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Тренинги, Курсы, Обучение — Agile, Scrum, OKR
Тренинги, Курсы, Обучение — Agile, Scrum, OKR
Тренинги, Курсы, Обучение — Agile, Scrum, OKR
18 October, 2022 г.
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What is Category Management?

Category management is an approach when the product range is broken into separate product groups based on same features / shopper needs to make…

What is Category Management?

Category management is an approach when the product range is broken into separate product groups based on same features / shopper needs to make marketing them easier. These groups are known as product categories.

Category management was found in USA in early 90s, when Procter&Gamble created new «Customer Team» department with Walmart. Their goal was to optimize the assortment and decrease the logistics expenses. They started to segment the assortment into product groups based on their functional features for customers. Later this approach started to use in different retail chains and FMCG companies.

It’s easier that way, isn’t it? 🙂

Nowadays category management is far beyond just segmenting an assortment into product groups. Category Management is a strategic management of a category with a focus on maximising category profit via meeting shoppers needs and gaining win-win-win result for a retailer, a produser and a shopper/consumer.

Category management analyses and explains category dynamics to maintain category dynamic and enable category growth and maximize sales for both produces and seller. It happens via optimizing all in-store aspects (range, merchandising & space, promo, price, availability, adjacencies, navigation).

So category management is integrated into lots of business processes, including logistics, demand planning, analytics and insights, shopper marketing, sales etc.

Category management significant difference from business development is that you optimize not only your products and operations, but you also meeting consumer needs as well. Key category management benefits are:

Increased consumer / shopper loyalty

Category management focuses on win-win-win strategies between Producer, Customer (Retailer) and Shopper/Consumer. Final shelf price for products depends on how much margin a retailer can add to producer’s entry price. An effective category management strategy helps Customer to optimize an assortment range to get the most cost-effective products, that cover a whole range of shoppers needs, and allows Customer to increase budgets on shopper experience optimization.

Improved category assortment reviews and listing plans accuracy

Effective category manager always follows data-driven approach, and ensure that all category and customer insights were taken into account while developing listing plan / assortment optimization in Customer.

Improved cross-functional relationships and relationships with vendors

Category manager involved in cross-functional communication with most functions in an organization, even without direct participation in an actual projects. Category management function serves as a consultant, both internal and external.

This approach can be very effective in communication with vendors. It helps to open new opportunities with new partners, and also to improve processes with current ones.

What is Category?

A category is an assortment of items that a consumer finds as reasonable substitutes for each other.

Category is a distinct measurable group of product/services, that consumers perceive to be interrelated and/or substitutable in meeting a consumer need.

Why it’s important?

Consumer/Shopper perspective is the most valuable — it shows us how the consumers see the category. If we make our decision based on shopper’s view, we have more chances to meet their needs and drive category performance.

How we structure the category?

1. Identify customer/shopper needs

2. Identify which products meet these needs

3. Identify the shopper path to purchase / CJM

4. Set up the right category execution / layout

Who is Category Manager? What is a Category Manager responsible for?

Who is Category Manager? What is a Category Manager responsible for?

Category managers are responsible for product categories strategies and new category development opportunities research to maximize category sales and cover shoppers needs. Category managers work in close cooperation with insights and analytics departments, sales, marketing and logistics.

In classical model category managers first of all deal with assortment optimization, shelf layout and in-store navigation, while modern category management deeply involved in most cross-functional processes, matching sales, category development and shopper loyalty agenda.

Category management is not just a project, it’s a long preplanned process, aims to reveal growth opportunities to gain the best business results.

Needs in Category Management will vary depends on a company processes level:

1. Short term goals: Operational category management to achieve category sales and profit, share in category, store traffic etc.

2. Longterm strategical goals: Strategical category management to meet consumer trends, create new business needs, drive profit and ROI.

Category Manager helps to answer key five business questions:

  1. What shopper we target and how we can reach him?

  2. Which target audience is the main opportunity?

  3. Who is the key competitor for target shopper’s wallet?

  4. How we can compete competitors in winning the shopper’s wallet?

  5. Which categories are fundamental for the target audience?

Key category manager goal is to increase a turnover/profit and develop category sales in retailer. Manufacturer/distributor’s target is to grow its sales via growing the whole category as the manufacture has its certain sales share on market. Even if you have just one piece of a pie, the bigger the pie is — the higher your sales are.

