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CATEGORY MANAGEMENT: SHARING BEST PRACTICES. Doing Business in Bentonville April 16, 2009. NWACC Category Management Curriculum Contributors. 2. Typical CPG Team Roles & Responsibilities. What’s The Diff?. Modular Development. Most people associate modular development with the CDM role.

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category management sharing best practices

CATEGORY MANAGEMENT: SHARING BEST PRACTICES

Doing Business in Bentonville April 16, 2009

slide3

Typical CPG Team

Roles & Responsibilities

What’s The Diff?

slide4

Modular Development

Most people associate modular development with the CDM role.

Those of us in the role know it’s NOT Tetris!

4

slide5

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

STEP 2: Know your Competition and your Category

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

category definition
Category Definition
  • Your Category Definition should…
  • Be determined by the customer’s point-of-view
    • When I say “Vitamins,” the customer thinks of …
  • Take into account “like customer solutions”
    • Multivitamins and Calcium both dietary supplements that contribute to consumers’ health and wellness
  • Include products with substitutable and/or complimentary benefits
    • Centrum and Viactiv are Multivitamin Brands that might be substitutable
    • Calcium and Vitamin D are Minerals/Vitamins that might be complementary
category definition7
Category Definition
  • Your Category Definition should not be determined by…
  • Manufacturer
    • made by J&J or Wyeth
  • Supplier
    • distributed by McLane or McKesson
  • Brand
    • sold under the Equate or Spring Valley names
category definition8
Category Definition
  • A Category Definition should outline a Strategic Business Unit
  • Nutritional Supplements Example:
  • A range of dietary supplement products consisting of vitamins, minerals, herbs and/or other organic/inorganic compounds, used to optimize one’s general health and wellness.
  • Category: Nutritional Supplements
  • Subcategory: Multivitamins
  • Segment: Adult Multivitamins
  • Sub-segment: Mature (or Age 50+) Adult Multivitamins
traditional category roles
Traditional Category Roles

Quick Definitions

Category Role Example Strategies

  • Traffic Building
    • High Share, Frequently Purchased, High % of Sales
  • Transaction Building
    • Higher Ring-up, Impulse Purchased
  • Cash Generating
    • High Turns, Frequently Purchased
  • Profit Generating
    • High Gross Margin, High Turns
  • Turf Defending
    • Used to Draw Customers
  • Excitement Creating
    • Impulse, Lifestyle Oriented
  • Image Enhancing
    • Frequently Purchased, Promoted, Impulse, Seasonal
slide10

Category Management Process /

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

STEP 2: Know your Competition and your Category

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

who is shopping who is consuming
Who is Shopping? Who Is Consuming?

SHOPPER not CONSUMER

CONSUMERnot SHOPPER

CONSUMER andSHOPPER

Sports Drink

Video Games

Baby Formula

Baby needs caregiver to provide her with nourishment

College jock is heading back to dorm from practice; He needs a quick energy boost

Aunt buys game for her nephew; She checks the package for ratings

the difference
The Difference

Baby Formula

THE SHOPPER (Mom)

THE CONSUMER (Baby)

  • WHO is she? Are there differences by income, age, race, religious beliefs, etc.?
  • WHERE does she live? Does that make a difference? Is she traveling or at home?
  • WHEN does purchase? At home, when her husband watches the baby? Does she stock-up or watch for sales?
  • HOW does she shop? Take the bus vs minivan?
  • WHY did she choose to feed the baby with formula? Why does she pick that brand or ingredient?
  • WHO is she? Is she a new-born or almost into semi-solid / solid food?
  • WHAT flavor or ingredient makes her happy when her mom feeds her?
  • WHERE is she when she is hungry? Store? Home?
  • WHEN does she get hungry? Late at night makes her tummy hurt so she needs the special allergy formula.
  • HOW much can she drink before she is full?
  • WHY does she need formula?

Baby needs caregiver to provide her with nourishment

the why behind the buy
The Why Behind the Buy
  • What is the reason for a purchase by a shopper?
  • Is it the price?
  • Is it convenience?
  • Is it a particular brand?
  • Does she likes a particular Retailer?
  • Other?
  • There can be many motivating factors…
abqq grid
ABQQ Grid

Quantitative

In-Store Observation (Quantitative)

Internet Survey

Telephone Survey

Loyalty Card Data

Mail Survey

Scan Data

Household Panel

Mall-Intercept Survey

Behavioral

Attitudinal

In-Home Ethnographies

In-Store Observation (Qualitative)

