Merchandising Philosophy Part 2: Category Management

What is Category Management? A Retailer/Supplier process of managing categories as strategic business units, producing enhanced business results by focusing on consumer value Category Management is a Process and involves a series of interrelated activities Category Management is comprised of distinctly different supplier and retailer components and cannot be done alone by either Category Management has improved business results and improved relationships between trading partners

Category Management Traditional Business Practices Retailer Develops Store-Level Marketing Plans Manufacturer Develops Marketing Plans and Programs for Brands Implementation Traditional Business Practices Retailer & Manufacturer Category Planning Implementation Category Management Practices

A New Way of Doing Business OLD NEW Brand/SKU Management Retailer Focused Tactics Deal-Based Decision Making Reactive Business Planning Adversarial Work Process Category/Brand/SKU Management Consumer Focused Tactics Data-Based Decision Making Proactive Business Planning Collaborative Work Process Purpose: To point out the difference between how business used to be conducted and how it should be conducted under Category Management. Detail: The big change is the focus on category vs. brands. Retailers don’t care about brands unless its success is directly tied to category success. Need to broaden focus to category level, to do what is best for the category. This is a fundamental change in the supplier business and it has implications on marketing and internal processes. Marketing is usually slowest to come around to a category focus. Consumer focused strategies is another big change, moving away from retailer-focused tactics. Five years ago the consumer didn’t really enter the discussion. For a retailer this is new. This change is primarily driven by fear of losing customers to other channels. Other important changes include the move to 12 month proactive Category Business Plans from planning next month’s ads, away from deal-based decision making to data-based decision making and towards collaborative work processes from adversarial relationships. When it comes to Collaborative Relationships, their importance is not always obvious. But when considering the changing environment, what is it that suppliers have that retailers need? Consumer data and research.

Figure 14.13 Applying Category Management

Figure 14.4b Shelf Logic: Software for Category Management Planning

Category Captains What is a Category Captain? Non-captains? What is a Category Captain? an appointed lead supplier who carries out the category review and leads the process to deliver the plan for the total Category The Category Captain must: have a demonstrable knowledge of customer insight and market understanding take an objective approach to growing the overall category recognize the role of other suppliers in delivering the goal Retailwire – April 29, 2004 (www.retailwire.com) What To Do When You're Not The Category Captain By Al McClain At the recent VNU Consumer 360 Conference, Ed Gamarano of Kellogg's and Steve Kapinus of Spectra discussed some problems inherent in a system that emphasizes the category leader over all other players and what can be done to improve it. According to the speakers, while all manufacturers have some good consumer insights, the category captain supplier generally works with the retailer on category definition, role, assessment, score carding, tactics, and consumer insights. The secondary players are brought into the process as validators, which makes it difficult because many important decisions have already been made. So, the goal for non-category captains is to: leverage their category and consumer knowledge, identify the upside opportunity of reviewing the category with the retailer before the formal review process and provide an enlightened recommendation based on the retailer's issues.