Is it time to reinvent category management?
Brian Harris, the “father of category management,” says that it’s past time to reinvent the effort and suggested there’s a need to move onto category management 2.0. Win Weber, another leading proponent, says the retail industry needs to change the way merchandising works because the concept of category management was formed before the internet was commercialized.
It’s not just the internet that wasn’t around when category management came into vogue. Data analytics capabilities were a fraction of what they are today. Data capture and the ability to deliver actionable information to front line employees are now several generations advanced. So how do we reinvent category management with technology that is geometrically more powerful?
The starting and stopping points must be the shopper. The tools are now available to better understand what motivations will drive buying behavior for individual shoppers, so customer-centric merchandising and personalized promotions should provide the pathways to both gain shoppers’ trust and yield proof points with C-level management to commit to a full revamp of category management.
From that base of understanding the customer, category management 2.0 or shopper-centric retailing, as Mr. Weber calls it (we at Precima prefer total store optimization) needs to marry customer insights with product data to create a personalized shopping experience across all customer touchpoints. This is much easier said than done, but companies making the investment in people and technology will see increased market share and profit improvements.
An example of how category management 2.0 works can be seen in the bottled water segment, where consumers see little variation among different brands and 12-pack and 24-pack sizes take up large amounts of shelf space. Armed with shopper-level data about product preferences, retailers can be confident customers will switch their bottled water purchase to the available brands/sizes without being disappointed. With that additional “real estate,” they can expand their assortment to include more facings of healthy lifestyle beverages, which offer greater opportunities for high-margin sales.
- A.B.A. told ‘category management is history’ – BakingBusiness.com
- Beyond Category Management – Retail Leader
DISCUSSION QUESTIONS: What are the most important factors for enabling the next generation of category management? Which do you think is more likely: Category management will evolve as e-tailers and suppliers make use of new data management tools or the practice will be replaced in favor of an entirely new, shopper-based approach?
Richard J. George, Ph.D.Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Richard J. George, Ph.D.Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Richard J. George, Ph.D.Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Richard J. George, Ph.D.Professor of Food Marketing, Haub School of Business, Saint Joseph's University
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19 Comments on "Is it time to reinvent category management?"
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Vice President of Marketing, OrderDynamics
Next-gen category management needs to start to blend buying journeys into the mix of product/sales considerations. You have to know the customer and what they want. You have to know the product and what it can deliver. You have to estimate both to come up with forecasts, merchandising plans and all the details with it. However, today’s multi-channel and omnichannel shopping also needs category managers to figure out how best to market and sell their portfolio of products across these channels.
Is it more conducive to m-commerce, e-commerce or the full blend — including brick-and-mortar? This drastically affects forecasts, SKU plans, inventory volumes and placement.
It’s a brave new world. All of it comes right back to the shopper’s preference and a shopper-based approach.
Strategy Architect – Digital Place-based Media
Category management can seem like a square peg in a round hole. The simple beauty of category management is that it is selling-focused. Retail continues to be challenged to be customer-centric, which is needs-focused. The chasm of planning and operations between a product push approach and the fulfillment of needs and wants is not about to be bridged too quickly. In fact it will be exacerbated as product manufacturers move more fully into the retail offering of their products, because CPGs and OEMs are truly sales-push focused.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Always good to hear from Brian Harris. At the risk of over-simplifying the concept, category management’s shortcomings emanated from most manufacturers and retailers neglecting the customer and the retailer’s positioning in the process. Category management in whatever space (online or in-store) needs to get back to Brian’s basic premise.
Strategy & Operations Leader | Retail Strategist | Trusted Advisor |
The time is always ripe for change. Fundamentally the concept and methodologies of category management remain very much the same as 20 years ago, however it’s the data inputs and customer shipping complexities that need to be accounted for. These are in the form of attribution, third dimensions of planning and other aspects that will incorporate the multi-channel, digital omnichannel retail model we face day-to-day.