Focus Groups

Telephone Survey

ShopAlongs

Mail Survey

Mall-Intercept Survey

Qualitative

data points to insight
Data Points to Insight

Who

What

Where

When

How

Why

Attitudes

Scorecard

Behaviors

ACTIONABLE INSIGHTS

slide17

Category Management Process /

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

STEP 2: Know your Competition and your Category

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

consumer decision tree
Consumer Decision Tree
  • A Consumer Decision Treeis a market research study based primarily on consumer research (surveys and at shelf observation) and determines the thought process behind a purchase decision.
  • Includes Attitudinal and Behavioral Data
  • Reveals the reasons why consumers buy a certain product
  • Incorporates information based on consumer recollection from past behavior
  • Developed based on needs assessment
market structure
Market Structure
  • A Market Structureis a market research study based on actual purchase data across all channels. Statistical analysis and interpretation of product interaction (substitutability) drives hierarchy. Market Structures details the long term types of decisions that consumers make from a overall product portfolio.
  • Behavioral Data
  • Transactional data based from household panel
  • Reflects purchase history over a period of time (typically 52 weeks)
know the competition
Know the Competition
  • What are competitors?
  • How are they identified?
  • Who are key competitors?
    • Channel
    • Chain
    • Category
    • Occasion/Trip Type
connection to segmentation
Connection to Segmentation

Customer/Shopper

  • Right Product,
  • Modular
  • Promotion
  • Assortment
  • Demographics
  • Right Time,
  • Seasonal
  • Events
  • Promotions
  • Right Place,
  • DC
  • Store
  • Market
  • Right Quantity
  • Display
  • Open Stock
slide22

Category Management Process /

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

STEP 2: Know your Competition and your Category

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

swot definition review
SWOT Definition Review
  • Strengths
    • A firms strengths are it’s resources and capabilities that can be used as a basis for developing a competitive advantage.
  • Weaknesses
    • The absence of certain strengths may be viewed as a weakness. In some cases the flip side of a strength.
  • Opportunities
    • Changes in the external environment may reveal certain new opportunities for profit and growth.
  • Threats
    • Changes in the external environment may also present threats to the firm.

It’s much less dangerous than calling in a SWAT team!

strategies and tactics
Strategies and Tactics

Strategy and Tactics for Car Air Fresheners category

slide25

Category Management Process /

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

STEP 2: Know your Competition and your Category

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

category roles
Category Roles
  • Assigned role based on a cross-category quantitative analysis that considers the:
  • Consumer (Step 1)
  • Retailer (Step 2)
  • Supplier (Step 2)
  • Marketplace (Step 2)

Category Role

traditional category roles27
Traditional Category Roles

Quick Definitions

Category Role Example Strategies

  • Traffic Building
    • High Share, Frequently Purchased, High % of Sales
  • Transaction Building
    • Higher Ring-up, Impulse Purchased
  • Cash Generating
    • High Turns, Frequently Purchased
  • Profit Generating
    • High Gross Margin, High Turns
  • Turf Defending
    • Used to Draw Customers
  • Excitement Creating
    • Impulse, Lifestyle Oriented
  • Image Enhancing
    • Frequently Purchased, Promoted, Impulse, Seasonal
retailer hybrid model
Retailer Hybrid Model

- Price Point Leads all Criteria for all Segments -

Good – Better – Best Pricing

category growth
Category Growth

+

+

=

Penetration

Frequency

Amount Purchased

Volume

  • How do You Move the Gears?
  • Penetration – Convert shoppers to buyers – increase the number of people that buy the category at a given retailer (Increase Buyer Conversion)
  • Frequency – Increase the number of trips buyers purchase the category at a given retailer (Increase the Buy Rate through more Trips)
  • Amount Purchased – Increase the amount of the category that buyers purchase at a given retailer (Increase the Buy Rate through more Volume per Trip)
slide30

Category Management Process /

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

STEP 2: Know your Competition and your Category

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

execution
Execution

Reconciliation

slide32

Category Management Process /

Category Development Planning

INITIATE

STEP 1: Know your shopper

Define the category

Define success

Roles & Responsibilities

Identify team members

Scope and Timing

Define expectations

Determine who is shopping,

what are their needs, how do they buy?

Understand barriers and opportunities.

STEP 6: Measure / COE

STEP 2: Know your Competition and your Category

Continual Measurement

Conduct Correction of Errors

Track Progress and adjust plan

accordingly

Assess category performance

(market, competitors, & our). Define the

winners and how they win.

STEP 5: Implement

Execute the Plan

STEP 3: Where do we want to go?

Develop category, sub-category

& segment strategies. Build

financial plans to achieve

category role and strategies.

STEP 4: How do we get there?

Develop the plan: the correct products, shelf arrangement, off-shelf product

placement, category adjacencies, department layout,

availability, pricing & promotion.

Strategic Pricing / Promotion / In-Stock / Assortment / Line Review

measurement correction of errors
Measurement & Correction of Errors

Execution

  • The Monitor and Review process includes three important components:
    • Review the key metrics for success (the report card of results)
    • Agreement upon the dates to review the results
    • Crystallizing the insights and results and taking appropriate action
  • Remember, the category management process is dynamic, not a one time event. It is a continuous cycle of attitudinal and behavioral analysis and action.
category management sharing best practices34

CATEGORY MANAGEMENT: SHARING BEST PRACTICES

Doing Business in Bentonville April 16, 2009

information and registration
Information and Registration

Marshall McCall

(479) 936-5171 

mmccall@nwacc.edu

James Thulin

(479) 936-5107

jthulin@nwacc.edu

Visit http://www.nwacc.edu/corporatelearning