Where to Category Management?

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Where to Category Management?

• Evolution and Best Practice
• 7 August, 2007
• Norrelle Goldring, Moxie Market Strategy
• Peter Huskins, Market Concepts

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Session Objectives

• Heads above the water line discuss the nature
  and potential scope of category management and
  shopper marketing
• Stimulate thought on how to better add value to
  the category/shopper marketing discipline, and
  thus your organisation
• Get you to share different viewpoints and best
  practices.

Thinking caps on we will be provocative!
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Agenda

• Category management When did it start and why?
  What was it?
• What is it now? How is it working in Australia?
• Where to how is it evolving?
• Examples of overseas trends
• Discussion

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Then how did category management start?
PAST
Range and space management was local and
fragmented for hundreds of years Local suppliers
understood local retailer needs Retailers could
observe first hand what their local shoppers
bought
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The Father of modern category management
PAST

• Category Management coined by Brian Harris and
  Larry Hernandez of The Partnering Group (USA) in
  the mid-late 80s as part of the notion of
  looking at categories as SBUs

A discipline thats less than 20 years old in its
current form!
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Category Management A supplier-distributor
process of managing categories as strategic
business units, producing enhanced business
results by focusing on delivering Consumer value.
By emphasizing business results for entire
product groups rather than individual items or
brands Category Management encourages a
longer-term, joint distributor-supplier focus in
marketing and product supply.
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Consolidating market necessitated efficiencies
PAST
Bigger/national suppliers and bigger retailers
with more products and floor space meant need for
space and profit efficiencies
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The 1990s The original 8-Step CM Process
A version of the traditional strategic planning
process, applied to FMCG Fairly product/numbers
based. Looks at the category as it is, not
necessarily where its going.
Price Promotions Assortment Layouts Private Label
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Nielsen refined this to 5 steps in 1992
PAST
Category Review
Target Consumers
Merchandise Planning
Strategy Implementation
Results Evaluation
Basically, a formal way of range and merchandise
planning and reviewing categories Grown out of
grocery, but could be applied to other retail
channels
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Category Management

• Formal, continuous process of fine tuning
  elements such as
• last years activities
• opportunity gaps
• better promotions
• range management
• space provisions
• cost reduction through
• ECR disciplines
• competitive analysis.

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Key Issues

• Category Management often seen as cost
  reduction
• ECR Efficient Cost Reduction?
• Over-riding need to hit the internal numbers
• Retailers struggle
• Supply vs demand?
• Culture for collaboration?
• Skills and resources?
• Internal silos?
• Information and what to do with it?

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No wonder were struggling
Sales
Marketing
Retail buyer
Trade Marketing/ Category
Supply/ Operations
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Key Issues

• Manufacturers struggle
• Trust?
• Benefit or cost?
• Brand vs category?
• Internal silos?
• Skills and resources?
• Losing track of the market as we focus more and
  more on reports, analysis, research and lose the
  feel for the Shopper and Consumer

And the Shopper and Consumer just keeps moving
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The Shopper and Consumer

• Growing channel promiscuity
• Smaller baskets more often
• Give me Solutions
• Time poor
• Educated
• Health and well being
• Impatient
• Judgemental

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Either way
PAST

• Purpose was mostly about efficiencies for
  retailers and manufacturers, based on what sells
• Tweaking of yesterday for a better today

Not oriented toward the shopper
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Where are we now, and where to from here?
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Now modifications to the original 8 step process
CURRENT
Category Definition
Consumer Decision
Tree
Demand Clustering
Category Assessment
Item Strategies
Category Role
Tactics/ Initiatives
Scorecard
Implementation
Spectra Marketing Systems process, 2006. Assumes
greater shopper focus.
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Where are we now? Depends on who it reports
toNobody owns the shopper
CURRENT

• Marketing Based
• Retail presence
• POS development
• Consumer promotions
• brand not category focussed

• Sales Based
• Sales decision support analysis
• Category analysis and reviews
• Range space analysis
• Price promotion analysis
• Space management
• Customer not shopper focus

• Makes it difficult to cover all instore marketing
  drivers
• Range, Space, Visibility/merchandising/theatre,
  Price,
• Promotion, Persuasion/service/incentives/training

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What else is happening?
CURRENT

