Category management capability and partnerships in 2014 Connect with us www.shoppervista.igd.com +44 (0) 1923 851 956 shopper@igd.com @IGDshoppernews Industry survey June 2014 – Key findings Category management capability and partnerships in 2014

About this report Hello and welcome This report examines six key findings from our recent supplier and retailer survey on category management. The full findings will be published on ShopperVista at the end of June. This brand new research builds on a decade of previous IGD industry benchmarking surveys, to give a clear picture of how category management has evolved and what the future may hold. Over 200 category management practitioners working for suppliers and retailers across the globe took part. Read on to discover:   What retailers are looking for from their suppliers and where they want support this year The role and influence of category partnerships, and what you can do if that isn’t you Where category management is in terms of suppliers capabilities and what best practice looks like The opportunities that growing complexity in the market place are creating for proactive category teams www.shoppervista.igd.com | +44 (0) 1923 851 956 | shopper@igd.com

Six key challenges 1 2 3 Opportunities beyond category partnerships Ensure you know your customers Opportunity to influence promotional strategy 4 5 6 Ready for the challenges of multichannel Tactical tool or business driver Putting strategy at the heart of category management www.shoppervista.igd.com | +44 (0) 1923 851 956 | shopper@igd.com

Opportunities beyond category partnerships Lack of category partnership shouldn’t be a barrier to influencing retailers category plans; only 2% of retailers said they only worked with one supplier Three out of five suppliers say they are partners with some or most customers. Suppliers need to work to ensure they have an influence when they are not the category partner Partnerships are resource hungry in terms of people, data and insight. Suppliers need understand the scope, expectations and responsibilities associated with a partnership An objective viewpoint is key to getting initiatives implemented, whatever the relationship. Only seven in ten suppliers are ensuring objectivity in most or all occasions ‘Too often trust is the biggest barrier to putting any proposals into action’ We asked retailers: How do they work with suppliers in terms of category management? more suppliers say they are a category partner with “some or most retailers” than a year ago 13% ? What relationships are you looking for with your customers? Do you have the tools and resources required to support partnerships? Source: IGD ShopperVista Category Management Capability Survey, June 2014

Ensure you know your customer of retailers said understanding their business and strategy distinguished best in class suppliers 45% No. of suppliers who, in most or all occasions, say they tailor category plans by their key retailers 49% As the market becomes even more competitive, retailers are looking to distinguish themselves from other retailers. They are looking for suppliers to tailor initiatives and plans by their strategies and shoppers Nearly half of all retailer respondents have ‘understanding of our business and strategies’ as a key practice of best in class suppliers in category management ‘They need an appreciation of our corporate strategy and how we can maximise our offer with this in mind’ Although three in five suppliers say they are doing this, at least in most cases this leaves another two fifths who aren’t Where initiatives have been tailored to retailer and format there is an increased likelihood of gaining agreement and successfully implementation No. of suppliers who, in most or all occasions, say they have a clear understanding of their key customers strategies and KPIs and make recommendations accordingly 63% ? Are you clear on the strategies and KPIs for your key retailers? Ensure initiatives are tailored to their needs? The better the fit the more likely to gain agreement and implementation Source: IGD ShopperVista Category Management Capability Survey, June 2014

Opportunities to influence promotional strategy We asked retailers: Category management ways of working are important or very important in influencing .... Top 5 answers With the increase in savvy shopping, promotions have been an increasingly used tactic by retailers and suppliers Retailers see promotional plans as a key area for category management to influence, and three in five say suppliers should be heavily involved in the decisions Half of retailers see price and promotional activity as a key focus for category management relationships over the next year. Less suppliers, though, expect it to be important, with only one-in-four having as an area of focus For a third of suppliers, promotional recommendations are not seen as a responsibility for category management ? Promotions are a key influencer of shopper behaviour. As such, suppliers and retailers need to ensure they are considering the tactic within their category management sphere of influence Source: IGD ShopperVista Category Management Capability Survey, June 2014

Ready for the challenges of multichannel We asked: What will have the biggest impact on category management over the next three years? As shoppers are using more shopping channels, both retailers and suppliers see this complexity as having a big impact on category management The top response for retailers was the internet and online. The way online engages with shoppers is very different to traditional shopping, and offers up new challenges for category management Less than half of suppliers say they are developing channel solutions in most cases, and just a third are developing solutions in most cases for shopper missions Shoppers behaviour does change by the channel they are in and the mission they are on. Retailers and suppliers need to understand how to influence this behaviour to ensure they deliver effective solutions For suppliers, “understanding the shopper” is the top response for the biggest impact on category management (37%) Retailers Suppliers ? As shoppers shop around their expectation and behaviours change. Solutions are more likely to be successful if they are built on specific insight for each shopping occasion Source: IGD ShopperVista Category Management Capability Survey, June 2014

