ECR Europe Forum ‘08. The moment of truth – putting Category Management into action at store level

The moment of truth – Putting category management into action – At store level 1

Crash Course - Objectives • To have a clear understanding of the values of working with category management on store level • Understand what it takes to move from project to process • Get a clear understand of how to measure and manage sales and profit effectiveness • See the true value of working proactively whit P.O.S data 2

Subject Content Expected output Understand Category The business to business to consumer market Give the participants a broad overwiev of the issues management issues and opportunities in relation to category and opportunities Category management models and steps management in FMCG From continiuosly improvements to Joint Category management – Focused at See the value of implementing category partnership management the right way Category A way of working in the FMCG industri – A Understand the category management could and management from shift in pradigme should become a way of working and not a project project to process retated to individual parameters Group discussions at the table From data to relevant Effective POS- data analyzes and tools Understand that managing kompleks data sources business knowledge could become simple asking the right questions Build on cases: using suffient tools Market potential - Issues and opportunities Reasons – Objectives Actionplan - Implementation – Cockpit and review procces Combined with 2 small workshops at the table Focusing at understanding potential and impostnat tools Next step How to go from project to process What will be step 1 in your company Group discussions at the tablefilling in a small questionare 3

Category management issues and opportunities 1

The business to business to consumer market CONSUMER MARKETING MANAGEMENT Manufacture Chain POP Consumer Mo me n tru t of th TRADE MARKETING MANAGEMENT 2

The Business to Business to Consumer market • We are actually selling 2 types of products! • The consumer product – covering consumer needs • The business product – covering business needs 3

The Consumer Product The value is basically build on taste, feelings and perceptions • Consumer evaluation • Ability to create consumer loyalty • Ability to create consumer trial • Ability to create consumer knowledge 4

The Business Product The value is basically build on facts • Business evaluation • Ability to create chain and store turnover • Ability to create chain and store profit • Ability to create chain and store profile and image 5

ECR & Category Management E fficient Though cooperation to fulfill the needs of our common C onsumer consumers – better, faster and at a lower cost R esponse 6

Category development How can we grow the cake together – optimizing the moment of truth Win for consumers Future potential Today's Win for manufactures Solutions = Sales & Profit Win for chains and stores 7

Category Management Category Management Category development Right assortment Right prices Right promotions Right place & space Right NPI’s 8

Cooperation at several levels creates the best results KAM/BUM Chain Consumer Sales Rep Store/POP / Merch. 9

Cooperation around the moment of truth External dialog Category manager Internal dialog KAM/BUM Chain Sales management Internal District management dialog Consumer Dialog Store/POP Sales rep / Merch Store / POP External dialog 10

Knowledge and understanding becomes key to success Knowledge sharing creates synergy Manufactures knows a Retailers knows a lot but not enough lot but not enough Efforts Results Data / knowledge sharing is a must to create best practice solutions 11

Category management / category development – Put to work ! Category profit - One chain - Remarkable results in one category + 4,5 mio 12

Category Management process – ECR Best practice Category Definition Category Role Category Assessment Category Objectives Category Review Category Marketing Strategies Category Tactics (initiatives) Implementation Plan 13

The “joint” Category Management model • Alignment – Go/No go Joint basic plan • Joint objectives • Priorities Retailer strategy definition • Cooperation Category definition and structure Tactics assessment Tactics optimization Store Development Communication Store Lay out program Assortment Category review • Specific objectives Promotion Space Price • Strategy • Action Category management & implementation plan 14

Assess and develop co-operation Focused Category Limited cooperation at management (low priority) Partnership Advanced Focused Investment Customer at by management Manufacture Improvement (Human Resources and Financial) Basic Focused Customer Limited cooperation at (low priority) management Discounts Traditional negotiations Key Supplier cooperation Category Management 15 Investment by Retailers

Continuously focusing at improvements Tactics assessment Tactics optimization Store Development Communication Store Lay out program Assortment • Specific objectives Promotion Space Price • Strategy • Action 16

The Classic category development dilemma 1 - Contribution formula X X X = Hvor mange forbrugere How kommer i butikken ? How How Which Store many? often? much? profit? profit • Are we going to increase traffic, attract the ideal shopper profile and perhaps more loyal shoppers? • Are we going to guarantee a more effective use of the shopper-flow by raising the average basket (or profit)? 17

