2. Aims
ECR – definitions, structure of model, ECR v QR
Category management
• Introduction, drivers
• Tesco structure
• Promotions
• Product introductions
• Store assortments
• Case study examples
2
3. Efficient Consumer Response (ECR) – History
• Commenced in Europe in 1993, European Executive Board 1994
• Catalyst - rapid maturing of retail markets with squeeze on
3
margins & pressure on contractors to ‘add value’
• Reducing total industry costs by 10%, or $30 billion in USA.
• Significant opportunity, as well as a competitive necessity.
• Grocery leaders recognised other retail channels had made better
use of technology and strategic alliances
• Re-examination of all aspects of operations
• Backed by IGD, key blue chip companies & multiples
• Pilot studies commissioned (eg Coopers & Lybrand - estimated
savings 6% turnover)
• Key efficiencies in replenishment, category management &
standardisation of handling systems
5. 5
ECR V Quick Response
• ECR builds on QR techniques but addresses issues beyond the
order cycle (eg new product introductions, item assortments and
promotions)
• ECR uses collaborative relationships; any combination of
retailer, wholesaler, broker and manufacturer work together to
seek out inefficiencies by looking at the net benefits for all
players.
• True efficiency comes only when overall costs are reduced for all
the parties in the relationship.
9. 9
IGD’s definition incorporates these elements:
"Category management is the strategic management of
product groups through trade partnerships, which aims to
maximise sales and profit by satisfying consumer needs."
Products are grouped to reflect consumers’ needs based on
how they are consumed or used or the means by which they
are purchased.
IGD defines a category as:
“A category is a group of products or services that
reflect consumer usage or purchase behaviour”
11. 11
Tesco: Four key areas
1. Range selection that meets consumer
needs.
2. Merchandising that attracts customer
attention and is easy to shop
3. Delivers financial targets whilst
optimising space, and minimising stock
inventory.
4. Effectively implemented in store
12. Structure of Tesco – Category Management
Growth driven by targeted product ranges and new
12
developments; continual competition for space in store.
14. Source: IGD
•Retailers – reinforcing strategies, KPI’s across chain, improved
modelling of fluctuations in demand
•Suppliers – improving service levels and modelling promotions without
significant increases in stock
15. Utilising CM levers to drive growth: store
assortments, product introductions, promotions,
Source: IGD Research
16. Product introductions – shorter life cycles,
pressures for innovations
Integration of NPI into the SIOP Process
New to the world
New to us
Additional product lines
Product changes,
and rationalisation
Cost reduction
Repositioning /
delistment
Anticipated
Change in
Rate of
Sale
New Product
Introductions
Existing
Products
Time
What they have in common is that no forecasting system in the world can help you…
17. Store Layout – Fresh & Easy
The layout that Tesco has chosen to roll-out at Fresh & Easy appears to
be highly uniform, with eight aisles in total and nine self-scan checkouts.
18. New territory for Wal-Mart
Wal-Mart’s lack of experience in small scale, fresh focused retailing.
This signifies a radical shift in thinking by Wal-Mart,
19. 19
Efficient Promotions
• Remove unnecessary costs by re-engineering
promotional practices.
• Aligning supplier and distributor operations to
retailer’s marketing strategy to support changes in
demand.
20. 20
Planograms
P1 P2 P
3
P4 P
5
P
6
P
7
P8 P9 P
1
0
P
1
1
P12 P13
A Trial
price
70p/can
Win World
Cup Tickets
Display
leaflet,
POS
10%
Price
Cut on
Multi-pack
Link save
with
Walker’s
crisps
Xmas Club
Loyalty Points
–
100 points
B 3 for 2
on
Premium
Beers
10% Price
Reduction
C Launch
new
strength
trial
price
Loyalty
points -
50
15% Price
reduction
on multi-pack
21. UK food and grocery promotion strategy
• UK grocery retailing has become significantly more
promotional in the last year
• The promotional mix has changed with the emphasis shifting
towards price reduction mechanics and away from BOGOFS
and multi-buys
• Retailers continue to employ a wide variety of promotions and
innovate with new offer types to target specific shopper
requirements
• These help to build the broader perception of value across the
offer
23. Retailer v supplier promotion preferences
Supplier
• Standard packs
• Viable quantities
• Least impact on production
• Use excess capacity
Retailers
• Minimum administration
• Capacity impacts at store and warehouse
23
25. 25
Collaborative Working
• Joint business planning.
