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CATEGORY MANAGEMENT:
SHARING BEST PRACTICES
Doing Business in Bentonville April 16, 2009
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NWACC Category Management Curriculum Contributors
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Typical CPG Team
Roles & Responsibilities
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Modular Development
Most people associate modular development with the CDM role.
Those of us in the role know it’s NOT Tetris!
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STEP 1: Know your shopper
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.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
STEP 4: How do we get there?
STEP 5: Implement
STEP 2: Know your Competition and your
Category
Assess category performance (market, competitors, & our). Define the
winners and how they win.
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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
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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
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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
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TRADITIONAL CATEGORY ROLES
DestinationTo be the primary category provider and help define the retailer as the store of choice by delivering consistent, superior target consumer value
Traffic Building
Turf Protection
Transaction Building
Excitement Creation
Cash Generating
Routine/PreferredTo be one of the preferred category providers and help develop the retailer as the store of choice by delivering consistent, competitive target consumer value
Traffic Building
Transaction Building
Profit Generating
ConvenienceTo be a major category provider, help reinforce the retailer as the store of choice by delivering frequent, competitive target consumer value
Transaction Building
Profit Generating
Image Enhancing
Occasional/SeasonalTo be a category provider and help reinforce the retailer as the full service store of choice by delivering good target consumer value
Traffic Building
Profit Generating
Excitement Creation
Category Role Example Strategies Quick Definitions
Transaction Building• Higher Ring-up, Impulse Purchased
Cash Generating• High Turns, Frequently Purchased
Profit Generating• High Gross Margin, High Turns
Traffic Building• High Share, Frequently Purchased, High % of Sales
Turf Defending• Used to Draw Customers
Excitement Creating• Impulse, Lifestyle Oriented
Image Enhancing• Frequently Purchased, Promoted, Impulse, Seasonal
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STEP 1: Know your shopper
STEP 2: Know your Competition and your
Category
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Management Process / Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly Assess category performance
(market, competitors, & our). Define the winners and how they win.
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.
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
STEP 4: How do we get there?
STEP 5: Implement
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WHO IS SHOPPING? WHO IS CONSUMING?
CONSUMER not SHOPPER
Baby Formula
Baby needs caregiver to provide her with
nourishment
CONSUMER and
SHOPPER
Sports Drink
College jock is heading back to dorm from
practice; He needs a quick energy
boost
SHOPPER not CONSUMER
Video Games
Aunt buys game for her nephew; She checks the
package for ratings
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THE DIFFERENCE
Baby Formula
Baby needs caregiver to provide her with
nourishment
THE SHOPPER (Mom)
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?
THE CONSUMER (Baby)
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?
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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…
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ABQQ GRID
Behavioral Attitudinal
Qualitative
QuantitativeInternet Survey
Mail Survey
Mall-Intercept Survey
Telephone Survey
Focus Groups
Mail Survey
Mall-Intercept Survey
Telephone Survey
Scan Data
Household Panel
Loyalty Card Data
In-Store Observation (Quantitative)
In-Store Observation (Qualitative)
In-Home Ethnographies
ShopAlongs
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ABQQ GRID DATA SOURCES
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DATA POINTS TO INSIGHT
WhoWhat
WhereWhenHow
Why Attitudes Behaviors Scorecard
ACTIONABLE INSIGHTS
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STEP 1: Know your shopper
STEP 2: Know your Competition and your
Category
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Management Process / Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly Assess category performance
(market, competitors, & our). Define the winners and how they win.
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.
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
STEP 4: How do we get there?
STEP 5: Implement
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CONSUMER DECISION TREEA Consumer Decision Tree is 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
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MARKET STRUCTUREA Market Structure is 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)
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KNOW THE COMPETITION
What are competitors?
How are they identified?
Who are key competitors? • Channel• Chain• Category•Occasion/Trip Type
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CONNECTION TO SEGMENTATION
Customer/Shopper
Right ProductRight Product,• Modular
• Promotion
• Assortment
• Demographics
Right Time,Right Time,• Seasonal
• Events
• Promotions
Right Place,Right Place,• DC
• Store
• Market
Right QuantityRight Quantity• Display
• Open Stock
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STEP 1: Know your shopper
STEP 2: Know your Competition and your
Category
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Management Process / Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly Assess category performance
(market, competitors, & our). Define the winners and how they win.
