What To Expect From Suppliers

The Category Management Association

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Category Management Definition

A Retailer-Supplier process of managing categories as Strategic Business Units, producing enhanced business results by focusing on delivering consumer value

The Intent of Category Management

• Separates and focuses

• Aligns around consumers

• Analyzes the facts

• Provides insights

• Offers success models

• Informs judgment

• Creates value

• Enables goals attainment

What you should expect

• A knowledgeable account rep

• Armed with relevant data and research

• Providing key facts and shopper insights

• Integrated into a CatMan plan

• Unique to your customers’ needs

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A Knowledgeable Account Rep? • Everyone in every transaction deserves a

knowledgeable service person. That‘s what an account rep is … a service person.

• Everyone who gets his car serviced or for that matter his gall bladder serviced wants someone whose expert credentials are certified by an external authority.

• That’s what the Category Management Association does.

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The Category Management Association

• Is an unbiased central resource for industry information and best practices. The CMA is the only organization certifying Corporate Category Management training programs and individual professionals according to recognized industry standards.

• We certify manufacturers and retailer personnel at three levels

• The CMA does NOT conduct training programs itself.

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Other CMA Services• An Annual Conference

• Share Groups on Multiple Subjects

• Jobs Postings

• A Newsletter

• Best Practices Mentoring

• Website cpgcatnet.org

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Find your issue: Click for a solution

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What you should expect

• A knowledgeable account rep

• Armed with relevant data and research

• Providing key facts and shopper insights

• Integrated into a CatMan plan

• Unique to your customers’ needs

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Example of Data Sharing • Shown below is a list of data shared by one best practice supplier.

Data like this is available in many if not all categories.

– Category Structure and consumer need states– Ethnographic research on in home and in store (shopper) behavior– Category, segment and sub-segment share trends by brand and size– Consumer behavior (purchase cycle, shopper annual worth, brand exclusivity)– Assortment optimization by segment, brand, type– Space constrained assortment optimization (turf analysis)– Pricing optimization between price tiers including private label– In store merchandising optimization including adjacency and aisle optimization– Promotion response by type, in-store merchandising and price reduction– Total basket revenue optimization– Path to purchase and touch point promo optimization– Loyalty card analysis– Cross category promotions including ‘cause’ and local promotions

Your first questions to the Rep

• From all the data your company has, please tell me the five most important facts that I should know to plan our business together.

• Please tell me the most important changes that have occurred in your category since we last talked.

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Example of Major Trends

• The premium segment is growing• Private brands and price brands are growing• Decreasing premium brand space is hurting sales• Increasing Private brands price increases profits• Premium buyers = your best shoppers• Brand D is dying without marketing $’s• Your 4th quarter share is tanking without support

Focus on Answers to theReally Big Questions:

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Expect a shopper marketing process

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Expect ‘Success Models’

• A success model is a tactical program (assortment, pricing model, in store presentation or promotion) that has repeatedly driven business profitably.

• Most success models are built on Insights beyond mere facts.

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Insights (Facts are not Insights)

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Facts are essential to insights; but insights are the leversthat build the business. Do your managers know the difference?

1. Identified the “purity” USP via attitudinal segmentation

2. Created in-store section w/demos, tab support, cross promos

• Led to introduction of flanker items

• Triggered “Environmental Sustainability” initiative at retailer

From Insight to In Store

area where Sensitive Skin products are located

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Shopper Insight: Retailer Has A Billion Dollar Opportunity Gap

Similar in everyday candy

Seasonal Opp Gap$877MM

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1. Changed the category role to Destination

2. Repositioned core items and resized package to meet price point and value objectives and drive additional traffic to the seasonal aisle

3. Revamped selling cases to highlight item type and ease of selection: Environmental Sustainability = less packaging

4. Built transaction size by positioning transaction-building items in adjacent areas

From Insight to In Store

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Reducing out-of-stocks is a significant opportunity for retailers 5% of beer volume is out-of-stock on

an average day … nearly 4 times higher on promoted items

As a result of out-of-stocks … 45% of beer shoppers avoid purchases 23% of Beer Sales are lost to competitors

5.0%

20.6%

Average Day On-Promotion

+4X

100% 55.4%

21.4%

18.7%

4.5%

Leave store, shopelsewhere

Buy item atdifferentstore

Make nopurchaseat all

Buy anotheritem incategory

Total

A Fact: Beer Out of stocks cost money A Fact: Beer Out of stocks cost money

23% lost sales

45% avoid purchases

Source: GMA Full Shelf Satisfaction Study

Shopper Insight: C-Store beer O-O-S problems caused by mis-alignment

of shopper segments and store clusters

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LOYALISTSLOYALISTSEXPERIMENTERSEXPERIMENTERSAspirersAspirersTRENDSETTERSTRENDSETTERSSIPPERSSIPPERS

These beer attitude segments are… well …. different

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6%

55%

20%

8%

11%Experimenter

Sipper

Aspirer

Loyalist

Trendsetter1. They drink different beers

2. For different reasons (needs)

3. They drink different amounts

4. With vastly different loyalties

1. Start with category segments . Make all assortment decisions within segments

2. Create store clusters based on beer attitude clusters. Vary space and assortment by the size and importance of these shopper segments for each cluster

3. Recognize that 75% to 80% of SKU’s will be the same everywhere .

4. It’s the marginal sku’s bought primarily by experimenters, trendsetters and aspirers who create the assortment problems