• Shared data on consumers, sales and products.
• Retailer knowledge of customers, and purchasing behaviour.
• Supplier knowledge of who purchases, their wants, and
behaviours.
• Mind-set change; suppliers focus on growth of whole
category, including competitor brands,
• Combine knowledge and skills to provide ideal category
offer at point of purchase
• Communication between managers at all supply chain levels
• Balance customer needs with commercial, financial and
strategic objectives.
26. Challenges
• Poor data availability
• Labour intensive
• Poor in-store implementation and execution
• Openness and trust towards information
sharing
• Embed in daily processes
26
27. 27
Brand mapping
• Quantify how products are perceived by
consumers; specific features or attributes.
• Statistical methodologies to create brand maps.
• Help to describe and a market or category
• Quantify segment and brands position in market
• Identify product strengths and weaknesses
• Highlights gaps and proliferation of products in
market.
31. Marks & Spencer – promotions
Marks & Spencer has become highly
promotional in the last few years
Building on its well developed ranges of
ready meals, the company has been at the
forefront of meal deal activity
Good fit with the secondary and
occasion-based missions of many M&S
shoppers
Improving pricing and promotion is one
of the main goals of its food strategy,
along with driving innovation and range
development,
32. M & S: store layouts, product assortments
Improving the in-store environment targeted
as a priority for M&S to deliver growth in.
Segmenting stores based on affluence, location,
demographics and competitors.
Currently underutilised space in M&S food halls
will be developed, enabling an increase of the
number of food SKUs ‘full basket’ shop and
continually add new products to the mix.
Cross-selling or ‘cross-presentation’ will be
introduced to promote volume growth across
different departments.
33. M & S : product introductions
During the first half M&S has continued its
focus on innovation launching 940 lines and
it remains on track to deliver its commitment
to refresh 25% of its total food range this
year.
M&S will deliver ‘innovation and inspiration’
to shoppers by promoting its strengths in:
1. Best of British – sourcing unique British products
2. Flavours of the World – this focus will build on the
retailer’s strength in speciality.
3.Core lines – M&S will improve quality of its top 100
lines.
34. Pharmaceutical Industry
2 key segments:
• Branded – acquisitions, drugs under
development, new products – eg Boots
• Generic – similar products, ‘followers’,
increased competition eg Superdrug, Savers
Key differentiators:
• Packaging, labelling, support service
35. Superdrug – promotions
Superdrug price (and promotion) strategy uses four main levers to drive volume
and to build a strong relationship with the consumer:
– Superdrug operates an EDLP pricing policy, using the “Prices
Permanently Squeezed” strap line.
– Ongoing promotions – a number of ‘standard’ price and multi-save
promotions in store, ranging from “2 for £”, price cuts and half price deals.
Using the banner
– “Big Price Squeeze”. - popular brands used as volume drivers.
– “Massive stock clearance” promotions - Superdrug also uses stock
clearances to sell a range of end of season products.
Superdrug aims to offer fewer promotions and more permanent price cuts led
by the EDLP pricing policy.
36. Boots – product innovations and stores
A “simple” strategy : Boots’ is working to grow sales
through
• investment in stores
• NPD
• brand development
• price and service competitiveness
• Outlets feature a pharmacy, a similar number
feature an in-store perfumery and all offer a film
developing/printing service.
Source : Boots Annual Report 2003
37. Boots
Merchandising Best Practice ‘implants’ within retail stores
Mini Mode Children’s Clothing New ‘re-launched’ Soltan brand
