Category Management Case Study Based on ECR Taiwan Category Management Pilot Project

Case Study Agenda Objectives of the Case Study Category Management Model Work through the Cat Man Process, (Scorecard & Tactics) Write a Category Plan

Objectives of the Case Study Understand the Category Management Model. Understand the linkage between the Steps in the Model by working through Cat Man Process. Understand Practical Application of Category Management by Agreeing a Category Plan.

This Case Study Is the International Process. Is based on real SKU’s and market, but Data detail is changed for confidentiality.

International Category Management Model Shelving Role Definition Assesment Scorecard Strategies Tactics Implementation Review Assortment Pricing Promotion

Handout Material - Pages 3 & 4 Category Definition Category Role (These are generally agreed by Supplier & Retailer management in advance.)

Category Definition & Structure Pretreater Cleanser Fabrics Care Fabrics Cleanser Fabrics- Conditioner Bleach Main Wash Delicate Wash Rinse Softener Ironing Aids Normal Color Conventional Concentrate Heavy Duty Liquid Light Duty Liquid Fabric Care

Case Study Focus - Fabrics Concentrate Conventional Main Wash Concentrate Fabrics Cleanser Heavy Duty Liquid Delicate Wash Light Duty Liquid Rinse Softener Fabrics Care Ironing Aids Fabrics- Conditioner Normal Bleach Color Pretreater Cleanser

Category Role Signature /Destination Priority Basic / Routine Occasional/Seasonal Fill-in / Convenience The Category is Priority because of it’s importance to Sales and Profit, plus it’s competitive importance.

Category Assessment What is the current performance of the Category and Segments? How does the performance compare to the Market? What are the Opportunities for Improvement?

Category Assessment (Page 5) Loss of Share Worse than Total Retailer Sales Profit Maintained

Category Segment Assessment (Sales) Under-performing Segments

Category Segment Assessment (Profit) Clear Opportunities for Improvement

Category Assessment (Retailer Performance in Market) Size of Bubble equals Size of Segment Opportunity Gaps (LH) Winners (HH) Questionable (LL) Sleepers (HL) Only one clear “Winner” segment, (and it’s small).

Category Assessment (Four Largest Segments) Opportunity Gaps (LH) Winners (HH) Questionable (LL) Sleepers (HL) …but, Clear opportunities to Increase Sales!

Category Scorecard What are the overall “Top Line” targets for the Category? These must be discussed and agreed with the Senior Management.

Category Scorecard (Page 8) Overall Management Goal for the Category $448.6m 5.3% $35.0m 7.8% This is 16.5% growth, but this Retailer wants Growth & Market Share.

Segment Scorecard (Page 9) Repeat the exercise for each Segment. $120.0m 5.3% $4.9m 4.1% Should we try and retain share in Segments with more than “Fair Share”? DEFINITELY YES! But not at the expense of Margin!

Category Strategies (Page 11) We assign different Strategies to each Segment to ensure we have a balanced Business Plan.

Category Strategies (Page 11) Balanced Profit. We use a different mix of Strategies, for each Category Role.

Assign Strategies to Segments. (Page 12) Segments with high shares are used for Profit Generation. High Unit price and “Related Sale” segments are used for Transaction Building.

Category Tactics. Based on the Role, Scorecard and the Strategies, we now confirm the Tactics to use in each area; Ranging Pricing Promotion Shelving

As a PRIORITY Category, we should stock a BROAD RANGE of SKU’s. Ranging Tactics As a PRIORITY Category, we should stock a BROAD RANGE of SKU’s.

As a PRIORITY Category, we should adopt STRONGLY COMPETITIVE pricing. Pricing Tactics As a PRIORITY Category, we should adopt STRONGLY COMPETITIVE pricing.

As a PRIORITY Category, we should adopt Shelving Tactics As a PRIORITY Category, we should adopt QUALITY location, with a slightly higher than average space allocation.

As a PRIORITY Category, we should BUILD Promotion Tactics As a PRIORITY Category, we should BUILD sales volumes, using Major Brands and SKU’s.

Strategic Summary Page 15 in the handout summarises what is agreed so far. This is the Blueprint for managing the Category. This is the reference for ALL actions and decisions as we work through the operational detail of the Plan.

Segment Ranging Review (Concentrates) Page 16 details the SKU’s available in the market, what is stocked in the Retailers channel, the Retailer, and his Competitors. Note that Competitor 1 has 19 SKU’s. Is this too broad? How much of the market is covered by the existing 14 SKU’s?

Segment Ranging Review (Concentrates) Page 17 ranks the SKU’s by sales share for comparison between the Retailer and the Market average. Note that 15 SKU’s covers 95% of the market. 3 SKU’s, (9,11,&12) are not stocked. The retailer’ lowest 2 SKU’s are poor performers in the market.

Ranging Recommendation Wulin 1.2k Primary LanPao Con 2Kg Color Care Con 1.2k Primary 2.6% 1.6% 1.5% +3.09m +1.90m +1.78m Wulin Con 1 Kg Refill Tide Con. 39oz / 42oz 0.4% 0.1% (0.47m) (0.11m) +6.19m Additional Annual Sales of $6.19m, 5.3% increase on this year, 5.46% Market Share

Segment Promotion Review (Frequency) Page 18 details the Promotion Frequency,Type and Price Point for the Retailer and his Competitors. Note the difference in Frequency and Mix

There is no “perfect” answer! Clearly the “mix” Promotion Frequency 4 4 8 36% 2 2 4 18% - - - 1 1 2 9% - 1 1 5% 1 - 1 5% There is no “perfect” answer! Clearly the “mix” needs adjusting to be competitive. Aligning Brand Frequency to market share is a good start!

Segment Promotion Review (Price Point) Page 19 outlines the current Price Point differential between the Retailer and his Competitors. Almost all promotion price points are higher than the competitors.

Promotion Review Impact In most cases, Price Elasticity and On-Sale Mix are not well understood. The recommendation is ESTIMATE the impact, and MEASURE the Actual Result for input to the next review.

Segment Pricing Review Page 20 details the current pricing for the Retailer, and his Competitors. While the Retailer is competitive against Comp 1, (a high/low retailer), he is not competitive on shelf for the major components of the segment.

ALL prices now competitive, with NO margin loss!

Shelf Placement Review Programs such as “Spaceman” and “Apollo” assist greatly. Key elements are Balancing “Days of Supply” on shelf. Using Minimum Facings Rules and Maximum DOS to recommend deletions. Allocating any “spare” space to SKU’s that support the Segment Strategy.

Balance the Plan Each Tactical Decision has produced a change in Sales & Profit. Add up the value of each change and compare with the original targets in the Scorecard section. Adjust the plans. Agree with Management that the result is acceptable.

Implementation. Communicate the Objectives, Targets and Strategies to EVERYONE involved in implementation. Set and AGREE implementation timing. Do tests in-store for shelving changes. Check, check, check that agreed actions happen!

REMEMBER: Category Management is a Process, NOT a task! Review After a reasonable period of time; Check actual results against plan. Analyze and understand variance to plan. Start the process AGAIN by reworking the Category Assessment, and either confirming or revising the Category and Segment Targets. REMEMBER: Category Management is a Process, NOT a task!

Case Study Result