CATEGORY MANAGEMENT

Category

CATEGORY

- is an assortment of items which the consumer may perceive as substitute for each other.

Category Management

CATEGORY MANAGEMENT

-is the process by which a retail business is managed with the objective of maximizing the sales and profits of a category.

Category Management

CATEGORY MANAGEMENT

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

The Concept of Category

Management Categories are managed as strategic

business units

Categories are managed strategically through category plans and strategic roles

Category Managers control their share of company assets

Asset Returns measure performance and establish priorities

The Concept of Category Management

Responsibility for category performance/ownership is clearly defined and not fragmented across organization

Category Management leverages distributor and supplier expertise for mutual benefit … neither party can do the job alone

Six Components of Category

Management CORE COMPONENTS

(ESSENTIAL)

1. Strategy

2. Business Process

Six Components of Category

Management ENABLING COMPONENTS

(ASSISTING)

3. Scorecard

4. Organization Capability

5. Information Technology

6. Collaborative Relationships

Strategy

Categories are strategic business units

Overall company strategies provide a infrastructure for category level strategies

Strategies must be clearly understood throughout the Retailer’s organization

The Strategic Promotional Process

Business Process

A formal, disciplined set of activities designed to produce a specified output

Development and implementation of Written Category Business Plans

Scorecard

A tools that defines, measures and monitors the progress of Category Business Plans

Organizational Capability

Development of the organization’s core competency Through organizational

structure Roles/Responsibilities Skill/Knowledge development Reward Systems

Information Technology

Critical elements of the Category Business Planning Process Need data-driven, fact-based

analysis and performance measurement

Collaborative Relationships

Relationships with suppliers who acquire unique perspectives, resources and skills

Common objective -- delivering superior consumer value more profitability

The Category Management Process

THE CATEGORY MANAGEMENT PROCESS

- Category Management is underpinned by a structured process which provides a framework for retailer & supplier to work together strategically. A formal 8-step category management process was developed just over a decade ago by the Partnering Group.

The Category Management

Process

Category Definition is the 1st step in the procedure. The definition of the category has a significant impact on the subsequent steps. A category definition ought to be based on how the customer buys, and not on how the retailer buys.

The trading partners need to define the new category with a name

What is it?

What are the sub-categories?

Category Definition

Category Role

The distributor (with supplier input) would define the overall role the selected category is going to play in the distributor’s total business

How important is the category?

How to leverage the importance?

The category role determines the priority and the importance of the numerous categories in the overall enterprise. These aids in resource allocation. Traditionally, four categories have been identified. They are:

Category Role- Components

DESTINATION

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

ROUTINE

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

Category Role- Components

OCCASIONAL/SEASONAL

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

CONVENIENCE

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

Category Assessment

Category Assessment: In this step, the existing performance of the category is evaluated with respect to the turnover, profits and return on asses in the category. It involves an assessment of the buyers, the marketplace, the retailer and the suppliers.

The process of Category Assessment

Consumer Assessment

Market Assessment

Retailer Assessment

Supplier Assessment

Scorecard orCategory Performance Measures

Establishment of the performance measures by which the category manager will measure the quality of the execution of the plan

What are the goals & objectives?

How is the progress?

The development of category performance measures involves the setting of measurable targets in terms of sales, margins and Gross Margin Returns on Investment (GMROI).

Scorecard orCategory Performance

Measures

Typical Category performance measures include:

Sales

Profits

Market Share

Inventory Turnover

Changes in the Assortment

Consumer Transactions

Good performance measures are characterized by:

A balanced Architecture of Measurement

Total system

Allow for comparison of Performance Over time

Timely, Accurate, Understandable Measures

Related to Corporate Strategy

Category Strategies

Assignment of specific strategies to key elements of the overall category

What is the business plan?

How will it achieve the role & scorecard?

The purpose of this step is to help the retailer and supplier to develop methods that capitalize on category opportunities by means of creative and efficient use of the resources that are accessible to the category. Category strategies can be aimed at developing traffic or transactions, generating cash, generating profit, enhancing the image or developing excitement.

Category Strategy –Components

The seven most typical category marketing strategies are:

Traffic Building

Transaction Building

Turf Defending

Profit Generating

Cash Generating

Excitement Creating

Image Enhancing (Price, Quality, Service & Variety)

Category Tactics

Specific activities supporting the category strategies which would include item variety, everyday and feature price targets, shelf presentation, etc.

What do we do to achieve the strategy?

Who does what?

Category tactics are developed in the areas of assortment pricing, promotions and the presentation of the merchandise in the store.

Category TacticsComponents

ASSORTMENT

PRICING

PROMOTION

SHELF PRESENTATION

PRODUCT SUPPLY

Plan Implementation

A specific implementation schedule is developed and responsibilities are assigned. Accurate implementation is the key to the success of the Category Management.

Plan Implementation

Key Components of Plan Implementation

Approval Process Strategic Fit Scorecard Impact Resource Allocation Impact on Other Areas

Assigning Responsibilities

Scheduling

Category Review

Ongoing review and measurement of the progress of the plan toward the category role and scorecard, and modification of the plan when appropriate

The Category Captain

Category captains is a supplier who forms an alliance with the retailer to enable the latter to develop consumer insight , satisfy consumers and improve performances and profit across the entire category.

Category captains receive downstream data for all SKUs, including competitor products, in the category they manage. The category captain advises the retailer on the best way to price, display, and promote all products in a category, including those of competitors. While this arrangement ensures retail efficiency, it does raise concerns about possible misuse of power by the category captain.

The category management 8-step process

Conclusion

The grocery industry is in a major state of transition. This change is a function of a complex mix of consumer, technological and market factors.

Category Management represents a business oriented approach to achieving business results -- both for distributors and suppliers

PRESENTED BY: GROUP 8