'Doing' Category Management
Following up on the previous post – ‘A Category Management Philosophy’, I see that many struggle with how to implement this in their organizational design and everyday working, so here are some ideas.
The first thing to consider is whether you have really accepted the mindset of Category Management as a way of working. Are you committed to ‘Growing the Pie?’ And is the organization as a whole? If you haven’t then you will come across as inauthentic with your partners, and fail to build the essential foundation: trust. This approach is based on working with your customer to grow their category – and if they can’t trust you to focus on this then you will get nowhere.
Like family, you are bound together, and each will sometimes do things that the other doesn’t like or agree with. So the fundamental bond must be strong and based on the premise that you have a vested interest in working to many of the same goals.
Assuming you want to ‘do’ Category Management for the right reasons, then it will influence your structure, how you work and decisions you make throughout your company.
Category Management is all about what your customer’s customer, the shopper, wants and influencing them by meeting their needs and encouraging them to buy the solutions from your customer.
So fundamentally you must commit to understanding your customer. If you are an innovation led company and they are price focused with limited range, then you may want to question the value to be had in aligning…
As in the article ‘Do you REALLY have a Sales Strategy?’ you need to prioritize the level of Category Management you will engage in with which customers. As all customers are different your approach must vary accordingly or you will lose authenticity.
Then you have to focus on them.
Your Customer’s Customers – The Shopper
One of the key reasons that a retailer will engage in Category Management with a supplier is to access the supplier’s consumer understanding. Historically this has been a strength for manufacturers, however, more and more the retailer is investing in consumer understanding to underpin their own brands and get into their shoppers' heads. Also with p.o.s. and loyalty data such as Retail Link and 84.51º (DunnHumby US) the retailer often has more accurate shopper data. Online retailers can access masses of data too.
Data to Insight
I have seen this lead to suppliers feeling insecure. Remember though, in combination with your organization’s deep consumer understanding you can add insight that releases growth.
Bringing insights that create clarity in understanding consumers and shoppers is extremely valuable to retailers.
For those who half-heartedly ‘do’ category management or want to use it to sell, the proliferation of data in the retailer enables them to challenge you much more readily and credibly.
If you are doing it right you’ll have some great insights. Now you must action them. Of course the retailer has to buy in (that’s on you retail folks too – take an entrepreneurial risk now and again). So come up with or co-develop actions that are as clear, simple and objectively supported as possible. For example:
- All aspects of shelf layout
- Range recommendations
- Category signage
- Pricing and promotion strategy
- On shelf availability strategies
And anything more that is proven to grow the category.
At the end of the day, if nothing changes then what was the point?
And measure the effect together. You’ll need some clear score-carding of key metrics (household penetration, basket size and trips for example, alongside the traditional sales measures). And the plans should be both of yours, so when reviewing be honest and open. If it worked, celebrate together and roll it out, and if not take the learnings and change.
These are some of the most important considerations, however, you must ensure that the whole organization is behind this approach. They must appreciate the role Category Management and the Category Management function (if you decide to create one) has in your business. Category management is not selling your brands and never negotiating terms.
They must also remember that their value only accrues when the category grows. So they will need to sell and drive action for the category.
Remain impartial and honest with the retailer, and internally, and both parties will reap the benefit.