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CATEGORY MANAGEMENT CATEGORY MANAGEMENT

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DefinitionsDefinitions Category

A distinct, manageable group of products/services that consumers perceive to be interrelated and/or substitutable in meeting a consumer’s needs.

Category Management

The distributor/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.

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Charter for ChangeCharter for ChangeFrom

Push

Salesperson

Buyer/Seller

Cost Averaging

Deals

Sales Drivers

To

Pull

Business Team

Account Management

Cost to Serve

Pay for Performance

Profit Drivers

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Charter for ChangeCharter for ChangeFrom

Data Protection

Data

Shelf Management

Win/Lose

Fast

To

Data Sharing

Knowledge

Assortment Management

Win/Win

Fastest

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Process ActivitiesProcess Activities

Category Definition

Category Role

Category Assessment

Category Scorecard

Category Strategies

Category Tactics

Plan Implementation

Cat

egor

y R

evie

w

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DefinitionDefinition What products are in a category? How will categories be grouped?

Source: ECR Category Management

Category

Sub-Category

Sub-Category

Segment

Segment

Segment

Segment

Sub-Segment

Sub-Segment

Sub-Segment

Sub-Segment

Sub-Segment

Sub-Segment

Sub-Segment

Sub-Segment

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Hair Care

Hair Oil

Hair Soap Hair Lotion

Shampoo Hair Bleach

Hair Gel

Hair Cream

Hair Dye

Herbal Medicinal

Regular

WithoutConditioner

WithConditioner

Dry Hair Oily Hair Normal Hair Tangle free Hair

Treated Hair

SunsilkNyle Head & shoulders

Halo Ayur Palmolive

500 ml1 ltr 300 ml 100 ml Satchet

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Category RoleCategory RoleDestinationTo be the primary category provider and help define the retailer as the store of choice by delivering consistent, superior target consumer value.

RoutineTo be one of the preferred category providers and help develop the retailer as the store of choice by delivering consistent, competitive target consumer value.

Occasional/SeasonalTo be a major category provider, help reinforce the retailer as the store of choice by delivering frequent, competitive target consumer value.

ConvenienceTo be a category provider and help reinforce the retailer as the store of choice by delivering good target consumer value.

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AssessmentAssessment

Share&

Efficiently

Contribution&

Productivity

Market Share&

Benchmarks

Buyer Profile&

Purchase Behavior

Distributor

Market

Consumer

Supplier

CategorySub-Category

SegmentBrandSKU

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Consumer StrategiesConsumer Strategies

Category Roles

Attract Strategy - Traffic Building - Image EnhancingBuild Loyalty Strategy - Transaction Building - Turf ProtectorMicro marketing

DC/Store Receiving - Auto ReplenishmentTransportation - DSD, BackhaulDC/Store Handling - Cross Dock - Sale-Ready Packaging

DC/Store Receiving - Auto ReplenishmentTransportation DC/Store Handling - Minimize Handling - Reduce Shrink

Transportation - Reduce Transit TimeDC/Store Handling - Reduce Shrink - Sale-Ready Packaging

DC/Store Receiving - Auto Replenishment DC/Store Handling - Minimize Handling - Reduce Shrink

Acquisition Strategy - Best Quality/Reliability - Best Cost & Terms

Transaction Strategy - All EDI & EFT


Transaction Strategy - Majority EDI & EFT


Transaction Strategy - Some EDI & EFT

Acquisition Strategy - Low Cost

Full Service - (If Necessary)

Differentiated - (From Competition)

Build Loyalty Strategy - Transaction Building - Turf Protecting

Cluster Marketing

Semi-Service - (If Necessary)

Non-Differentiated - (From Competition)

Attract Strategy - Traffic Building - Excitement Creating

Cluster Marketing

Build Loyalty Strategy - Transaction Building

Uniform Marketing

Self Service - (If Necessary)


Self-Service


Category Roles

Category Strategies

Procurement Distribution Marketing In-Store Service

Destination

Routine

Occasional/Seasonal

Convenience

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StrategiesStrategies

Traffic Building

Transaction Building

Profit Contribution

Cash Generating

Excitement Creating

Image Creating

Turf Defending

Impulse Purchasing

Higher Gross Margin, Higher Turns

Higher Turns, Frequently Purchased

Impulse, Lifestyle-Oriented, Seasonal

Category Strategies Category Strategies Characteristics

Frequently Purchased, Highly Promoted, Impulse, Unique Items, Seasonal

Used by Retailers to Draw Traditional Customer Base

High Share, Frequently Purchased, High % of Sales

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TacticsTactics

Prime Store Location - High Traffic - High Exposure Time

Leadership - Best Value (Per Unit or Use) - Entire Category

Competitive/Consistent - Equal to Competition (Per Unit or Use) - Sub-Categories - Segments - Major Brands/SKU - Reduce Shrink

Competitive/Seasonally - Close to Competition (Per Unit or Use) - Sub-Categories - Segments

Non-Inflammatory - Within Reach to Competition (Per Unit or Use) - Major Brands/SKUs

