What To Expect From Suppliers

1. What To Expect From Suppliers The Category Management Association

2. Category Management Definition A Retailer-Supplier process of managing categories as Strategic Business Units, producing enhanced business results by focusing on delivering consumer value

3. The Intent of Category Management • Separates and focuses • Aligns around consumers • Analyzes the facts • Provides insights • Offers success models • Informs judgment • Creates value • Enables goals attainment

4. What you should expect A knowledgeable account rep Armed with relevant data and research Providing key facts and shopper insights Integrated into a CatMan plan Unique to your customers’ needs

5. A Knowledgeable Account Rep? • Everyone in every transaction deserves a knowledgeable service person. That‘s what an account rep is … a service person. • Everyone who gets his car serviced or for that matter his gall bladder serviced wants someone whose expert credentials are certified by an external authority. • That’s what the Category Management Association does.

6. The Category Management Association • Is an unbiased central resource for industry information and best practices. The CMA is the only organization certifying Corporate Category Management training programs and individual professionals according to recognized industry standards. • We certify manufacturers and retailer personnel at three levels • The CMA does NOT conduct training programs itself.

7. Other CMA Services An Annual Conference Share Groups on Multiple Subjects Jobs Postings A Newsletter Best Practices Mentoring Website cpgcatnet.org

8. Find your issue: Click for a solution How can I get top management to understand CatMan and what it can do for us? What’s the one thing my team must do to tell the best story to our customers? How good is my Category Management program versus the gold standard? How do I justify my assortment and get new sku’s accepted? How do I get started with CatMan? As a retailer, how many resources should I commit to each category and why? How can I create better line reviews to earn Category Captain status? As a retailer, do I have the correct store clusters to serve a diverse population? What’s my roadmap for being best in class? Where should CatMan report in my organization, and how should I staff it? As a retailer, what’s the gold standard in resources I should expect from a supplier? My category lacks data. Can I really use CatMan to build my business and if so, how? What are ‘shopper insights’ and how do I develop them? What data do I need and how can I get the most from it? How can I make my shelves sets easier to shop and sell more stuff? Is there one process approach that can get every department in the company on the same page?

9. What you should expect A knowledgeable account rep Armed with relevant data and research Providing key facts and shopper insights Integrated into a CatMan plan Unique to your customers’ needs

10. Example of Data Sharing • Shown below is a list of data shared by one best practice supplier. Data like this is available in many if not all categories. • Category Structure and consumer need states • Ethnographic research on in home and in store (shopper) behavior • Category, segment and sub-segment share trends by brand and size • Consumer behavior (purchase cycle, shopper annual worth, brand exclusivity) • Assortment optimization by segment, brand, type • Space constrained assortment optimization (turf analysis) • Pricing optimization between price tiers including private label • In store merchandising optimization including adjacency and aisle optimization • Promotion response by type, in-store merchandising and price reduction • Total basket revenue optimization • Path to purchase and touch point promo optimization • Loyalty card analysis • Cross category promotions including ‘cause’ and local promotions

11. Your first questions to the Rep From all the data your company has, please tell me the five most important facts that I should know to plan our business together. Please tell me the most important changes that have occurred in your category since we last talked.

12. Example of Major Trends The premium segment is growing Private brands and price brands are growing Decreasing premium brand space is hurting sales Increasing Private brands price increases profits Premium buyers = your best shoppers Brand D is dying without marketing $’s Your 4th quarter share is tanking without support

13. Focus on Answers to theReally Big Questions:

14. Expect a shopper marketing process

15. Expect ‘Success Models’ A success model is a tactical program (assortment, pricing model, in store presentation or promotion) that has repeatedly driven business profitably. Most success models are built on Insights beyond mere facts.

16. Insights (Facts are not Insights) Facts are essential to insights; but insights are the levers that build the business. Do your managers know the difference?

17. From Insight to In Store area where Sensitive Skin products are located • Sales up +47% in first six months • Demos sold out/supported by pallet force outs • Brand repositioned nationally Marketplace Result • Identified the “purity” USP via attitudinal segmentation • Created in-store section w/demos, tab support, cross promos • Led to introduction of flanker items • Triggered “Environmental Sustainability” initiative at retailer

18. Shopper Insight: Retailer Has A Billion Dollar Opportunity Gap Similar in everyday candy Based on relative ACV the Retailer should outsell its nearest competitor 4:1 Seasonal Opp Gap $877MM

19. From Insight to In Store • Seasonal Category becomes Destination Category, • 42% of imbalance captured in year one Marketplace Result Changed the category role to Destination Repositioned core items and resized package to meet price point and value objectives and drive additional traffic to the seasonal aisle Revamped selling cases to highlight item type and ease of selection: Environmental Sustainability = less packaging Built transaction size by positioning transaction-building items in adjacent areas

20. A Fact: Beer Out of stocks cost money As a result of out-of-stocks … • 45% of beer shoppers avoid purchases • 23% of Beer Sales are lost to competitors Reducing out-of-stocks is a significant opportunity for retailers • 5% of beer volume is out-of-stock on an average day … nearly 4 times higher on promoted items 100% 55.4% 45% avoid purchases +4X 21.4% 23% lost sales 18.7% 4.5% Total Buy anotheritem incategory Make nopurchaseat all Buy item atdifferent store Leave store, shop elsewhere Source: GMA Full Shelf Satisfaction Study

21. Shopper Insight: C-Store beer O-O-S problems caused by mis-alignment of shopper segments and store clusters SIPPERS TRENDSETTERS Aspirers EXPERIMENTERS LOYALISTS

