A Category Management Philosophy
Note – this article is specifically aimed at Retailer/Supplier Category Management. Procurement Category Management will be covered in future articles
Category Management; it’s been around for many a year and plenty of retailers and suppliers say that they ‘do it’. But often talking with clients I question if they really know what it is, what they are doing, how they should do it and why they try. I get the feeling it’s something they feel they should be doing without really understanding how to deliver the potential benefits. As the market is getting more competitive by the day it seems an experienced view may be useful.
I was very lucky in that an early boss of mine was one of the first to embrace Category Management and her approach shaped mine, delivering breakthrough results. This has shaped my thinking successfully since, across many organizations and categories, both from the retailer and supplier sides.
The Purpose of Category Management
To grow the pie. Everyone benefits when revenue and profit grow. A supplier can do this in 3 ways, focusing on different methods:
1. Grow their brand in the market - Marketing
2. Grow their share in the retailer - Sales
3. Grow the category - Category Management
This is illustrated here:
Your share is A
Great marketing grows your share to A+B
Great work with your customers grows share again to A+B+C
Category management grows the category, with you taking your share of this growth (the green area)
The benefits of Category Management are potentially great, creating a multiplying effect as A, B and C all become bigger.
From a Retailer perspective, you almost always want to growth the category in your store, but how often do you really think about growing the size of the total market?
Category Management is not Sales. And yes, your competitors will experience category growth. This isn’t about what you do for your brand, it’s about focusing on the whole category impartially and trusting that your Sales and Marketing efforts will multiply the effects and enable you to win in the market.
My personal view is that if you keep the diagram above in mind, particularly Fig.4, then you will build trust with your customer, and enable the category to grow. It is a philosophy, a mindset that Category Management is focused on the category.
What the Retailer Wants
All successful businesses focus on their customers. Your customer wants to see the whole category grow and if you have category expertise (i.e. their customer, the shopper) then you can help, but they want you to focus on the category, not your brands. They will only allow you to work closely with them if they can trust you. If you constantly talk about your brands, present only brand based plans and undermine the category then you are unlikely to get beyond a trading relationship.
Does this mean that your category and account management teams must never talk? Some retailers ask for this…which says to me that there is little trust in the relationship. If sensitive information is shared, then have a confidentiality agreement and stick to it. But we’re all realists; and account managers often have great category knowledge that can help in growing the category. If the category view is widely heard then it will influence Marketing to create category enhancing products and ads.
Honesty is key
Meet up front with the whole team and honestly share what both parties want from the relationship and your rules of engagement. Then review regularly and honestly – you want your relationship to develop. I am tired of hearing about category reviews where a standard presentation that both parties know bears no resemblance to what’s really going on is shared, and nothing changes. If you can’t do this at the very least, then don’t even start talking about Category Management.
If you are committed to trying a different way to build your business and are ready to take a different, non-partisan look at the world, then a Category Management approach could be for you. Remember that both parties will learn through the process and ensure you set it up with the ability to be honest.
See the following post on how to go about it, with tips from my experience and conversations with others.