Category Management: An Opportunity To Become More Strategic In Your Retail Business

Category ManagementCategory Management has evolved significantly over the past 30 years, and retail Category Managers have also evolved since their titles changed from “Buyers” to “Category Managers” in the 80’s (or have they?).

  • For most retail organizations, buying used to be done by vendor instead of by category – in fact, there are still some retailers in North America who continue to purchase by vendor.
  • Data – particularly retailer point of sale data, loyalty data and inventory data – is available at a much more finite level. For many retailers, data is also being sold to retailer’s vendor partners as a means of empowering them to make more strategic recommendations for their brands.
  • Technology has advanced – rather than having to go to 5 different systems to look at your business (by store, inventory levels, point of sale, warehouse shipments), many organizations have moved to more streamlined systems that allow them to look across multiple data sources much more easily.

So there have been many advancements, but still, many retailers are struggling as they pursue a more strategic, category management approach in their business.

There’s an important piece of category management that tends to be missing (or at least parts of it are) for many retailers. This relates to the retailer’s strategic side of category management, including specific strategies that are well articulated, and communicated appropriately to their organization. Without well-articulated strategies, category management success is limited, and a Category Manager’s role is much more difficult.

Consider the retailer strategy to be an umbrella that drives all the different components of the Category Management process (including the data, analysis and decisions being made). Once created, these overarching strategies create the rules and principles which guide decisions made internally, as well as externally, to ensure a consistent approach to the business.

A well-defined retailer strategy

I’ve worked with many retail organizations – both large and small – and articulating and formally “officiating” their overall strategies usually proves to be a daunting but liberating experience. The retailer’s senior leadership team needs to lead this initiative. The strategy needs to include considerations for each of the following at a topline / corporate level:

  1. The services offered (things to include: hours / locations / customer service / additional services / return policies)
  2. The target consumer (things to include: loyal customer groups / demographics by retail store cluster / overall target demographic groups by banner or cluster) – this is such a huge area of opportunity, and one that is neglected by most retailers, even with all of the emphasis on the consumer and shopper.
  3. Targeted competition (things to include: key competition by banner and/or region based on similar target consumers) – not every retail store that sells similar merchandise in their stores is necessarily your competition – you need to be more strategic and specific in defining your largest competitive threats.
  4. Overall product assortment strategies (things to include: what categories does the retailer carry in their stores AND what is the range of items that they will generally offer in their stores) (example strategies: large size strategy, premium segment strategy, private label / store brand strategy)
  5. Product placement / merchandising strategies (things to include: store layout / category adjacencies / category layouts) (example strategies: vertical / horizontal blocking; private label placement strategies; consumer-focused strategies using decision trees)
  6. Pricing strategies (things to include: competition / guardrails / regional considerations) (examples:   cheapest price / premium price / hot priced features (high-low) / everyday low price (EDLP) / price matching / private label pricing thresholds vs national brands)
  7. Promotion strategies (things to include: 1) Marketing strategies (brand, retail, flyer programs, event marketing); 2) Promotion or Flyer Program strategies (flyers, in-store specials) (examples: # of flyers, frequency, ad scheduling processes, ad allocation, private label promotion strategies))
  8. Private label / store brand strategies (things to include: overall strategies for each different brand / target consumers by brand / price tier & quality for each brand) (example strategy:   NoName brand will be the value brand for each category it competes in, it will never be advertised, and will always be the lowest priced product per eq vol in every category it is available in)

Define Category Roles

Once the above pieces are defined, it’s important to define the relative importance of each category to the retailer’s total business. This can be done through assigning some type of category role assignment (the most traditional method is destination, routine, convenience/impulse, seasonal). This is primarily based on category size and importance of the category to their most loyal consumers.

Finally, once roles are assigned, the retailer can define principles around each of the tactics for each role that are a subset of the strategies described for each of the tactics above. For example, destination categories may have a large product assortment offering, price matching on top selling sku’s, weekly promotions with 2 front-page ads per month, strong displays to support aggressive promotions and avoid out of stocks, and planograms that ensure that there is enough product on top selling sku’s to avoid out of stocks.

Category Management DecisionsIf you are a Retail Category Manager, imagine how much easier some of the decision-making in your role would be if you understood from a corporate retail perspective all of the information covered above. The intent with the retailer strategies is to give a consistent decision-making process across all of the most important things that a retailer is trying to accomplish. These guidelines and principles allow the organization to make more choiceful decisions that also give a consistent message to consumers who are shopping in the store.

If your strategies are old and no longer relevant, or you really haven’t properly defined your strategies with much specificity, you have a huge opportunity that can really have profound effects for your organization. The opportunity is a) to define and formalize strategies across the key “buckets” captured above (typically defined by senior management, but hopefully with Category Manager input) (this may require some process rework or development work), b) to communicate these strategies broadly across your organization, and ensure that everyone understands them; c) to maintain these strategies and not let them get obsolete; and d) to define what pieces to communicate to trusted vendor partners. If you follow these steps, you will enable your entire retail organization to make more strategic and aligned decisions in the work that they do, ultimately driving your overall retail business results.

Category Management Knowledge Group can help to train your retail organization on the strategic side of category management, as well as on the analytic and tactical sides of the business.  Please contact us (info@cmkg.org) for more details.

2 Comments »

  1. Comment by бесплатные игры на мобильный телефон

    Привет, после прочтения этого
    удивительным пункт я слишком веселый рады поделиться опытом коллегами.

  2. Comment by Vilas Nair

    Good Insight beautifully conveyed

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