Clarify areas of alignment Manufacture Chain / POP 1. 1. 2. 2. 3. 3. 4. 4. 18

Focused at partnership and cooperating around category development Banner/Chain X Situation today Situation year 1 Situation year 2 Situation year 3 Business as usual Preffered partner adding volume Preffered partner adding value Increased customer loyalty % Turnover Profit % Turnover Profit % Turnover Profit % Turnover Profit Total category turnover 100 10000 1800 100 11000 1980 100 11000 2145 100 11000 2178 Preffered partner share 30 3000 600 30 3300 660 30 3300 825 35 3850 963 Competitor 1 20 2000 400 20 2200 440 20 2200 440 18 1980 396 Competitor 2 10 1000 200 10 1100 220 10 1100 220 8 880 176 Private label 40 4000 600 40 4400 660 40 4400 660 39 4290 644 19

Category management = Category development Yes we know that it is a valuable opportunity The key challenges are clear It only works when you can go from project to process, Category management has to become the way you run your business. Category management is not brand management Category management involves many employees at several levels at your Company, requires a sufficient management and knowledge sharing structure – Billions of data is involved You need true cooperation throughout the whole value chain It is only working when it is working at store level If it is not working for you, you are probably making it to academic 20

The moment of truth – Putting category management into action – At store level 21

Crash Course - Objectives • To have a clear understanding of the values of working with category management on store level • Understand what it takes to move from project to process • Get a clear understand of how to measure and manage sales and profit effectiveness • See the true value of working proactively whit P.O.S data 22

Subject Content Expected output Understand Category The business to business to consumer market Give the participants a broad overwiev of the issues management issues and opportunities in relation to category and opportunities Category management models and steps management in FMCG From continiuosly improvements to Joint Category management – Focused at See the value of implementing category partnership management the right way Category A way of working in the FMCG industri – A Understand the category management could and management from shift in pradigme should become a way of working and not a project project to process retated to individual parameters Group discussions at the table From data to relevant Effective POS- data analyzes and tools Understand that managing kompleks data sources business knowledge could become simple asking the right questions Build on cases: using suffient tools Market potential - Issues and opportunities Reasons – Objectives Actionplan - Implementation – Cockpit and review procces Combined with 2 small workshops at the table Focusing at understanding potential and impostnat tools Next step How to go from project to process What will be step 1 in your company Group discussions at the tablefilling in a small questionare 23

Category management from project to process 1

The business to business to consumer market Consumer marketing Manufacture / Purchase / Supplier Category Chain Store / POP Consumer management Mo me n tru t of th Trade marketing Copyright ® Gordios Retail Innovation A/S 2

Overall category management objectives • Category development – Grow volume, Grow value, Grow loyalty • Transform the strategic frames of the business plan to a category plan which could and should be implemented a round ”the moment of truth” • Use fact based decision process using sufficient tool’s managing bill of complex data • Continuously focus on best practice in store solutions – recognizing different shopper behavior Copyright ® Gordios Retail Innovation A/S 3

From projects to process Category Definition Category Role On going analyses Dynamic planning Execution Category Assessment Potential Objectives Headquarter Category Objectives Issues Action plan Store / POP Category Review Category Marketing Strategies Reasons Cockpit Review Category Tactics (initiatives) Implementation Plan Copyright ® Gordios Retail Innovation A/S 4

Category Management proces Joint ”plan” Analyses Planning Execution 1 4 Common Potential Objectives Head quarter Platform 2 5 Issues & Chain strategi Action plan POP opportunities 3 6 Category role Reasons Cockpit Review ”Seldom” Very often ”Once” Copyright ® Gordios Retail Innovation A/S 5

Joint basic plan – Common understanding • Retailer category strategies • What, combined with objectives • Category rolls • Category definitions • Structure and decision trees • Best practice tactics – Tactograms etc. • Assortment • Place & Space • Prices • Promotions • Communication • NPI’s • Overall implementation plan • Process and responsibilities Copyright ® Gordios Retail Innovation A/S 6

Step 1. potentiale Category importance and chain potential • Consumer perspective • Category impact on primary target group • Category trends and market options • Category consumer positioning • Business perspective • How important is this category to turnover, profit and image enhancing • Competitive overview with focus on complementary and substitute competition in the category Copyright ® Gordios Retail Innovation A/S 7