• Increasing shopper focus - growth of shopper
  insights departments. Retailers increasingly
  requesting shopper insights from suppliers
• Shifting of above-the-line marketing dollars into
  instore
• Some category management has gone too far too
  much range rationalisation can mean shoppers seek
  smaller brands in non-grocery
• Mundane shopping experience in grocery, based on
  numbers and clean store policies, no theatre

BUT Shift to shopper behaviour emphasis not yet
reflected in store Difference between behaviour
and providing an experience!
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What is needed

• New strategies and processes that take you to the
  next level that involve
• Total store then Category
• The Consumer and the Shopper
• The total supply chain to the end use
• Targeted responses
• International trends
• Experience the intimacy

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Understanding the Difference
Category Development
Category Management

• Operational Effectiveness
• Running the same race faster.
• measure retail performance
• identify opportunity gaps
• focus on retail performance.

• Strategy
• Running a different race.
• identify consumer-based opportunities
• create value
• focus on total supply chain.

Retailer
Source Porter Competitive Strategy
Taking a Category Development approach encourages
innovation and maximizes total supply chain value.
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The future a potential model
FUTURE
Insights
Customer/ Sales
Consumer/ Marketing
Shopper/ Category Channel
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Shopper Marketing should own the shopper
FUTURE

• Shift from category to instore or shopper
  marketing and development
• Owns the shopper experience for the category in
  the store, in all its locations (across channels,
  occasions, dayparts, missions)
• Informed by a) broader consumer trends
  (marketing), b) customer/retailer realities
  (sales), and c) shopper behaviour (insights)
• Shopper Development need to synthesise marketing,
  sales, insights and analysis to improve shopper
  experience to grow overall category
• Look to tomorrow - DEVELOPMENT, using SOME of
  yesterdays info to inform it. Emphasis on
  shopper, consumer and retailer trends and how to
  leverage these what should we be doing, not
  how can we do yesterday better

Purpose mostly about improving the shopper
experience, for retailer and supplier profit
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Some examples of where the future lies
FUTURE

• SEGMENTED EXECUTION
• How brand, pack, price, display, promotion and
  persuasion change by shopper occasion
• DEMAND CLUSTERING
• store types, shopper types, impacts on range,
  space, marketing
• THEATRE
• Visibility plus ambience sound and smell, not
  just sight

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Pharmacy example executional priorities change
by channel segment
SEGMENTED EXECUTION
Front of store displays

• 
  At shelf

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1
2
Staff recommendation
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Check out (impulse)
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Gondola end displays condition based cross-sell
with related categories e.g. cold flu,
arthritis, skin care, infant care / womens health
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Identifying unique shopper groups by store or
category
DEMAND CLUSTERING
Forecasting category or brand demand at a local
level Also applied to store marketing strategy
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THEATRE
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THEATRE
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THEATRE
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From To
SUMMARY

• Performance based
• A better yesterday
• Numbers focussed
• Range and space focus
• One size fits all solutions
• Subset of sales

• Demand based
• A new tomorrow
• Led by shopper behaviour and needs
• All sales drivers, plus theatre
• Clustering and segmented execution
• Shopper marketing division

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Summary
SUMMARY

• Category management is evolving into more
  holistic shopper marketing based on localised
  demands rather than national performance
• To stay relevant and reap rewards companies and
  brands need to look at the entire shopper
  experience, not just range and space
• Retailers are looking to suppliers for insight
  and inspiration provide it!
• Take the reins and synthesise sales/customer,
  marketing/consumer, and category/shopper.

The market is shifting toward instore focus
were in the right place at the right time!
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A final word from Brian Harris

• The techniques of CM are a means to an end...
• not the end itself!
• We need to rekindle the original spirit of CM
• as a consumer-focused philosophy
• for creating excitement and differentiation.

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Discussion

• What is your take on how category management is
  evolving?
• Who would you consider best practice in any or
  all of the instore sales drivers? What are they
  doing?
• Who in your opinion has the most holistic
  approach to the shopper? How are they attacking
  it?
• What instore sales drivers do you need to focus
  on in order to take advantage of the evolution to
  shopper marketing? What would need to change in
  structure and capabilities in order to achieve
  this?

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• Moxie Market Strategy
• Norrelle Goldring
• P 61-2-9427 7473
• M 61-411-735 190
• E norrelle_at_moxiemarketing.com.au
• W www.moxiemarketing.com.au

• Market Concepts
• Peter Huskins
• P 61-2-9982 3084
• M 61-412-574 793
• E phuskins_at_marketconcepts.com.au
• W www. marketconcepts.com.au

THANK YOU