What springs to your mind when you think of the term category management? Consultants? A new range? Template after template after template? Or maybe you’ve heard of it but have no idea what exactly it entails. Maybe you’ve been working in category management for a number of years and still haven’t perfected your ‘elevator speech’.
IGD’s Tasmin Sibbald explains what category management is, what successful category management looks like and gives some tips to ensure that your company is optimising this business practice.
So what is Category Management?
Category management involves strategically managing ‘product groups’ or ‘categories’ by ensuring that shopper and consumer needs are fully met or exceeded at the point of purchase. Retailers and suppliers work together in collaboration to grow the total category, maximising sales and profits for all parties.
For example, when a shopper walks up to a soup fixture in a store they see a range of related products and perhaps some promotions. They are probably oblivious to the many hours of work that allows them to easily find and select their desired item. This is likely to be the result of the category manager and the retailer’s labour, who will have identified the key to category growth and selected the appropriate tactics to achieve it.
Strategic or Tactical?
Some companies have perfected the art of applying category management tactics. They can create a new range or a new merchandising plan at the touch of a button. However, the key to long-term sustainable growth is to create category strategies which clearly identify which shopper behaviour must be influenced. Once the retailer and supplier are working to the same strategy, all tactics, such as range, merchandising, promotions and new product development, can be aligned to achieve the strategy.
According to the latest IGD research findings companies are using category management more strategically than two years ago. In the UK 28% of companies use the full ‘8-step’ approach - the category management framework created by The Partnering Group in the 1990s. This has increased from 22% in 2005. Similarly, more companies are using an ‘Innovative’ approach which IGD define as a streamlined version of the ‘8-steps’ (now at 35% up from 31%.) Less companies use a ‘Tactical’ approach which focuses on tactical quick wins (31% down from 40% in 2005.)
A Driving force in the Supplier’s Business
For category management to be a successful business driver, it is critical that the function is seen as having an important role to perform in its own right. It should not be viewed as a support function for the sales department or a conduit between the brand and sales team, but as a strategic work-stream concerned with driving the total category. The category management function is the key to collaborative activity in the retailer, without which both brand and sales activity would be harder to implement. It should therefore be recognised as playing this critical role and should be perceived as being of equal importance to both brand and sales teams.
The Bigger Picture
Category managers need a highly developed understanding of all elements that impact their category such as shopper behaviour and usage. In the current retail environment where retailer differentiation is key, they must also have in depth understanding of the retailer’s short and long term goals. This way all activity can be tailored to grow the total category and deliver the retailer’s objectives.
As meeting shopper and consumer needs is the heart of category management, it is critical that category managers keep abreast of all consumer trends. They must consider political, economic, social, technological and environmental issues, and gauge their relevance and potential impact on the category. One such rising mega-trend is the increase in the aging population. In 2004 16% of the UK population was over 65 years old. According to Eurostat this is anticipated to rise to 27% in 2050. This life-stage growth will give older shoppers increased spending power, making them a key group whose needs must be met. Such information will inform new product development, packing size and design, store location and display.
Going forward successful companies will need to have a structured process for capturing data and driving insight from it. Without this, response times will be slow and competitors will claw market share. Category Management teams must be set up for success, not failure. Working strategically and recognising that category functions are the key driver of change is great start point to achieve this.
Tasmin Sibbald is a Senior Business Analyst at IGD
For more information see IGD’s latest Category Management Report ‘Welcome to Category Management’. This report will help companies to implement the right infrastructure and ways of working to maximise the impact of category management and avoid the more common barriers that can be experienced.
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