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Category Management 
1
Aims 
ECR – definitions, structure of model, ECR v QR 
Category management 
• Introduction, drivers 
• Tesco structure 
• ...
Efficient Consumer Response (ECR) – History 
• Commenced in Europe in 1993, European Executive Board 1994 
• Catalyst - ra...
4 
Different Levels of ECR
5 
ECR V Quick Response 
• ECR builds on QR techniques but addresses issues beyond the 
order cycle (eg new product introd...
6 
Emerald
7 
ECR Improvement Concepts 
Establish 
Infrastructure 
Optimise 
Introductions 
Optimise 
Assortments 
Optimise 
Promotio...
8
9 
IGD’s definition incorporates these elements: 
"Category management is the strategic management of 
product groups thro...
10
11 
Tesco: Four key areas 
1. Range selection that meets consumer 
needs. 
2. Merchandising that attracts customer 
attent...
Structure of Tesco – Category Management 
Growth driven by targeted product ranges and new 
12 
developments; continual co...
13
Source: IGD 
•Retailers – reinforcing strategies, KPI’s across chain, improved 
modelling of fluctuations in demand 
•Supp...
Utilising CM levers to drive growth: store 
assortments, product introductions, promotions, 
Source: IGD Research
Product introductions – shorter life cycles, 
pressures for innovations 
Integration of NPI into the SIOP Process 
New to ...
Store Layout – Fresh & Easy 
The layout that Tesco has chosen to roll-out at Fresh & Easy appears to 
be highly uniform, w...
New territory for Wal-Mart 
Wal-Mart’s lack of experience in small scale, fresh focused retailing. 
This signifies a radic...
19 
Efficient Promotions 
• Remove unnecessary costs by re-engineering 
promotional practices. 
• Aligning supplier and di...
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 ...
UK food and grocery promotion strategy 
• UK grocery retailing has become significantly more 
promotional in the last year...
22
Retailer v supplier promotion preferences 
Supplier 
• Standard packs 
• Viable quantities 
• Least impact on production 
...
Reading 
24
25 
Collaborative Working 
• Joint business planning. 
• Shared data on consumers, sales and products. 
• Retailer knowled...
Challenges 
• Poor data availability 
• Labour intensive 
• Poor in-store implementation and execution 
• Openness and tru...
27 
Brand mapping 
• Quantify how products are perceived by 
consumers; specific features or attributes. 
• Statistical me...
Virtual stores – assist layout planning and e-retailing 
28
29
From project to process (eCM)
Marks & Spencer – promotions 
Marks & Spencer has become highly 
promotional in the last few years 
Building on its well d...
M & S: store layouts, product assortments 
Improving the in-store environment targeted 
as a priority for M&S to deliver g...
M & S : product introductions 
During the first half M&S has continued its 
focus on innovation launching 940 lines and 
i...
Pharmaceutical Industry 
2 key segments: 
• Branded – acquisitions, drugs under 
development, new products – eg Boots 
• G...
Superdrug – promotions 
Superdrug price (and promotion) strategy uses four main levers to drive volume 
and to build a str...
Boots – product innovations and stores 
A “simple” strategy : Boots’ is working to grow sales 
through 
• investment in st...
Boots 
Merchandising Best Practice ‘implants’ within retail stores 
Mini Mode Children’s Clothing New ‘re-launched’ Soltan...
38
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Category management

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Category management

  1. 1. Category Management 1
  2. 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. 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
  4. 4. 4 Different Levels of ECR
  5. 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.
  6. 6. 6 Emerald
  7. 7. 7 ECR Improvement Concepts Establish Infrastructure Optimise Introductions Optimise Assortments Optimise Promotions Integrated Suppliers Synchronised Production Continuous Replenishment Automated Store Ordering Reliable Operations Cross-Docking Electronic Data Interchange (EDI) Electronic Fund Transfer (EFT) Item Coding & Database Maintenance Activity-Based Costing (ABC) Category Management Product Replenishment Enabling Technologies
  8. 8. 8
  9. 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”
  10. 10. 10
  11. 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. 12. Structure of Tesco – Category Management Growth driven by targeted product ranges and new 12 developments; continual competition for space in store.
  13. 13. 13
  14. 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. 15. Utilising CM levers to drive growth: store assortments, product introductions, promotions, Source: IGD Research
  16. 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. 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. 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. 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. 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. 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
  22. 22. 22
  23. 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
  24. 24. Reading 24
  25. 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. 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. 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.
  28. 28. Virtual stores – assist layout planning and e-retailing 28
  29. 29. 29
  30. 30. From project to process (eCM)
  31. 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. 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. 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. 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. 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. 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. 37. Boots Merchandising Best Practice ‘implants’ within retail stores Mini Mode Children’s Clothing New ‘re-launched’ Soltan brand
  38. 38. 38

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