Step 2. Issues • What are the issues and opportunities optimizing this category on a day to day basis? • Prioritize business issues • Profile, Consumer flow, Average purchase, Profit pr purchase • Where do we see those issues • At segment or brand level • At HQ level / Chain level or individual store level / regions etc. Copyright ® Gordios Retail Innovation A/S 8

Step 3. Reasons • What are the reasons to our “on going” issues and opportunities • Focus on manageable variables • Chain level ex: • Assortment – Wide and depth, brands etc. • Price levels – shelf and campaigns • Promotions – Relevance, quantities, qualities • In store space and place management • Store level ex: • Consumer flow • In store placement of category and products • Implementation quality • Out of stock / shelf • Local activities / local competition • Regional demographical differences . • In store attitude and merchandising Copyright ® Gordios Retail Innovation A/S 9

Step 4. Objectives • What are the overall objective of the category • Focus on the “contribution formula” • What specific objective are we working with in relation to the P’s • Products (Assortment) price, place etc. the “engine” • What is our potential • Focus at the “spread” in store effectiveness Copyright ® Gordios Retail Innovation A/S 10

Step 5. Solutions and action plan • Which issues should be solved in which sequence – Prioritizing against issues and objectives • Which objectives should we have solving specific issues • Which specific actions do we need to take and who will be the “on going” responsible • Create a dynamic action plan giving an overview of – What, how, where, who and when • Agree on a review/adjust sequence of meetings Copyright ® Gordios Retail Innovation A/S 11

Step 6. Cockpit, managing on going implementation and review of the category development process • Development and implement a joint cockpit • Which KPI’s should we focus on developing the category – Sales and profit effectiveness • How often should we update our cockpit • Who should have access to the cockpit • Agree on review meetings • Status on our action plan – Focus on exceptions and “red areas” • Decide on needed adjustments to our plans • Focus for the coming period • Updating our best practice understanding if appropriate Copyright ® Gordios Retail Innovation A/S 12

KPI’s and Assessments • Sales effectiveness • Turnover / 1000 customer in the chain/store • Profit effectiveness • Turnover / 1000 customer in the chain/store • Loyalty • Loyalty to the chain / store – Number of potential customers who decide to buy in this chain / store • Loyalty towards the supplier – Supplier category share of total category sales in the chain / store • Category importance • Category share of total chain / store turnover • Category share of total chain / store profit • Supplier importance • Supplier share of total chain / store turnover • Supplier share and total chain / store profit Copyright ® Gordios Retail Innovation A/S 13

Cockpit Copyright ® Gordios Retail Innovation A/S 14

KCRS case - chain scorecard Copyright ® Gordios Retail Innovation A/S 15

Ex: Best practice tactogram – Developing the engine Targets Strategies The supplier and the 4 P’s Assortment Price Distribution Promotions Merchandizing Space and positioning Increased turnover Build customer Focus on top 10 of the Shelf prices on market Minimize space share Sharp price flow category level or lower and use C positions promotions Currently advertised Multi sales and Develop a wide and Shelf prices on market Optimize shelf position Promotions on complementary deep assortment level of top 20 – A positions for marginal and niche sales covering all sorts of products. Relatively marginal products. products – Theme demands of the high prices of marginal advertising category and niche products Focus on great activities Increased earnings Profit maximization Focus on items with Optimize sales prices Disproportional space No price promotions high contribution per for high-marginal only theme and idea unit. products. promotions on high Delist marginal issues A-position on the floor marginal products and articles with low for high-marginal contribution per unit products – No display of products with low contribution Increased loyalty Image build-up Maximize assortment Shelf prices on market Optimize space based Use a wide palette of focus on all what is in level of top 20 on the market position promotions the category products. Relatively of the individual Advertise currently and high prices of marginal products. Extra space where possible and niche products for new products on A positions Events Focus on new Optimize sales prices Optimize space based Develop activities and products from the on the market position events about new whole world of the individual launches products. Extra space for new products on A positions Maintain loyal Develop a wide and Shelf prices of top 20 Optimize space focus Pay day promotions customers deep assortment under the market price on the best positions focusing on stock Copyright ® Gordios Retail Innovation A/S covering all sorts of for top 20 products loading demands of the category 16