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.
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
STEP 4: How do we get there?
STEP 5: Implement
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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!
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STRATEGIES AND TACTICSStrategy and Tactics for Car Air Fresheners category
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STEP 1: Know your shopper
STEP 2: Know your Competition and your
Category
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Management Process / Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly Assess category performance
(market, competitors, & our). Define the winners and how they win.
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.
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
STEP 4: How do we get there?
STEP 5: Implement
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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
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TRADITIONAL CATEGORY ROLES
DestinationTo be the primary category provider and help define the retailer as the store of choice by delivering consistent, superior target consumer value
Traffic Building
Turf Protection
Transaction Building
Excitement Creation
Cash Generating
Routine/PreferredTo be one of the preferred category providers and help develop the retailer as the store of choice by delivering consistent, competitive target consumer value
Traffic Building
Transaction Building
Profit Generating
ConvenienceTo be a major category provider, help reinforce the retailer as the store of choice by delivering frequent, competitive target consumer value
Transaction Building
Profit Generating
Image Enhancing
Occasional/SeasonalTo be a category provider and help reinforce the retailer as the full service store of choice by delivering good target consumer value
Traffic Building
Profit Generating
Excitement Creation
Category Role Example Strategies Quick Definitions
Transaction Building• Higher Ring-up, Impulse Purchased
Cash Generating• High Turns, Frequently Purchased
Profit Generating• High Gross Margin, High Turns
Traffic Building• High Share, Frequently Purchased, High % of Sales
Turf Defending• Used to Draw Customers
Excitement Creating• Impulse, Lifestyle Oriented
Image Enhancing• Frequently Purchased, Promoted, Impulse, Seasonal
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RETAILER HYBRID MODEL
Win Play Show Brand Value Price Leadership “Always” High Share High Turns Profitable High Year over Year (YOY) Growth
Rates Aligns with corporate strategies Promoted Differentiation Disproportionate investment by Wal-
Mart Supplier – Wal-Mart Co-Marketing On or Ahead of shopper Trends
Difficult to differentiate
Some Brand Value Consistent
Performance Limited Marketing
Support
Price and differentiation is all commodity
No marketing support
- Price Point Leads all Criteria for all Segments - Good – Better – Best Pricing
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CATEGORY GROWTH
+ + =Penetration 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)
Frequency
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STEP 1: Know your shopper
STEP 2: Know your Competition and your
Category
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Management Process / Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly Assess category performance
(market, competitors, & our). Define the winners and how they win.
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.
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
STEP 4: How do we get there?
STEP 5: Implement
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EXECUTION
Reconciliation
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STEP 1: Know your shopper
STEP 2: Know your Competition and your
Category
STEP 3: Where do we want to go?
INITIATE
STEP 6: Measure / COE
Category Management Process / Category Development Planning
Define the categoryDefine success
Roles & ResponsibilitiesIdentify team members
Scope and TimingDefine expectations
Determine who is shopping, what are their needs, how do they buy?Understand barriers and opportunities.
Execute the Plan
Continual MeasurementConduct Correction of Errors
Track Progress and adjust plan accordingly Assess category performance
(market, competitors, & our). Define the winners and how they win.
Develop category, sub-category & segment strategies. Build
financial plans to achieve category role and strategies.
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
STEP 4: How do we get there?
STEP 5: Implement
33
MEASUREMENT & CORRECTION OF ERRORS
Monitor and Review
Review key metrics for
success
Agree upon dates to review
results
Crystallization and action
The Monitor and Review process includes three important components:
1. Review the key metrics for success (the report card of results)2. Agreement upon the dates to review the results3. 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.
Execution
CATEGORY MANAGEMEN
T: SHARING
BEST PRACTICES
Doing Business in Bentonville April 16, 2009
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INFORMATION AND REGISTRATION
Marshall McCall (479) 936-5171 [email protected]
James Thulin(479) [email protected]
Visit http://www.nwacc.edu/corporatelearning