Category Mangement
New Science of Retailing
Category management
Involves a systematic process that has been shown to be robust in various
retail situations
It emphasizes decision making based on complex analyses of consumer
data, scanner data and market level syndicated data.
Replaces the brand bias that stems from a suppliers interest in maximizing
market share with a more objective view based on the consumer’s desires.
Category management
is the
A category is a distinct
distributor/supplier
manageable group of
process of managing
products and services
categories as strategic
What is
that consumers
business units,
perceive to be inter
producing enhanced
related and or
business results by
substitutable.
Category
focussing on delivering
customer value.
managemen
t
Category is an
Thus a category is a assortment of items
basic unit of analysis for that the consumer sees
making merchandising as reasonable
decisions. substitutes of each
other.
Category management
• The strategic management of product groups through trade
partnerships which aim to maximise sales and profit by satisfying
consumer and shopper needs.
• Category management aims to provide the shopper and consumer
with what they want where they want and when they want.
• Products are grouped together into categories to reflect customer’s
needs based on how the product is used, consumed or purchased.
Brian Harris(3 step definition)
• A philosophy for strategically managing a retailer’s or a supplier’s
business that recognizes categories as strategic business units for the
purpose of planning and achieving sales and profit goals.
• Inherent in this philosophy is the belief that simply managing at the
departmental level does not provide adequate strategic focus.
Classical Buying vs Category
Management
Reasons for the Emergence of
Category Management
• Consumer Changes
• Economic and Efficiency Considerations
• Competitive Pressures
• Information Technology Advances
Components of Category Management
Category Management Business
Process
1. Category Definition
• A distinct manageable group of products/services that consumers perceive
to be interrelated and or substitutable in meeting a consumer need.
• The category definition should be based on how the consumer buys and
not how the retailer buys.
• The retailer and supplier should mutually agree on the definition of the
word category.
• Suppliers knowledge plays a key role in this process.
• At each step a process of filtering is done to ensure that the category
defined is as close to what the consumer is likely to buy as substitutes.
Category definition
• The next step would be to define the subcategories:
• Define the consumer need
• What provides a similar solution to the need?
• What does the consumer see as substitutes?
• What does the consumer see as inter-related?
• Is the information measurable?
• What is the group of products that comprise of the category?
2. Defining the category role
• Determines the priority and the importance of the various categories
in the overall business.
• Within a category products will be assigned sub-category roles:
• Traffic Builders: Products with high market share
• Transaction Builders: Products frequently purchased on impulse
• Cash Generators: Products with high stock turns and margins
• Image Creators: Products that are promoted with some feature that
makes them unique
• Excitement Creators: Products with high impulse appeal.
Role Played
by
category
Four Consumer Based Category
Roles
• Destination Categories
• Preferred/Routine Category
• Occasional Category/Seasonal Category
• Convenience Category
3.
Category
Assessme
nt
4. Category Performance Measures
• Sales
• Profits
• Market Share
• Inventory Turnover
• Changes in the Assortment: changes in SKU
. Category Performance Measures
• Provides discipline and structure
• Influences organizational Practices when linked to benefits and award
schemes
• Facilitates cross business comparisons
. Category Performance Measures
• Good performance measures are characterized by :
• Balanced architecture of measurements
• Comparison of performance overtime
• Timely, accurate understandable measures
• Related to corporate strategy
.5 Category Strategies
• Seven typical category marketing strategies are:
• Traffic Building
• Transaction Building
• Turf defending
• Profit generating
• Cash Generating
• Excitement category
• Image Enhancing
6. Category Tactics
• Works around the determination of optimal category pricing,
promotion, assortment and shelf management that are necessary to
achieve the agreed on role, scorecards and strategies.
7. Category Plan Implementation
• The Plan Approval process
• Assigning Responsibilities
• Scheduling
8. Category review
• Review of progress and actual achievement.