22. These beer attitude segments are… well …. different They drink different beers For different reasons (needs) They drink different amounts With vastly different loyalties Experimenter Trendsetter Aspirer Loyalist Sipper

23. Follow the EIA Rules Start with category segments . Make all assortment decisions within segments Create store clusters based on beer attitude clusters. Vary space and assortment by the size and importance of these shopper segments for each cluster Recognize that 75% to 80% of SKU’s will be the same everywhere . It’s the marginal sku’s bought primarily by experimenters, trendsetters and aspirers who create the assortment problems Discriminate in favor of brands with the highest brand loyalties or those bought by high worth shoppers For the big brands drunk by loyalists, focus on DOS issues

24. Deployment Process Operate within Guard Rails Days of Supply For Individual Stores Exception Based Reporting can be used to identify schematics with Actual DOS beyond the acceptable range of values; these schematics can be adjusted so that DOS fall within the established targets

25. Success means O-O-S < 1% This means an > of nearly 3% in beer volume and profit day in and day out. It also means happierbeer shoppers and higher store loayaly

26. Shopper Insight: Millions Of D.I.Y.’ers All Change Their Motor Oil On The Same Days I can never find the motor oil I need when I need it! Oil changing is steeped in tradition Key holidays signal time to change oil, especially Memorial Day, Independence Day, and Labor Day The motor oil business is complicated and fractionated by type, brand and package size Out-of-stocks are rampant

27. From Insight to In Store • In stock ratio skyrocketed to 99.5% • Manned hours decreased Marketplace Result • Developed a strategy to stay in stock at key times and days: • New rolling fixture for weekend and peak time holding power alleviates OOS’s, • Color-coded pallets and cases to match shelving enable stocking ease • Identified convenience opportunity via TLE to appeal to men and placed additional register for ease of check-out • Created in-store smart sections with Kiosks and information including education/information on synthetics • Placed appearance items in key location drive impulse sales

28. Shopper Insight: “If I can’t touch it, I won’t buy it” • 70% of the Retailer’s business was in basic, functional socks; 30% in fashion socks • The overwhelming majority of basic sock shoppers judge a sock’s quality by touching the fabric • Manufacturers failed to supply this Retailer with packages that allowed the shopper to touch the fabric • Shoppers tore the packages open and frequently dropped the socks on the floor • The Retailer had >$20 million in damaged merchandise in the backrooms of its stores • The Retailer lost $150 million in sales to other stores, where shoppers could touch the socks Price Is Paramount, $78M, 11% Fashion Focus, Everyday Basics, $216M, 30% $103M, 14% Working Basics, $97M, 13% Pay For Performance $228M, 32%

29. From Insight to In Store • Men’s Socks category sales increase by 23% Marketplace Result • Solved the “touch” problem with new packaging to allow shoppers to feel the socks • Built on that “reinvention” to: • Make the new packaging environmentally sustainable, i.e. less packaging • Resize the package to meet price-point and value objectives and drive additional traffic into the section • Revamp selling cases to highlight item type and ease of selection • Reorganize the shelf set into one layout for all of the three leading brands (rather than three conflicting layouts) • Build transaction size by developing the sock category as a destination, positioning transaction-building items in adjacent areas

30. Shopper Insight: Women Shoppers Won’t Buy Tires Unless They Know They Are Safe There is never anyone available to help me and I can’t carry these tires by myself • Six Club members buy their tires elsewhere for every member who buys tires at this Club • Significant lack of service and information: • Shoppers found the sales people unhelpful • Shoppers must use a tattered catalog to find tire information • The tire selection process is a cumbersome, filthy experience that takes too long

31. From Insight to In Store • Women Tire purchasers represent 63% of category purchases, up from 11% • Overall sales increased 17% Marketplace Result Provided shoppers the information they need to know the tires are safe for their car….“Tire Professor” informational kiosk for member use to identify tires/accessories needed Developed operational training guide for key service areas Streamlined the purchase process with pull cards and display tires only Implemented a paging process so members can shop while they wait

32. Shopper Insight: Set The Shelves By The Way The Shopper Uses The Category • Shoppers prefer to shop category by usage • 40% of shoppers find the Food Storage department difficult to shop • Shelf merchandising is haphazard (Trays/PDQ’s used for some cases – cut case for some, hand-stacked for others) • Retailer was capturing only 26% of category purchases across all channels

33. From Insight to In Store • Sales up +27% in new modular without lipped trays • Shopper Conversion registers 48% Marketplace Result • Transitioned from brand set to product type set • Utilized PDQs • Added category name to Aisle Sign • Fixed assortment • Under-assorted in sliders in storage bags • Under-assorted in foil at the aggregate • Moved section near food items to improve adjacencies • Out-posted Food Bags to other departments

34. Shopper Insight: Untrained Labor Can’t Be Expected To Keep Top Selling SKUs In-stock • Fashion is critical to sales in the category: • sunglasses are a “sexual signal” • purchase entails 20 minutes of shopping • High fashion SKU’s sold and were replaced with low fashion SKU’s • Very low conversion at the Retailer • Sub-optimal presentation of the products

35. Expect New Product Validation • What segment? • Is it growing? • What sales from new item? • Source of volume? • Effect on category profits? • What trial support?

36. What products are included? What are the sub-categories? How important is the category to the consumers? To the retailer? Who buys the category? How is the Category doing? What are the goals and objectives? How shall we measure success? How will we achieve our goals? What are the elements of the plan for each sub-category or segment? Who does what and when? Category Review Category Plan Basics Best Practice Category Management Business Process CategoryDefinition CategoryRole CategoryAssessment CategoryScorecard CategoryStrategy CategoryTactics PlanImplementation Examine the Scorecard