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Efficient Consumer Response

Learn how efficient category management strategies such as consumer response, assortment optimization, and joint category plans benefit retailers and suppliers in maximizing profitability, turnover, and brand perception.

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Efficient Consumer Response

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  1. HED 460

  2. HED 460

  3. HED 460

  4. Efficient Consumer Response • Efficient replenishment • Systems, EDI • Fewer stockouts • Efficient promotion • Promotions based on consumer demand • Lean inventory to support promotions HED 460

  5. Efficient Consumer Response • Efficient assortment • Turnover • Profit • Enhances brand and retailer perceptions • Efficient product introduction • Pull strategy for new products • Based on unmet needs HED 460

  6. Category Management • Technique used by retailers • Product is sub-divided into categories that • Reflect purchasing behavior of target customers • Are managed as separate business units • Supermarkets and mass merchandisers HED 460

  7. Categories as SBU’s • Department is too broad and less strategic • 150-300 categories vs. 15-20 departments • Product/brand is too narrow to approach strategically • 15-20,000 skus in a store and 16,000 new products/year HED 460

  8. Category Management • Integration of Buying and Merchandising responsibilities • Management of price, shelf space, merchandising assortment strategy, promo efforts, replenishment • Affects manuf. sales and marketing • Team approach between channel members HED 460

  9. Category Plans • Jointly developed by retailers and suppliers • Define strategies and financial objectives • GM • Sales/cu ft. HED 460

  10. Buying/Merchandising Decisions • Responsibilities must be integrated • Inventory allocation • Space allocation/analysis • Customer demand HED 460

  11. Category Management • Goal - Retailer • Optimize each part of the store • Allocate space that maximizes Gross Margin/unit of space • Goal – Supplier • To become the lead supplier or channel captain for that category HED 460

  12. Benefits • Increased category sales (5-15%) • Increased category margins • Assists in creating optimal assortments • Reduction of SKU’s in most cases • For Mfct., move from trade allowances (push) to trade promotions (pull) HED 460

  13. Manco example • Merchandising of tape products was difficult • Different buyers bought tape • Solution = tape center • Later mailing center • Prevented other vendors’ access • 19 SKUs to up to 32 feet in office superstores HED 460

  14. Direct Profit Profitability (DPP) • Profit associated with each category • Per unit Gross Margin minus all variable costs • Procurement • Distribution • Sales HED 460

  15. Defining Categories • Consider end uses (frozen, chilled, deli fresh) • Consider substitutablity (fresh/frozen) • Consider complimentary purchase decisions (pasta + sauce) • Base decision on how customer buys • Same “real estate” HED 460

  16. HED 460

  17. Dairy category • Displayed by brand name • Customers shop by type (low fat, full fat, no fat, fruit) • Then individual flavors HED 460

  18. Ready to eat meals category • Type – Chinese, Italian, meat/two vegetables • Cooking method – oven, micro, stove • Low calorie or regular HED 460

  19. Defining Categories • What products should be included? • Beer Category- decisions • Shelf beer and cold beer part of total • Shelf beer = 1 category and cooler = 2nd • Sub category of beer/wine/alcohol • Beer as a solution (picnic, party, meal) HED 460

  20. Destination Traffic building Turf protecting Transaction building Excitement creation Cash generating Image creator Roles/Implied Strategies HED 460

  21. Pasta Category HED 460

  22. Routine/ preferred Transaction building Profit generating Turf protection Roles/Implied Strategies HED 460

  23. Convenience Transaction building Profit generating Image enhancing Roles/Implied Strategies HED 460

  24. Occasional/ seasonal Traffic building Excitement creation Profit generating Roles/Implied Strategies HED 460

  25. Tactics – Traffic building • Aggressive pricing on loyalty products/low margins • Media on frequently purchased items • Prominent space HED 460

  26. Case Study - Toothpaste HED 460

  27. Leading Manufacturers – CM • P & G • Kraft • General Mills • Unilever…Ralston Purina…Pillsbury • Quaker…Kellogg’s…Coke HED 460

  28. Leading Retailers – CM • HEB • Safeway • Wal-mart • Ahold • Kroger • Wegman’s HED 460

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