Complete Variety - Sub-Categories - Segments - Brands - SKUs

Broad Variety - Sub-Categories - Segments - Major Brands - Major SKUs

Timely Variety - Sub-Categories - Segments

Select Variety - Major Brands/SKUs

High Level of Activity (If Necessary) - High Frequency - Long Duration - Multiple Vehicles

Average Store Location - High Frequency

Average Level of Activity (If Necessary) - Average Frequency - Average Duration - Multiple Vehicles

Good Store Location - High Traffic

Available Store Location

Seasonal/Timely Activity (If Necessary) - Multiple Vehicles

Low Level of Activity - Multiple Vehicles

Category Roles

Category Tactics

Assortment Pricing Shelf Presentation

Promotion

Destination

Routine

Occasional/Seasonal

Convenience

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Retail Category PortfolioRetail Category Portfolio

Flagship Cash Machine Maintain/Grow

Core Traffic Under Fire Rehab

Sales LowHigh

High

Low

GrossMarginPercent

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Retail Category PortfolioRetail Category Portfolio

Sleeper Winners

Questionable Opportunity Gaps

Market Growth

RetailerShare ofMarket

Low High

High

Low

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Consumer Based Category Consumer Based Category RolesRoles

Staples Niches

Necessities Fill-ins

Reach

Frequency

LowHigh

High

Low

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Shelf Presentation Tactics Guidelines: Example

Strategy General Tactical Approach

Transaction BuildingShelf sets should direct consumer attention to higher priced SKUs> Consider blending higher priced SKUs throughout set to increase consumer response and purchase

Traffic Building

High profile location and competitive category space allocationOverall shelf should be attractive and invite consumers to return to the storeHighlight loyalty SKUs segments

Turf ProtectingPlanograms should direct consumer attention to higher margin SKUs>Capitalize on impulse items>Locate higher margin categories in high traffic aislesConsider blending higher margin SKUs throughout set to increase consumer exposure and trade-upMaximize visibility of private label and high profit SKUs segments

Cash Generating Planogram highlights new/high profile SHUs/segmentsAdequate space to get consumer attention

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Share/Growth Decision Matrix

Sleepers Winners

Questionables Morning Stars

Review product mix versus marketWeed out slow moversBring in faster moving new items if not carriedReview space management to see if faster movers have adequate spaceUnder-promoting compared to market?Tie in promotions with WinnersIncrease Gross Margins

Continue current programmeIncrease promotional supportReview space management to ensure minimal out-of-stock potentialAdd good performing items not carried but available in the marketReview pricing and Gross Margins to see if selected price reductions can enhance image and increase growth and share

Review assortment versus marketDelete poorest performing itemsCan prices be raised?Is category under-promoted versus market?

Is category and /or fast movers under spaced?Review pricing mix-Is pricing of key items too high versus the market?Are category and key items under-promoted versus market?Review product mix-Is mix wrong for target consumer?Any new faster moving items not being carried?Tie-in-promotions with higher margin, expandable consumption items

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Category performance Category performance evaluationevaluation GMROI: Gross Margin Return on Inventory

Investment:

GMROI measures the gross earning of the retailers for the investment in merchandise. It can be used to evaluate departments, merchandise classifications, vendor lines and items.

GMROI = (Gross margin percentage X Sales-to-Stock Ratio)

= (Gross Margin Net Sales) X (Net sales Average Inventory)

= (Gross Margin Average Inventory)

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Contd..Contd.. Gross Margin Return on Floor Space: GMROF is a measure of

the productivity of space. It determines the sales generated from the investment in space. This measure guides the retailer in space allocation of items. Items with higher GMROF would get more space allocation.

GMROF = Gross Margin Space provided

Gross Margin Return on Persons Employed: GMROP is a measure of the productivity of sales people employed in a particular product category. The higher this ratio for a particular department higher would be the productivity of people of that department. It is calculated as:

GMROP = Gross Margin Persons Employed

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Category ReviewCategory Review Evaluation of overall performance & taking action to enable

rectification of issues & assessment of opportunities for new goals

What worked? What did not? Why? Timeliness? Accuracy in execution Do the role & strategies require to be re-looked at (in light of

changing markets or other factors) Which aspect of the plans need to be modified?

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Category Management Category Management Implementation ModelImplementation Model

Supplier Retailer

Retail outlet

Consumer

Strategic relationshipImplementing CM

Implications of CMImplementation on the retail outlet

Value creation for The consumer

Enhanced consumer satisfaction & category growth

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Advantages of C Mgt.Advantages of C Mgt. Consumer

– Improved shopping experience– Improved selection– Fewer stock outs

Retailer– Increased sales thru better product assortment– More effective promotions– Better displays– Higher customer satisfaction & loyalty– Improved returns in all respect

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Advantages of C Mgt.Advantages of C Mgt. Suppliers

– Improved market reach & sales– More effective promotions– Improved operations due to collaborative approach with

retailer

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Essentials for Category Essentials for Category ManagementManagement

Existence of brands & brand awareness Clear Category definition Information availability (easy access, high accuracy) Partnership & trust