In addition, the rapid emergence of the speed to market, fast fashion and the vertical integrated showroom model necessitate the need for a change, and revisiting how category management can address the new planning universe powered by insights.
Category management helped identify some low-hanging fruit for store improvements. The process has some fundamental errors that will produce misleading recommendations when it is pushed to its limits. Academics have listed many problems with the process, but the industry still needs to apply the fixes. We need to move to category management 3.0 to get those improvements into the system.
Senior Vice President, Dechert-Hampe
Category management started out as “consumer-based” merchandising (we didn’t say “shopper” back then). What sent it off the rails is simply that we ignored the consumer part of the process because it was too cumbersome, too amorphous and we had too little actionable data. So category management became a template-driven real estate grab (if you are a manufacturer) or a template-driven assortment optimization tool (only one step above the old “spin reports” if you are a retailer). All this discussion of reinvention and 2.0 sounds like returning to the original premise to some of us original believers.
President, Rubinson Partners, Inc.
First, a lot of the discussion about reinventing category management feels like an infusion of shopper insights that was definitely light in version 1.0 of category management which was heavily sales analysis based. Second, the biggest change in the past five years is understanding that shopper marketing is squarely in the digital and mobile world and the seamless blending of those activities to physical store layout, signage, experience, etc.
Global Retail & CPG Sales Strategist, IBM
The true innovators are now collaborating, not just transferring the burden of category management from the retailer to the CPG supplier. Yes, they supposedly have been “collaborating” for decades, however in the majority of cases, “The fox has been watching the hen house.” Now we are seeing suppliers and merchants optimize the category assortment mix to the best possible intersection of revenue, velocity and margin. This is taking into account both internal data of product movement, etc., along with external data that follows sources like social sentiment, long-term weather patterns, events, etc. to capture true shopper journey components.
Chairman and CEO, Winston Weber & Associates
Principal, VSN Strategies
Sr Director, Global Enterprise Marketing, Infovista
As the services and capabilities around applying data-driven insights from data analytics become better and better for retailers, I believe we’ll see a blending of processes we see today as distinct into something new and more efficient. Retailers will blend their organizations, breaking down silos, and leverage these insights to better understand their customer journey allowing them to optimize product assortments and manage categories all as part of a single task.
Principal, Boston Retail Partners
Global Senior Director, Retail Business Unit at SAP
Great points Graeme! I would say that even though analytics and category management methodologies have developed rapidly over the years, other execution systems have lagged. What this has resulted in is a highly difficult ability to scale strategy around the consumer-centric analysis. A large portion of FMCG retailers in the US still have many mainframe systems in place which pre-date category management origins. What this results in is a lack of capability to execute around a shopper/consumer dimension and general system disconnects across stakeholders in operations/supply chains, etc. This is why we see category managers still spend a lot of their time chasing fires over implementing new strategies. It’s almost akin to the strategy/planning systems talk one language e.g. French and the execution systems talk another e.g. English. What the industry needs is someone to develop these translation or reconciliation methods as much as more advances on the strategy side.
EVP Latam Category Management Association
Retail Influencer, Speaker and Consultant
Managing Director Waypoint Strategic Solutions
The next generation of category management, equipped with more data, analytics, and insights, will be best enabled when we can see it as the basis for CPG supplier, retailer, and consumer collaboration – with both supplier and retailer sharing data more freely to better understand and facilitate the customer journey. It’s not so much re-inventing as it is evolving, and making better use of, and sharing the data that we now have available to us. Those mutually derived insights will become the foundation of of collaboratively developed long-range strategic growth plans.
I think Category Management needs an overhaul with a new generation of thought starters and though leaders. Data is vital, but we need a comprehensive approach to bringing all data from all channels in together to view all opportunities together. I.e., it is not just looking a Nielsen and IRI data any longer.
We need all eCommerce sales, social media sales, and other online channels due to the largest growth rates coming from online sales vs. traditional brick and mortar stores.