Promotion and communication Category RTEC/K- Snacks Date: 30.06.07 Segment Objectives Type of Split of Promotion Placement Pricing Amount of Comments promotion investments material/ of promotions In-store promotion communication All Family Drive FMIO (free Suppliers pay FMIO End gondola Soft 4 per year frequency of mailing in POSM End price purchase in offers) Cross category gondola+fruit reduction HH with kids communicated 50/50 split of benefits department from avg 2,5 in-store. price to 2,8 times Cross reduction per year by promotions end of q1 with fruit 2008 manufacturer K-snacks Build In-store Supplier pay Brand Traffic spots Normal 5 per year penetration promotion for POS communication. Close to to 10 % by focusing on material Demos. shelf the end of Q4 communication 2008 Copyright ® Gordios Retail Innovation A/S 17

Copyright ® Gordios Retail Innovation A/S 18

Execution • The category management mind ship • A way of working • Common knowledge and understanding – a key treads whole • Same view on “development” and management • You need a cockpit solution “to take off” • Agreed and formalized review process • Focus on exceptions and prioritize Copyright ® Gordios Retail Innovation A/S 19

Execution • Focus on exceptions !! • Reasons related to plan or execution • Are we doing what we have agreed • Do we understand the “engine” - Developing and implementing best practice • Prioritizing focusing on utilizing the potential of what we have created Copyright ® Gordios Retail Innovation A/S 20

Group discussions Are your company working with the category management mindset? Do your company have “cockpit” solutions and are you working with the same data base though out the value chain? Do your company have and agreed process related to execution and review process? Discus what you see as the main barriers to develop common category management results what it will take to create “excellence" in your opinion Copyright ® Gordios Retail Innovation A/S 21

From data to knowledge – Using a cockpit solution developing the category on a day to day basis 1

From projects to process Category Definition Category Role On going analyses Dynamic planning Execution Category Assessment Potential Objectives Headquarter Category Objectives Issues Action plan Store / POP Category Review Category Marketing Strategies Reasons Cockpit Review Category Tactics (initiatives) Implementation Plan 2

Category Management proces Joint ”plan” Analyses Planning Execution Common Potential Objectives Head quarter Platform Issues & Chain strategi Action plan POP opportunities Category role Reasons Cockpit Review ”Seldom” Very often ”Once” 3

The full effect of Category Management isn’t proven until it works on store level! Category development is done store by store 4

Ranking analyses and the challenge of successful development Relative effectiveness – Sales / profit X+10% Goal X The average of the chain in the category Stores 1 N 5

Tools and models in our cockpit • Customer scorecard • The contribution formula • Ranking- and quadrant analyses • Store descriptions • Chain / Store action plans • Using POS data, Nielsen and GFK as main sources to common knowledge 6

Customer scorecard - catman@solution 7

What and where are the issues ? • What is the issue ? • What is the most important Issus ? • Consumer flow, Shoppers, sales pr shopper, average purchase, profit etc. (%) ? • Where is the issue ? • At segment level/ brand level SKU level / Campaign level / Normal sales ? • Head quarter / Chain / Region / Store level • (indkøb/kæde) og/eller butiksniveau ? 8

Contribution formula Number of Number of Average Contribution x x = Contribution Shoppers sales ratio Visitors • are we to create customer flow / attendances? • Attract the wanted customer profile • More customers in the store or perhaps more loyal customers • Ensure that the visiting customers buy ”customer hit-rate” • are we to ensure a more effective use of the customer flow? • by increasing the average sale per attendance (sell more or sell out) • by getting a better earning on the sold units • by increasing the sale on the goods with the best earnings 9

Focus on The Earnings of the Category / Store defining the issues and opportunities The turnover Number of Average Contribution Contribution attendances x sales x ratio = • Increase number of • Sell more to the • Sell better attendances in the customers in the store store • More custom-ers in • Have more • Sell goods of high store / Increase ”cus- customers in store profit margin tomers hit-rate” buy in the department • More loyal customers / more often • Buyers buy more + extra/ more • The right customers expensive • More loyal to category 10

What is the issues ? Turnover Contribution / purchase Number of Increase profit customers in store Avarge Contribution x x = Contribution purchase margin Need more to Need to buy Buy category More of category How do we utilize the shopper flow to sell more and to increase our profit Buy improving our coverage of consumer needs 11

What is the issue ? • If the goal is to increase profit in store – what to analyse? • Should we use this category to increase number of shoppers and their by increase turnover and profit? • Should we chose to optimize utilization of present shopper flow • Increase number of shoppers in category • Increase sales pr shopper • Increase profit pr purchase • Prioritize one issues and one goal 12

