Category management has evolved over the past 16 years to where just about every retailer practices this business model in some form. It has contributed significantly to sales and profit growth for a vast majority of retailers. Specifically, it has positioned retailers to align merchandising strategies and tactics more closely with consumer purchase behavior; it has led to an environment that encourages fact based decision making; it has led to greater efficiencies across the supply chain; it puts a much sharper focus on costs down to the item level; and it has provided the framework for retailers to achieve an acceptable return on sizable investments in information technology. It has also created an environment that encourages collaborative information sharing and planning between trading partners.
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Many CPG manufacturers have benefitted from category management. They have been able to better align their brand strategies and tactics with retailers, as well as improve service levels and inventory management through collaborative planning.
Manufacturers ranked either one or two in a category or category segment have been able to leverage their market position to competitive advantage by capitalizing on their role as a category captain or advisor. In most cases, these manufacturers say they are experiencing an acceptable ROI.
Other manufacturers, both large and small, say they are not getting an acceptable return-on-investment.
They indicate they are not experiencing the top line
results required to support their investment in people and technology. Yet, most agree “they must play to stay”. Whatever the case, most manufacturers are continuing to focus on strengthening their category management capabilities. |
Considering the magnitude of investment most manufacturers are making to support current category management initiatives, the growing need to provide retailer specific shopper research, and investment in newly created shopper insight functions, manufacturers must sharpen their focus on return-on-investment. This will require rethinking how resources are being allocated, determining the feasibility of further resource investment versus resource reallocation and determining “how” to evolve the organization to shopper centric capabilities.
In this environment, in addition to continued emphasis on building capabilities, design and implementation of disciplined ROI management processes and measurment systems, if not in place, should be a priority.
Our Experience
Recognized as an original architect of category management, we have an in-depth understanding of how to maximize return-on-investment from both a retailer and CPG manufacturer perspective. Our extensive experience includes customer alignment strategy development, category management organization design,
customer alignment processes, customer segmentation, collaborative planning, skills development, selling systems and tools requirements, preparation of trade communication vehicles and ROI measurement.
Over the years we have facilitated several hundred retailer/manufacturer “top-to-top” and collaborative planning processes.
We are leading the industry in the design and implementation of shopper insight functions located within sales. Most manufacturers are wrestling with how to position this function within their organizations, and how to transition from current category management capabilities to future shopper centric focused requirements. We have the answers.
Value Based Category Management
Our value based approach, which is driven by the business question to be answered, the size of the opportunity, a shopper centric focus and anticipated ROI, has proven to be more effective than more conventional approaches to the development of CPG manufacturer capabilities. We stretch beyond educating on basic category management principles and advanced analytics. In an environment where the store is now the primary demand generator, we believe it is extremely important to understand how to influence the effectiveness of the shopping experience, how to interpret and apply shopper insights, the importance of understanding the two types of self serve shopping behavior and how to effectively apply the “art” of merchandising when making merchandising decisions.
Our design focus is on simplicity and practical application .
Maximum ROI Success Factors
In order to maximize category management ROI
there are several interrelated success factors that must be in place.
- There must be a clearly defined customer alignment strategy. This aligns with the corporate strategic plan, it defines the customer relationship strategy and go-to-market tactics, it defines desired outcomes, it defines value proposition alternatives and it guides the allocation of resources.
- There must be formal operating procedures that provide the parameters for the allocation of resources on an account specific basis. Based on retailer segmentation , retailers are categorized into several tiers, with resource deployment guidelines defined for each tier.
- The account profiling process must include all insights that can influence the probability for achieving an acceptable return-on-investment. In other words, only when one is a “student of the business” , with an intimate knowledge of all aspects of the retailer, can the probability of achieving desired outcomes be determined.
- There must be a defined value proposition that differentiates from primary competitors, and is effectively communicated to the retailer.
- There must be a multi-level account penetration plan…the account must be committed to the manufacturers initiatives from top down through the organization.
- Organizational skills must be well developed and effectively applied.
- There must be a system to measure performance and return-on-investment.
This formula will guarantee a higher ROI .
Resource Assessment and Allocation Model
Our Resource Assessment and Allocation Model is a process we implement with our clients. It is a disciplined process designed to ensure maximum performance and ROI capability.
We encourage manufacturers to institutionalize this process
as a way of managing its category management capabilities.
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