In this week’s podcast blog, the focus is Collaboration (also known as joint business planning). Today, we’ll define collaboration and why it’s so important to be successful as the future of category management unfolds. Plus, you’ll take away some key considerations to prepare for collaboration.
So why does strategic collaboration in category management matter and what’s your status?
Over the past couple of years, there’s been a lot of discussion about collaboration. Can you give a brief history on category management, including why and how it evolved?
Category Management evolved in the 1980s, driven by the availability of point of sale data via new Retailer scanners. Many retail “buyers” became “category managers”, replacing vendor buying with category buying. This was a significant change for both Retailers and Vendors / Manufacturers but it made so much more sense! Imagine a P&G buyer and a Unilever buyer, working for the same Retailer, both competing for shelf space, assortment, flyer space and pricing to hit their vendor volume and profit objectives.
From the scanners, data slowly started to trickle out – market data, item rank reports, panel data – it was an exciting time, because all of this data was so new and gave an incredible new perspectives on both Retailer and Vendor / Manufacturer business results (granted that it was primarily available via hardcopy reports).
Space management software was another huge catalyst for category management, with category planograms being a key output from newly evolved category management teams.
So what’s changed since category management was first introduced?
Today, we can see some significant changes:
- A completely new “Market” with more choices for Shoppers, blurring channels, and the complexity of the online and omni-channels;
- Incredible, robust data available (although not in some industries / channels) and highly sophisticated tools to mine data;
- More complex and educated Shopper, driven primarily by the Internet and social media;
- Changes in relationships / partnerships between Retailers and Vendors / Manufacturers (collaboration / joint business planning); and
- New requirements and expectations in resources and capabilities for both Retailer and Vendor multifunctional teams.
We can also see things that haven’t changed — but need to — in order to prepare for the future of category management. One of these areas is activating collaboration between Retailers and Vendors / Manufacturers.
Just to make sure we’re all on the same page, what’s your definition of collaboration?
Eric Schmidt, Chairman of Google, once said “When you say collaboration, the average 45-year-old thinks they know what you’re talking about: teams sitting down, having a nice conversation with nice objectives and a nice attitude.”
He was joking, of course! When I went to find a good definition for collaboration for our industry, there wasn’t one that really hit the nail on the head. Carlos Dominguez of Cisco more closely defined my interpretation of collaboration.
With just a little modification, the following definition engages the whole organization, both internally and externally, and focuses on the Shopper:
“COLLABORATION = highly diversified, multifunctional teams working together inside and outside a Retailer / Vendor with the purpose to create value by improving Innovation, Shopper Relationships, and Efficiency while Leveraging Technology for effective interactions in the virtual and physical space.”
Why is collaboration so important for category management? I hear and read that it is required to be successful in category management, but I don’t really see the connection.
In 2014 and 2015, I had the pleasure of working on a “Collaboration” committee led by the Category Management Association (CMA). We developed a whitepaper called “Strategic Collaboration for Shopper Satisfaction”, with the intent to propose the next evolution of category management. The collaboration whitepaper was truly a collaborative effort on the part of leading Retailers, Vendors / Manufacturers, Brokers, Consultants, and Solution Providers in the Consumer Packaged Goods (CPG) Industry to update the process of how we all work together to create demand, attract Shoppers and sell products in today’s market.
It was released as a free publication that was made available to the industry in early 2015, and provides a guide for both Retailers and Vendors / Manufacturers to move to a more strategic and collaborative approach to their business.
What is required for successful collaboration?
There are several important things to consider regarding collaboration. It’s not just about “getting along” or having great relationships with your internal and external partners. Going for coffee or a drink doesn’t mean you’re collaborating. Collaboration has specific requirements for both Retailers and Vendors / Manufacturers, and there are different levels of collaboration. Requirements drive the level of collaboration and resulting outcomes that you can expect through partnerships. There are 3 requirements for successful collaboration.
Collaboration Requirement #1: Data & Tools
Most organizations spend millions of dollars on data and the technology to mine and/or analyze the data. Many annual data budgets focus on the actual data purchase which may include some “point & click” or “technical” training. At the same time, organizations question their return on investment (ROI) on the data budget.
So what’s the problem? There’s no overarching, strategic category management training that gives the big picture perspective on:
- YOUR GOALS: what you’re trying to accomplish,
- YOUR RESOURCES: how all of the pieces come together across your multifunctional teams, and
- YOUR OPPORTUNITIES: determining the biggest areas of opportunity for your categories and brands.
The opportunity for multifunctional teams to be knowledgeable enough to think strategically in category management allows for a consistent and aligned approach to your business — ultimately increasing strategic focus and ROI on your data and software purchases. Your data and tools need to fit into your guidelines and processes so that multifunctional teams understand when and how to use different data sources based on business opportunities or issues.
Collaboration Requirement #2: Research
The Shopper is paramount in a highly collaborative relationship, including:
- Understanding the Shopper, their needs and behavior, and their path to purchase (including knowledge of the omni-channel).
In more advanced collaboration, conducting primary research and mining loyalty card data is necessary to understand the Retailer’s consumer. Once this is determined, you can create action to retain and increase the value of current consumers and acquire new consumers, driving category sales and profit.
Collaboration Requirement #3: Personnel
The level of collaboration between Retailer and Vendor / Manufacturer is also driven by the depth of resources and their skill sets across multifunctional teams. The opportunity is to educate multifunctional teams in category management fundamentals, and develop strategies, processes and guidelines internally for working together in an aligned approach.
One team (usually your category management team) armed with the knowledge and strategic thinking in category management isn’t enough. Expand your strategic approach across your multifunctional teams and start to create a bond and alignment for a corporate solution and new collaborative approach for your organization!
Moving to a collaborative approach is game-changing for most organizations, so how do I get started?
Before pursuing potential collaborative partners, you need to look internally first. Senior management needs to be completely onboard before you can move to a more collaborative approach, with clear definition of what “collaboration” means for your organization, including:
- Defining your overall strategies and requirements for collaborative partnerships, and the level of collaboration that you can realistically perform within (based on data, research and resources).
- Choosing your partners is a big deal, and you need to be selective of who you want to partner with and ensure that you can deliver on your commitments (the CMA White Paper includes all of the considerations when choosing partners).
- Once you’ve defined your partners, you need to work with them individually to identify areas of mutual interest which focus on growing the pie (ie. a win-win for Retailer and Vendor / Manufacturer).
Any final thoughts on collaboration?
Category management and category management training create the foundation for organizations who are looking for a more collaborative approach between Retailer and Vendor / Manufacturer. A fact-based, multifunctional, strategic approach leads to “win-win” Shopper solutions that ultimately build sales and profit for both.
You don’t have to make all the changes at once, but you can evolve over time and as you learn what works most effectively for your organization and collaborative partners. There’s not a “one size fits all” or template approach that you can apply, so getting things right may take some time.
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