5. Discriminate in favor of brands with the highest brand loyalties or those bought by high worth shoppers

6. For the big brands drunk by loyalists, focus on DOS issues

Follow the EIA Rules

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Deployment Process

Exception Based Reporting can be used to identify schematics Exception Based Reporting can be used to identify schematics with Actual DOS beyond the acceptable range of values; these with Actual DOS beyond the acceptable range of values; these schematics can be adjusted so that DOS fall within the established schematics can be adjusted so that DOS fall within the established targetstargets

Exception Based Reporting can be used to identify schematics Exception Based Reporting can be used to identify schematics with Actual DOS beyond the acceptable range of values; these with Actual DOS beyond the acceptable range of values; these schematics can be adjusted so that DOS fall within the established schematics can be adjusted so that DOS fall within the established targetstargets

Operate within Guard RailsOperate within Guard RailsOperate within Guard RailsOperate within Guard Rails

Days of Supply For Individual Stores

1. This means an > of nearly 3% in beer volume and profit day in and day out.

2. It also means happierbeer shoppers and higher store loayaly

Success means O-O-S < 1%

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• Oil changing is steeped in tradition

• Key holidays signal time to change oil, especially Memorial Day, Independence Day, and Labor Day

• The motor oil business is complicated and fractionated by type, brand and package size

• Out-of-stocks are rampant

Shopper Insight: Millions Of D.I.Y.’ers All Change Their

Motor Oil On The Same Days

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1. Developed a strategy to stay in stock at key times and days:

– New rolling fixture for weekend and peak time holding power alleviates OOS’s,

– Color-coded pallets and cases to match shelving enable stocking ease

2. Identified convenience opportunity via TLE to appeal to men and placed additional register for ease of check-out

3. Created in-store smart sections with Kiosks and information including education/information on synthetics

4. Placed appearance items in key location drive impulse sales

From Insight to In Store

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• 70% of the Retailer’s business was in basic, functional socks; 30% in fashion socks

• The overwhelming majority of basic sock shoppers judge a sock’s quality by touching the fabric

• Manufacturers failed to supply this Retailer with packages that allowed the shopper to touch the fabric

• Shoppers tore the packages open and frequently dropped the socks on the floor

• The Retailer had >$20 million in damaged merchandise in the backrooms of its stores

• The Retailer lost $150 million in sales to other stores, where shoppers could touch the socks

Shopper Insight: “If I can’t touch it, I won’t buy it”

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1. Solved the “touch” problem with new packaging to allow shoppers to feel the socks

2. Built on that “reinvention” to:

• Make the new packaging environmentally sustainable, i.e. less packaging

• Resize the package to meet price-point and value objectives and drive additional traffic into the section

• Revamp selling cases to highlight item type and ease of selection

• Reorganize the shelf set into one layout for all of the three leading brands (rather than three conflicting layouts)

• Build transaction size by developing the sock category as a destination, positioning transaction-building items in adjacent areas

From Insight to In Store

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• Six Club members buy their tires elsewhere for every member who buys tires at this Club

• Significant lack of service and information:

– Shoppers found the sales people unhelpful

– Shoppers must use a tattered catalog to find tire information

• The tire selection process is a cumbersome, filthy experience that takes too long

Shopper Insight: Women Shoppers Won’t Buy Tires

Unless They Know They Are Safe

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1. Provided shoppers the information they need to know the tires are safe for their car….“Tire Professor” informational kiosk for member use to identify tires/accessories needed

2. Developed operational training guide for key service areas

3. Streamlined the purchase process with pull cards and display tires only

4. Implemented a paging process so members can shop while they wait

From Insight to In Store

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• Shoppers prefer to shop category by usage

• 40% of shoppers find the Food Storage department difficult to shop

• Shelf merchandising is haphazard (Trays/PDQ’s used for some cases – cut case for some, hand-stacked for others)

• Retailer was capturing only 26% of category purchases across all channels

Shopper Insight: Set The Shelves By The Way

The Shopper Uses The Category

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1. Transitioned from brand set to product type set

2. Utilized PDQs

3. Added category name to Aisle Sign

4. Fixed assortment

5. Under-assorted in sliders in storage bags

6. Under-assorted in foil at the aggregate

7. Moved section near food items to improve adjacencies

8. Out-posted Food Bags to other departments

From Insight to In Store

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Shopper Insight: Untrained Labor Can’t Be Expected

To Keep Top Selling SKUs In-stock

• Fashion is critical to sales in the category: – sunglasses are a “sexual signal”

– purchase entails 20 minutes of shopping

• High fashion SKU’s sold and were replaced with low fashion SKU’s

• Very low conversion at the Retailer

• Sub-optimal presentation of the products

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Expect New Product Validation

• What segment?

• Is it growing?

• What sales from new item?

• Source of volume?

• Effect on category profits?

• What trial support?

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Category Plan Basics

What products are included?

What are the sub-categories?

How important is the category to the consumers? To the retailer?

Who buys the category?

How is the Category doing?

What are the goals and objectives?

How shall we measure success?

How will we achieve our goals?

What are the elements of the plan for each sub-category or segment?

Who does what and when?

CategoryDefinition

CategoryRole

CategoryAssessment

CategoryScorecard

CategoryStrategy

CategoryTactics

PlanImplementation

Category Review

Best Practice Category Management Business Process

Examine the Scorecard