2. Definitions
Category
A distinct, manageable group of products/services
that consumers perceive to be interrelated and/or
substitutable in meeting a consumer’s needs.
Category Management
The distributor/supplier process of managing
categories as strategic business units, producing
enhanced business results by focusing on delivering
consumer value.
2
3. Charter for Change
From To
Push Pull
Salesperson Business Team
Buyer/Seller Account Management
Cost Averaging Cost to Serve
Deals Pay for Performance
Sales Drivers Profit Drivers
3
4. Charter for Change
From To
Data Protection Data Sharing
Data Knowledge
Shelf Management Assortment Management
Win/Lose Win/Win
Fast Fastest
4
5. Process Activities
Category Definition
Category Role
Category Review
Category Assessment
Category Scorecard
Category Strategies
Category Tactics
Plan Implementation
5
6. Definition
What products are in a category?
How will categories be grouped?
Sub-Segment
Segment Sub-Segment
Sub-Category Sub-Segment
Segment Sub-Segment
Category
Sub-Segment
Segment Sub-Segment
Sub-Category Sub-Segment
Segment
Sub-Segment
Source: ECR Category Management
6
7. Hair Care
Hair Hair Soap Hair Shampoo Hair Hair Hair Hair
Oil Lotion Bleach Gel Cream Dye
Herbal Medicina Regular
l
Without With
Conditioner Conditioner
Dry Hair Oily Hair Normal Hair Tangle Treated
free Hair Hair
Nyle Halo Sunsilk Head & Ayur Palmolive
shoulders
1 ltr 500 ml 300 ml 100 ml Satchet
7
8. Category Role
Destination
To be the primary category provider and help define the retailer as the store of
choice by delivering consistent, superior target consumer value.
Routine
To be one of the preferred category providers and help develop the retailer as
the store of choice by delivering consistent, competitive target consumer value.
Occasional/Seasonal
To be a major category provider, help reinforce the retailer as the store of
choice by delivering frequent, competitive target consumer value.
Convenience
To be a category provider and help reinforce the retailer as the store of choice
by delivering good target consumer value.
8
10. Consumer Strategies
Category
Category Category Strategies
Roles
Roles In-Store Service
Procurement Distribution Marketing
Acquisition Strategy DC/Store Receiving Attract Strategy Full Service
- Best Quality/Reliability - Auto Replenishment - Traffic Building - (If Necessary)
- Best Cost & Terms Transportation - Image Enhancing
Destination - DSD, Backhaul Build Loyalty Strategy Differentiated
Transaction Strategy DC/Store Handling - Transaction Building - (From Competition)
- All EDI & EFT - Cross Dock - Turf Protector
- Sale-Ready Packaging Micro marketing
Acquisition Strategy DC/Store Receiving Build Loyalty Strategy Semi-Service
- Best Quality/Reliability - Auto Replenishment - Transaction Building - (If Necessary)
- Best Cost & Terms Transportation - Turf Protecting
Routine Non-Differentiated
Transaction Strategy DC/Store Handling Cluster Marketing - (From Competition)
- Majority EDI & EFT - Minimize Handling
- Reduce Shrink
Acquisition Strategy Transportation Attract Strategy Self Service
- Best Quality/Reliability - Reduce Transit Time - Traffic Building - (If Necessary)
Occasional/ - Best Cost & Terms DC/Store Handling - Excitement Creating
Non-Differentiated
- Reduce Shrink
Seasonal Transaction Strategy - Sale-Ready Packaging Cluster Marketing - (From Competition)
- Some EDI & EFT
Acquisition Strategy DC/Store Receiving Build Loyalty Strategy Self-Service
- Low Cost - Auto Replenishment - Transaction Building
Convenience DC/Store Handling Uniform Marketing Non-Differentiated
- Minimize Handling - (From Competition)
- Reduce Shrink
10
11. Strategies
Category Strategies Category Strategies Characteristics
Traffic Building High Share, Frequently Purchased, High % of Sales
Transaction Building Impulse Purchasing
Profit Contribution Higher Gross Margin, Higher Turns
Cash Generating Higher Turns, Frequently Purchased
Excitement Creating Impulse, Lifestyle-Oriented, Seasonal
Image Creating Frequently Purchased, Highly Promoted, Impulse,
Unique Items, Seasonal
Turf Defending Used by Retailers to Draw Traditional Customer Base
11
12. Tactics
Category Category Tactics
Roles Assortment Pricing Shelf Promotion
Presentation
Complete Variety Leadership Prime Store Location High Level of Activity
- Sub-Categories - Best Value - High Traffic (If Necessary)
- Segments (Per Unit or Use) - High Exposure Time - High Frequency
Destination - Brands - Entire Category - Long Duration
- SKUs - Multiple Vehicles
Broad Variety Competitive/Consistent Average Store Location Average Level of Activity
- Sub-Categories - Equal to Competition - High Frequency (If Necessary)
- Segments (Per Unit or Use) - Average Frequency
Routine - Major Brands - Sub-Categories - Average Duration
- Major SKUs - Segments - Multiple Vehicles
- Major Brands/SKU
- Reduce Shrink
Timely Variety Competitive/Seasonally Good Store Location Seasonal/Timely Activity
- Sub-Categories - Close to Competition - High Traffic (If Necessary)
