“We don’t practice category management in our company / region / industry.”
It might surprise you that I’ve heard a version of this statement several times in the past few weeks. But the bigger surprise is that even in non-category management worlds, the principles of category management are being used, even though they could be improved for the benefit of both Retailers and Manufacturers around the globe.
Whether you call it category management or not, you might be missing the boat if you answer YES to any of the following questions:
- Does your organization purchase Nielsen or IRI syndicated data?
- Do you have access to retail Point of sale data? Consumer panel data? Store level data?
- Do you make assortment / space management / pricing / promotion decisions or recommendations?
- Do you launch innovation or sell new product opportunities or make decisions on new products?
- Do you make presentations to sell an idea that incorporates data?
- Do you see opportunities to be more strategic in the approach to your business?
- Are you looking for ways to look at data to uncover new opportunities in your business?
If you answered YES to any of the questions above, you are probably doing one or more components of category management — maybe without even realizing it. Category management is most commonly known as a Retailer-driven process where items are managed in strategic business units based on Shopper needs.
Any YES answer means there is the opportunity to use the incredible framework of category management for powerful, strategic approaches to incorporate into your business. And these approaches can help you to drive sales and profit by uncovering new opportunities that would otherwise be unreachable.
If you want to become more strategic in your business through changes in perspective, analytics and approaches, then read on …
4 Ways to Become More Strategic Using Category Management Principles
Understand different perspectives to uncover more opportunities
If we stay within a bubble and only look at our business from an internal perspective (ie. Retailer or brand), we are missing out on identifying bigger strategic opportunities for our business. By looking at things from a broader perspective, the options and opportunities also expand and become more relevant to your business.
There are 3 perspectives that should be considered:
- Retailer Perspective: Every Retailer has unique strategies, Shoppers, formats and approaches. By better understanding each, you will develop better solutions to help them achieve their objectives.
- Category Perspective: Most Retailers have structured their business around categories (or items that offer similar solutions to Shoppers). If you’re only looking at the business from a brand perspective, your recommendations may overlook important implications on the Retailer’s total category business. You’re also limiting the opportunities for both national brands and store brands by not looking at a bigger picture perspective.
- Shopper Perspective: If you have Shopper insights / marketing in your organization, it needs to align with the Retailer, their category approach and their Shoppers. This is best done by incorporating Shopper into the overall assessment and opportunity identification done through a category assessment (see more details in #3 below).
Learn how to develop category / business / Shopper insights
We have more access to data than we have ever had in the past. In some regions / markets / industries the set of data may not be as robust, but you most likely have more data than ever before.
It’s better to make fact-based decisions that tie in with our knowledge of the business, rather than to rely only on intuition or experience to make decisions.
Learning how to drill down through data (whether it’s market data, consumer panel data, warehouse data, shipment data) is an essential skill that will help you take your analytics to a whole new level, particularly if you’re incorporating the insights with the strategic understanding that you developed in #1 above.
Here are some simple examples of what I mean:
MANUFACTURERS: Complete a category assessment to understand how your brand is performing vs. competition from a market / channel / Retailer perspective and identify the biggest areas of opportunity.
RETAILERS: Complete a category assessment to understand how your category is performing vs. competition from a market / channel perspective and identify the biggest areas of opportunity.
Build skills in assortment / space management / pricing / promotion
Many of us spend time and money on driving the tactics, ultimately to drive sales and profits for our brands / categories / business. But how do you know that the recommendations that you are making are the right ones for your business? Most Retailers do not (or should not) make decisions on each of the tactics on a brand-by-brand basis.
Start turning your data into action through the category tactics! You can learn how to become more strategic in your approach for each tactic, and learn how to effectively analyze and determine the biggest areas of opportunity for your business.
- Product Assortment: Adding or removing items from your category assortment is an ongoing process for Retailers. If you are responsible for making decisions or recommendations that affect a Retailer’s assortment, you should have the skills to make more strategic recommendations that are beneficial for each unique Retailer / category behind innovation, distribution opportunities or Shopper initiatives.
- Space Management: So many organizations have allowed this critically important area to become administrative and tactical. Anyone who makes decisions or recommendations that affect the Retailer’s shelves (typically done through assortment changes) should understand Retail shelving strategies, how the shelf works, and some basic shelving terms and calculations.
- Pricing: Pricing is the most complex tactic, and decisions and recommendations made on this tactic have a direct impact on sales and profit for the Retailer. By learning how Retailers develop pricing and overall strategies, and how to be more strategic and fact-based in this tactic, you will develop better solutions to drive sales and profit for your business.
- Promotion: Promotion drives incremental sales and is also a point of differentiation for Retailers. By better understanding Retailer promotions, strategies and ways to analyze the impact of promotions, you will develop better promotions in the future that will drive sales and profit for your business.
Develop fact-based presentation / selling skills
A big area of opportunity for many organizations is to develop fact-based presentation and selling skills across their teams. Traditional sales approaches are no longer working, and we can’t rely on relationships alone to sell our ideas anymore. Anyone who develops sales presentations or business reviews needs to learn how to apply fact-based principles into a logical, well-formed presentation. Without a persuasive approach, great ideas can get lost in a poorly developed presentation.
Take your presentations to a whole new level by developing your presentation skills. By doing this, and incorporating the relevant data and insights into your presentation, you are more likely to add value to your presentation audience, and to get them to say YES to your idea.
5 Benefits of Moving to a More Strategic Approach grounded in the principles of category management:
- Uncover new ideas and opportunities to build your business that considers the bigger picture perspective
- Develop better solutions for your business partners
- Increase alignment in your organization in your approach to analyzing data
- Improve return on your investment in data and technology
- Improve your business results
I hope that you see the opportunities to use the category management framework to create a strategic approach in your business that will ultimately help you improve your business results — whether or not you have category management training or background.
Where are your biggest opportunities? The first step is to determine the ways that you can improve your strategic approach to the business using one (or all!) of the examples I've presented above.
Please contact me at email@example.com if you'd like to identify, refine, or implement your ideas.