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.
Today, there are retailers who still have an opportunity to experience considerable incremental gain by continuing to evolve the process, there are those who can experience some incremental gain and a growing number who have reached a “Best Practice” plateau. They are asking... “Where do we go from here?” To these retailers we are suggesting they begin moving forward to our beyond category management Shopper Centric RetailingSM model.
Category management is now at a point where there are wide ranging variations from the original textbook versions of the concept.
Some retailers have learned how to successfully tailor the process to fit their individual capabilities and operating practices while many have allowed essential disciplines to erode over time.
In fact, we are receiving an increasing number of requests from retailers asking us to help them restore and institutionalize those disciplines required to optimize the concept.
Erosion, or what some are referring as “back sliding”, can be caused by a number of factors.
For example, during initial implementation category management may not have been institutionalized across the business or it may have been necessary to compromise the process because it was too template oriented and resource draining. In many cases we find
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reinforcement procedures were never put in place. This usually leads to falling back on old habits. Category manager turnover and changes in senior management are often contributing factors. Whatever the cause for the erosion, there are several factors that typically need to be addressed. We often find category definitions do not adequately focus on the customer; cross-category analysis has not been institutionalized as part of the process; strategic and tactical decisions are being made outside of the context of category roles; and cost negotiation is the primary focus of collaborative planning between trading partners.
The concept of “category captain” is another issue. Too many retailers have allowed suppliers to abuse the original intent of this concept, with suppliers translating brand bias’s into jointly developed category plans. Finally, in many instances we find retailers have compounded their store execution capabilities by turning over responsibility for store execution to their suppliers. Store execution of well thought out category plans is usually compromised when this occurs. For those retailers who are experiencing erosion or “back sliding”, and who are not maximizing return on investment, we suggest a reassessment of current status, redesign or repositioning of the concept, and implementation of those disciplines required to institutionalize the process. Category management must be institutionalized before a retailer can consider evolving to the new Shopper Centric RetailingSM model currently being introduced to select retailers in the advanced stages of category management.
Our Experience and Expertise
Recognized worldwide as an original architect of category management, WWA introduced category management in the US in 1991 at HEB Food &Drug. Since then, our experience has included many leading retailers in the US, Canada, Mexico, Latin America, Australia and Asia. Our extensive experience includes category management organization design; introduction of a simplified category planning process; collaborative planning; internal cross-functional planning; alignment of KPMs across the organization; skills development; required support systems and tool evaluation and recommendation; implementation support; scorecard development; and monitoring.
Over the years we have facilitated several hundred retailer/manufacturer “top-to-top” and collaborative planning processes. In 2001 and 2003 WWA was the only consulting firm selected by the US Government to appear before a Federal Trade Commission Sub Committee to discuss antitrust and category captaincy issues related to category management. This selection was based on our category management expertise and understanding of industry dynamics.
Value Based Category Management
Our value based approach to the design of a strategic category planning process recognizes the unique characteristics of each retailer, available internal resources and the availability of supplier resources to support the process. The value based approach is driven by the business question to be answered, the size of the opportunity and anticipated ROI. Our design focus is on simplicity and practical application. Leading retailers recognized as the best practitioners of category management utilize WWA’s value based approach.
Guiding Principles
In order to maximize the benefits of category management, there are several interrelated success factors that must be in place.
- There must be a clearly defined strategy for the business under which category management will operate. This provides a strategic foundation for category management to deliver the desired result. It defines the consumer positioning, the competitive differentiation, the desired go-to-market strategies and tactics, the desired business outcomes, and it guides allocation of resources.
- There must be clarified roles and responsibilities for all functions within category management and all functions that are impacted by or can impact category management.
- Business processes and decision matrices must be developed and communicated across all functions. This provides discipline and consistency for the organization.
- There must be an alignment of key performance measures for all functions across the organization.
- There must be a clearly defined supplier relationship strategy and plan. Offerings and expectation needs to be clearly defined and communicated within the organization and externally to trading partners.
- Organizational skills must be well developed and effectively applied.
- Support tools and information systems must be in place to provide decision makers with the proper information to assess the situation, make decisions and ensure the quality of decisions over time.
- Communication across the organization and to external trading partners must occur with a frequency to demonstrate the commitment and a clarity of purpose to ensure delivery of the desired result
WWA… the True Category Management Experts
