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  2. 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. 3. Charter for ChangeFrom ToPush PullSalesperson Business TeamBuyer/Seller Account ManagementCost Averaging Cost to ServeDeals Pay for PerformanceSales Drivers Profit Drivers 3
  4. 4. Charter for ChangeFrom ToData Protection Data SharingData KnowledgeShelf Management Assortment ManagementWin/Lose Win/WinFast Fastest 4
  5. 5. Process Activities Category Definition Category Role Category Review Category Assessment Category Scorecard Category Strategies Category Tactics Plan Implementation 5
  6. 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. 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 ConditionerDry Hair Oily Hair Normal Hair Tangle Treated free Hair HairNyle Halo Sunsilk Head & Ayur Palmolive shoulders 1 ltr 500 ml 300 ml 100 ml Satchet 7
  8. 8. Category RoleDestinationTo be the primary category provider and help define the retailer as the store ofchoice by delivering consistent, superior target consumer value.RoutineTo be one of the preferred category providers and help develop the retailer asthe store of choice by delivering consistent, competitive target consumer value.Occasional/SeasonalTo be a major category provider, help reinforce the retailer as the store ofchoice by delivering frequent, competitive target consumer value.ConvenienceTo be a category provider and help reinforce the retailer as the store of choiceby delivering good target consumer value. 8
  9. 9. Assessment Market Market Share & Benchmarks Category Distributor Sub-Category Consumer Contribution Segment Buyer Profile & Brand & Productivity SKU Purchase Behavior Supplier Share & Efficiently 9
  10. 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. 11. StrategiesCategory Strategies Category Strategies CharacteristicsTraffic Building High Share, Frequently Purchased, High % of SalesTransaction Building Impulse PurchasingProfit Contribution Higher Gross Margin, Higher TurnsCash Generating Higher Turns, Frequently PurchasedExcitement Creating Impulse, Lifestyle-Oriented, SeasonalImage Creating Frequently Purchased, Highly Promoted, Impulse, Unique Items, SeasonalTurf Defending Used by Retailers to Draw Traditional Customer Base 11
  12. 12. TacticsCategory 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 FrequencyDestination - 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 CompetitionConvenience (Per Unit or Use) - Major Brands/SKUs 12
  13. 13. Retail Category Portfolio High Sales Low High Flagship Cash Machine Maintain/GrowGrossMarginPercent Core Traffic Under Fire Rehab Low 13
  14. 14. Retail Category Portfolio Low Market Growth High High Sleeper WinnersRetailerShare ofMarket Questionable Opportunity Gaps Low 14
  15. 15. Consumer Based Category Roles High Reach Low High Staples NichesFrequency Necessities Fill-ins Low 15
  16. 16. Shelf Presentation Tactics Guidelines: Example Strategy General Tactical Approach Shelf sets should direct consumer attention to higher pricedTransaction 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 segmentsTraffic Building Planograms should direct consumer attention to higherTurf 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. 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. 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. 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. 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. 21. Category ManagementImplementation 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. 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. 23. Advantages of C Mgt. Suppliers – Improved market reach & sales – More effective promotions – Improved operations due to collaborative approach with retailer 23
  24. 24. Essentials for Category Management  Existence of brands & brand awareness  Clear Category definition  Information availability (easy access, high accuracy)  Partnership & trust 24