Category Management is becoming an integral part of manufacturer and retailer operations and at the same time this term can be pretty confusing as each company can perceive it in a different way. Of course, it all depends on the scale and market readiness when deciding on the approach and the external help needed. Sometimes a simple solution is enough to improve your product or category performance but there are some core things what need to be taken into account if you want to win at the store.
Today we will tell you about the, how we call it, “4 U’s of Category Management” which will help you to plan further steps on the Category Management and can be used in the product planning stage. The 4 U’s stand for:
- Understand your Customer
- Understand your Product
- Understand the Category and its Strategy
- Understand the Retailer
Understand your Customer
Understanding the customer we are putting in the first place because the customer should always be in the heart of everything you do, whether you are manufacturer or retailer. Who is your customer? Do you know what your customer profile is, where can you meet him, what does he like and actually need? Let us give you a simple example.
Let’s imagine you are producing an expensive, solid looking phone with integrated hi-tech functions. In this case most probably you are targeting to mid-upper and higher income class business people who are very much dependent on the technology and use it in conducting daily business. Now think about the places where they might be looking for the new technology information and products, and what could be the most important features they’d like to have in their phones.
And now you have also created a pink phone with the cover with shiny crystal decorations having the same functions as the previously mentioned mobile. Do you think the same people will choose it? No, it looks like your new phone will catch an eye of a teenage girl rather than a business man no matter how up-to-date it is,. So you see that it’s the combination of many: customer perception, need, like, even prestige for some products etc.
The previous example is about the shopper and it’s perception about the product. But there is one more important aspect – shopper perception of the product cluster, which means, how shopper groups the products in his mind. Why is this important? Because it directly impacts your sales. And here is the example of the project carried out in some of the biggest stores of Eastern Europe. Female Care products used to be placed in different categories but none of them was within the category where shopper would actually seek for Female Hygiene products. This means that often in store this sub-category is simply missed and sale doesn’t happen and not to mention shopper frustration that they can’t easily find what they are looking for. By introducing the shopper based category creation and moving Female Hygiene products to Beauty Care category, the sales of this sub-category increased on average by 5% and it gave also a positive sales lift to all Beauty Care category.
Understand your Product
When you are a Manufacturer then understanding the customer and your product goes hand in hand. There are many questions you want to answer for yourself before you present the new product to the Retailer. Here are some questions for you to start thinking about:
What is my product about? What is special about my product compared to competitor products? How can my product improve the lives of my customers? What is the role of my new product within my product portfolio? What is the role of my product in the category?
If you are a Retailer, this is even more complicated because you need to understand each of major contributors (products) and the role they play in achieving your goals.
Of course, Manufacturers and Retailers often perceive products differently and here is important to find how this understanding can be united in achieving the goals of both parties.
Understand the Category and its Strategy
Does your product fit into the category and supplement the strategy? This requires analyzing the present category; maybe the sub-groups of the category need to be revised in order to meet the customer perception.
Coming out of Retailer’s format strategy, category roles and needs are defined and by analyzing them you can determine how and where (even- if) the product fit’s in and how it would help building your company’s sales results.
The typical Category Roles are: Destination, Routine, Convenience and Seasonal.
And here are a couple of examples of sub-category strategies: Profit Generation, Traffic Builder, Transaction Builder, Share Protector, Excitement Creator.
Understand the Retailer
The last but definitely not the least is understanding the retailer and its store format. The business strategy should clearly define the format strategy or strategies, the operating model and the key differentiation from the competitors (for example: everyday low price; promotion-driven retail; family centric, branding; quality; or service). This again comes to cooperation and mutual understanding between the parties- manufacturer and retailer. It will never be success if manufacturer just comes in and pushes his products to be listed without interest into retailer goals and strategies, and vice versa. Yes, it sounds logical, but in real life this is actually one of the most challenging questions which needs a lot of attention.
The importance of Understanding goes both ways and there is a need to look from different perspectives to be able to create the successful strategy and cooperation resulting in most profitable product/service.
We hope the “4 U’s of Category Management” will help you in daily work and will give some ideas how you can improve category management in your organization. If you wish to give us any feedback about this article or you have any questions, we’ll be pleased to hear from you (email us: info [at] experience-mind.com).