control. Full steam ahead everywhere is not a viable approach.
Retailers need to be clear on how they invest in those categories, knowing how and where to prioritise the four key resources that they’re constrained on: time, money, space and people. If they can align those things, they’ll be in a much better place to spend their time with the manufacturers that are right, that will drive them forward, aligning with what the customers need.
Using science to get under the skin of categories can help work out what’s most important. How important is price? Promotions? How important is choice? How important is innovation and label? And working that out for every single customer segment enables more effective planning around what retailers need to give these different groups to drive repeat purchase and sales.
Here are a couple of example categories where we’ve really been able to get under the skin of the DNA. The first is soft drinks – here customers want a lot of choice, they like innovation, availability is not that important to them, they’re willing to switch between sizes or potentially between brands. Promotions are really important in driving the category, but own label is less important. This starts to build a picture.
Another example is the bakery category where range is very important, customers want a lot of choice but innovation is less important. Availability is critical because if you’re baking a cake and you can’t find the products you need, substituting one ingredient for another isn’t going to work; so you’re probably going to go somewhere else to shop the category to complete the recipe. Promotions aren't necessarily going to drive the category sales, and customers are happy to choose own label products over brands.
Understanding the dynamic of every category helps Category Managers ask the right questions and assess how they’re doing against these. If promotions are identified as being important, how am I doing against that internally? Do promotions in my category work as well as they do in other categories? How about versus the overall market? Am I under or over-promoting the category? By setting up the right questions we can start to determine the difference between what’s important and how am I doing against it. The gap between those two is really where the opportunity sits.
Best in class Category Management is about using the right information at the right time, ensuring that by focusing on what’s right for shoppers in the category, you drive the category growth, you drive the brand growth and you drive customer satisfaction. It’s certainly a journey. But one that should be built on clarity.
To learn how you can adopt best in class Category Management, download our report on Category Leadership