Occasional/ - Segments (Per Unit or Use) - Multiple Vehicles
- Sub-Categories
Seasonal - Segments
Select Variety Non-Inflammatory Available Store Location Low Level of Activity
- Major Brands/SKUs - Within Reach to - Multiple Vehicles
Competition
Convenience (Per Unit or Use)
- Major Brands/SKUs
12
13. Retail Category Portfolio
High Sales Low
High
Flagship Cash Machine Maintain/Grow
Gross
Margin
Percent
Core Traffic Under Fire Rehab
Low
13
14. Retail Category Portfolio
Low Market Growth High
High
Sleeper Winners
Retailer
Share of
Market
Questionable Opportunity Gaps
Low
14
15. Consumer Based Category Roles
High Reach Low
High
Staples Niches
Frequency
Necessities Fill-ins
Low
15
16. Shelf Presentation Tactics Guidelines: Example
Strategy General Tactical Approach
Shelf sets should direct consumer attention to higher priced
Transaction Building
SKUs
> Consider blending higher priced SKUs throughout set to
increase consumer response and purchase
High profile location and competitive category space allocation
Overall shelf should be attractive and invite consumers to
return to the store
Highlight loyalty SKUs segments
Traffic Building
Planograms should direct consumer attention to higher
Turf Protecting margin SKUs
>Capitalize on impulse items
>Locate higher margin categories in high traffic aisles
Consider blending higher margin SKUs throughout set
to increase consumer exposure and trade-up
Maximize visibility of private label and high profit SKUs
segments
Cash Generating Planogram highlights new/high profile
SHUs/segments
Adequate space to get consumer attention
16
17. Share/Growth Decision Matrix
Sleepers Winners
Review product mix versus market
Continue current programme
Weed out slow movers
Increase promotional support
Bring in faster moving new items if not
Review space management to ensure
carried
minimal out-of-stock potential
Review space management to see if faster
Add good performing items not carried but
movers have adequate space
available in the market
Under-promoting compared to market?
Review pricing and Gross Margins to see if
Tie in promotions with Winners
selected price reductions can enhance
Increase Gross Margins
image and increase growth and share
Questionables Morning Stars
Is category and /or fast movers under
spaced?
Review assortment versus market Review pricing mix-Is pricing of key items
Delete poorest performing items too high versus the market?
Can prices be raised? Are category and key items under-
Is category under-promoted versus promoted versus market?
market? Review product mix-Is mix wrong for target
consumer?
Any new faster moving items not being
carried?
Tie-in-promotions with higher margin,
expandable consumption items
17
18. Category performance evaluation
GMROI: Gross Margin Return on Inventory
Investment:
GMROI measures the gross earning of the retailers for
the investment in merchandise. It can be used to
evaluate departments, merchandise classifications,
vendor lines and items.
GMROI = (Gross margin percentage X Sales-to-Stock
Ratio)
= (Gross Margin ÷ Net Sales) X (Net sales ÷ Average
Inventory)
= (Gross Margin ÷ Average Inventory)
18
19. Contd..
Gross Margin Return on Floor Space: GMROF is a measure of
the productivity of space. It determines the sales generated from
the investment in space. This measure guides the retailer in
space allocation of items. Items with higher GMROF would get
more space allocation.
GMROF = Gross Margin ÷ Space provided
Gross Margin Return on Persons Employed: GMROP is a
measure of the productivity of sales people employed in a
particular product category. The higher this ratio for a particular
department higher would be the productivity of people of that
department. It is calculated as:
GMROP = Gross Margin ÷ Persons Employed
19
20. Category Review
Evaluation of overall performance & taking action to enable
rectification of issues & assessment of opportunities for new
goals
What worked?
What did not?
Why?
Timeliness?
Accuracy in execution
Do the role & strategies require to be re-looked at (in light of
changing markets or other factors)
Which aspect of the plans need to be modified?
20
21. Category Management
Implementation Model
Strategic relationship
Implementing CM
Supplier Retailer
Retail outlet
Implications of CM
Implementation on the retail outlet
Value creation for
The consumer
Enhanced consumer satisfaction
& category growth Consumer
21
22. Advantages of C Mgt.
Consumer
– Improved shopping experience
– Improved selection
– Fewer stock outs
Retailer
– Increased sales thru better product assortment
– More effective promotions
– Better displays
– Higher customer satisfaction & loyalty
– Improved returns in all respect
22
23. Advantages of C Mgt.
Suppliers
– Improved market reach & sales
– More effective promotions
– Improved operations due to collaborative approach with
retailer
23
24. Essentials for Category Management
Existence of brands & brand awareness
Clear Category definition
Information availability (easy access, high accuracy)
Partnership & trust
24