Tactical tool or business driver We asked suppliers: What statement best describes how your business practises category management ? Over the last year we have seen a rise in suppliers for whom category management is driving their business vision and strategy. We have also seen a growth in suppliers who take a tactical approach to category management Being tactical doesn’t mean they are not providing objective advice; half of them say they are providing objective recommendations Less than one-in-five ‘tactical’ suppliers say they have multiple contacts in terms of category management with their key customers, and again only one-in-five have a clear understanding of their contacts KPIs For strategic category focused business, seven in ten have multiple contacts and three quarters understand their contacts KPIs The more involved suppliers are with their key retailers, the more benefits category management can offer their business Responsible for our businesses vision and strategy and driving business planning. Work closely with customers in building strategic category plans This year Last year This year Last year Informal process around range reviews and when opportunities arise or supporting commercial needs ? Retailers are looking for more than just a category partner to work with in category management. Suppliers should look to build external contacts and influence Source: IGD ShopperVista Category Management Capability Survey, June 2014

Strategy at the heart of category management We asked suppliers: What are the responsibilities of category management? Three quarters of supplier respondents had vision and category strategy as a responsibility of category management Three-in-five retailers saw category management as being important in the decision process of category strategy with two thirds seeing suppliers making recommendations or being involved in the process One in five suppliers say that category management is now responsible for driving their businesses strategies and plans Less than half of suppliers say that in most cases they follow a 2-3 year plan for category management Top 5 answers of suppliers have it as an established practice that category management is involved in all internal business initiatives 22% ? Category management is influencing supplier and retailer category strategy. Suppliers should look to develop a long term strategy for how they apply and develop category management Source: IGD ShopperVista Category Management Capability Survey, June 2014

Supplier category management capability At the IGD, we have established six key areas that are essential for developing suppliers best practice category management. Through the survey we asked suppliers several questions on their business capability in each of the six areas. From this research we have established a picture of where as an industry we are in terms of category management capability, and what current best practice looks like DATA AND INSIGHT – Is at the heart of category management. What types and range of data is purchased? How is it used for identifying insights and reviewing past activities? Is the supplier getting the most out of the data and the data supplier? SHOPPER UNDERSTANDING – Influencing shopper behaviour is the only way to drive improved performance. Do suppliers understand their shoppers, and what motivates them in the different shopping channels, and when on different shopper missions? CATEGORY STRATEGY AND PLANNING– Is the supplier in incorporating category management principles into their business planning? Do they have a long term plan for category management engagement? CATEGORY LEADERSHIP – When it comes to driving category growth, how innovative are the solutions? Solutions should be tailored to meet shopper and customer needs. Category management should be focused on delivering plans that look to deliver future category growth CUSTOMER ENGAGEMENT– In most cases a retailer is the point of purchase for suppliers products. Establishing trust and a relationship is important in driving the joint benefits of category growth TOOLS AND RESOURCES – Delivering successful category management can require a lot of resource, whether it is highly trained practitioners, shopper research or the right software www.shoppervista.igd.com | +44 (0) 1923 851 956 | shopper@igd.com

Current view on supplier capability For the median supplier, customer engagement is the most developed capability - one in four say it is established business practice to have clear actionable recommendations. One in three have it as an established business practice to provide fully objective insights Data and insight performance is strong with a lot of data being purchased; evaluation of the data needs is low with only one in ten doing as an established business practise Shopper understanding is a capability opportunity for all suppliers, including best practice suppliers. Understanding the shopper behaviours across the different channels is an opportunity for suppliers For best practice suppliers, the most established practises are category leadership and customer engagement. Senior level influence internally and senior level engagement with retailers is achieved Data and insight Tools and resources Shopper understanding Customer engagement Strategy and planning Category leadership All suppliers Best current practice SCALE Not currently doing Established Business practise 0% 100% Source: IGD ShopperVista Category Management Capability Survey, June 2014

Want to understand where your business sits in category management capability ? Do you want to understand how your business stacks up against best practice category management? Where are your capabilities in comparison to your peer group? Do you want to understand where you can improve your category ? SHOPPER UNDERSTANDING STRATEGY AND PLANNING CATEGORY MANAGEMENT CAPABILITY TOOLS AND RESOURCES DATA AND INSIGHT If you would like to discuss how IGD can assist you in identifying capability gaps in category management, and improving your business’ capability, please contact us CUSTOMER ENGAGEMENT CATEGORY LEADERSHIP IGD Process of assessment IGD’s Capability Shield Self assessment Compare to best practice & peer group* Identification of capability gaps Plan to improve * Based on adequate sample size for peer group. No individual business results will be disclosed

1 2 3 Can we help you further? Report author: Gain inspiration for your category plans with the exclusive ShopperVista series of quarterly In-store Excellence presentations >> See IGD’s latest In-store Excellence 2 Build your category management, shopper marketing and customer engagement capability with training from the IGD Academy >> See IGD’s Academy training opportunities 3 Report author: Simon Attfield Category Insight Manager simon.attfield@igd.com Would you like to understand how your own company capability in category management measures up, >> Send me an email to discuss how I can help Need something else? Email askigd@igd.com or call +44 (0) 1923 851 954 Follow us on Twitter @IGDShopperNews