Where is the issue? • Generel consumer level / Chain level • Specifick shoper level / Regional level / local level (Few shops) 13

Ranking analyses - Category management segments Affectivity of sale in the store 6.00 5.00 X Description 1 4.00 Description 2 3.00 X 2.50 Description 3 2.00 Description 4 1.80 X Description 5

Store ranking – Identifying under performing stores 15

Creating store segments using quadrant analyses Salgseffektivitet 1,6 05259 BILKA ESBJERG 1,4 05255 BILKA ISHØJ 1,2 05257 BILKA NÆSTVED 1 05254 BILKA ODENSE 05261 BILKA VEJLE Salg pr 1000 exp. 05256 BILKA SLAGELSE 0,8 05265 BILKA VIBORG 05252 BILKA SKALBORG 05258 BILKA HOLSTEBRO 05262 BILKA KOLDING 05251 BILKA TILST 0,6 05263 BILKA HORSENS 05253 BILKA HUNDIGE 0,4 0,2 05264 BILKA ONE STOP, FIELDS 0 0 500 1000 1500 2000 2500 Salg i stk 16

Optimizing the 3P’s focusing on Assortment performance / Promotion performance / Space & Place Salgseffektivitet 1,6 05259 BILKA ESBJERG 1,4 05255 BILKA ISHØJ 1,2 05257 BILKA NÆSTVED 1 05254 BILKA ODENSE 05261 BILKA VEJLE Salg pr 1000 exp. 05256 BILKA SLAGELSE 0,8 05265 BILKA VIBORG 05252 BILKA SKALBORG 05258 BILKA HOLSTEBRO 05262 BILKA KOLDING 05251 BILKA TILST 0,6 05263 BILKA HORSENS 05253 BILKA HUNDIGE 0,4 0,2 05264 BILKA ONE STOP, FIELDS 0 0 500 1000 1500 2000 2500 Salg i stk 17

Understanding store segments The Stores are visited and described 18

Creating golden rules understanding best practice ”Golden rules”… 19

Retailnet Tandpleje mod DVH og Føtex Case 20

Targit – Litas varegrupper – bemærk kun SuperBest excl. ISO og Dreisler. Forrige 52 uger 21

RetailNet, alle varegrupper mod DVH og Føtex Se valg Case 22

WEB based store Plan Store plan • Operational store plan • Analysis platform • Store data (POS) • SWOT • Store evaluation • Main problem • Part problems Chain: ___________________________ • Goals and objectives Kardex: ___________________________ • Action plan Store: ___________________________ • National efforts Period: ___________________________ • Chain program Consultant: __________________________ _ • Store efforts Enclosure 1: Data from the store Enclosure 2: Analysis charts with the placement of the store Enclosure 3: Evaluation charts -/ platform 23

Category Management proces Joint ”plan” Analyses Planning Execution Common Potential Objectives Head quarter Platform Issues & Chain strategi Action plan POP opportunities Category role Reasons Cockpit Review ”Seldom” Very often ”Once” 24

Workshop 1 Discuss and set up a list of variables which create different “category potential” store by store understanding the ranking analyze 25

Workshop 2 Discus and come up with good ideas of how to use quadrant analyzes working with category management. 26

Next Step – How to go from project to process 1

• Please discuss your experience – • What does it take to go from project to process • Focus on how to get started • Please fill the questioner and we will supply the result on our homepage 2

GordioS focus areas Gordios Knowledge Cube Consulting People Training Retail solutions CoCoCo IRS 4

Gordios We support our customers sales and marketing efforts with a clear focus on the retail market • Consulting / We develop simple, and effective solutions which deliver measurable results • People – We make sure that you have the right team in your sales and marketing operation • Training – We coach and develop your sales and marketing peoples competencies 5

Reference List - Selective 6

The presentations could be found at www.forum.ecrnet.org – after 6 june 2008 www.gordios.ecr.com – after 29 may 2008 If you want access to a demo version of CatMan@Solution please hand in your company card to Claus Nykjær or Erik Svendsen and they will mail you an individual access code 7

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ECR Europe Forum ‘08. The moment of truth – putting Category Management into action at store level

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ECR Europe Forum ‘08. The moment of truth – putting Category Management into action at store level — Presentation Transcript