Do you see the difference? 😉 That’s where you create your value as a category manager.

Lots of category manager responsibilities are connected with different business units, while the most common day-to-day tasks are:

  • Market analysis, consumer and shopper habits studies research and in-store tests to increase sales and find new growth opportunities
  • Data-based products and categories development strategies delivery
  • Supporting sales and marketing teams with market and shopper insights for more accurate category initiatives and activations
  • Constant optimising of assortment range and shelf layouts to lessen ineffective assortment and to make in-store path to purchase easier for shoppers

Category Manager essential skills

The following hard and soft skills are the most important for developing in Category Management:

Analytics and research skills

Category managers works closely with analytics and insights teams to understand consumers and shopper behaviour and market and category trends — all business decisions in category management are data-driven and have strong analytical argumentations

Strategic mindset

Category managers deal with lots of tactical day-to-day task, however the most value for category development lies in longterm category development plans and initiatives, including influence on shoppers and consumers habits and Customer way of working reorganisation — successful Category Manager has to see the big picture and complete complex strategical goals

Project management skills

Category managers collaborate with lots of internal and external cross-functional teams during category development initiatives implementation, and not all of them are always truly happy with category projects, as they connected with usual processes review and reorganisation. Sometimes it can lead to temporal short term negative effects — you have to be strong and persuasive project manager to pushback and deliver right results

Communication skills

As category manager works both with Customers and internal departments, effective communication skills are a must for successful career in category development. You have to be persuasive and flexible enough to be an impartial expert for you Customer and also to deliver win-win solutions for both Customer and your company. Sometimes it’s harder for category manager to make an agreement with a client than with sales or marketing departments — some growth opportunities for a product category can have differences of opinions about successful strategy for your company’s brands sales.

What much do category manager make?

According to Comparably.com, the salaries of Category Managers in the US range from $78,400 to $117,600, with a median salary of $98,000. The middle 67% of Category Managers makes $98,000, with the top 67% making $117,600.

How much does a Senior Category Manager make?

The average Senior Category Manager in the US makes $138,783. The average bonus for a Senior Category Manager is $10,000 which represents 7% of their salary, with 100% of people reporting that they receive a bonus each year. Senior Category Managers make the most in Austin at $130,300, averaging total compensation -6% greater than the US average.

What is Category Management 8 steps model?

8 steps of Category Management — the classical model of category management, which helps to set up category project and drive it into the results.

What we do on each step?

Category Definition Setting the boundaries and structure of the product category
Category Role Assessment Determining how the category is important to the retailer
Category Performance Tracking Identifying the current state of the category
Category Objectives & Benchmarks KPIs, which allows to evaluate the results of category development plan
Category Strategy "The guide of changes»
Category Tactics Actionable steps towards the implementation of the category development plan
Plan Implementation Project realization in-store
Review Evaluation of the final results of the category development plan

What we do on each step?

1)    Category Definition

The correct definition of the category allows to maximize sales by: — Increase in the share of "closed" purchases — the buyer's need is satisfied = the goods in the basket — Fast shopping — the buyer does not waste time searching for a product — Customer loyalty growth — satisfied customer = repeat visit to the store)

You can define the category features based on your consumers and shoppers behavior and habits. You can always conduct consumer and shoppers studies like U&A (usage and attitude), purchase drivers and barriers, segmentation analysis etc. All these data will help to make an accurate decision about a category boundaries and products segmentation

Shoppers don’t like to spend a lot of time looking for the right product!

2) Category Role is the purpose the category plays within the retailer’s whole portfolio

Matching categories to their roles for Customer strategy is a key to success

3) Category Performance Tracking

Successful category development plan have to be data-based and consider fundamental market and shopper trends to have longterm value for Customer growth and meeting consumers and shoppers needs. All your companies categories form your products portfolio and define your companies broad vision — what is your global strategy on the market? That’s when you think about a category mission and it’s impact. Your company’s main goal determines its positioning on market and how you communicate your products value to your shoppers, consumers and customers. For example, if your company supports a sustainability values, this decision influences the most of business departments from pr and marketing tone of voice to suppliers choices.

At this stage you identify the category’s current performance. You can use different sources of data: retail panel data (e.g. Nielsen), Customers sell-out data, internal sell-in reports, household panel data (e.g. GFK) & retailers loyalty cards data (both of them also allows you to explain sales shifts with shopper KPIs dynamics).

Basic approach is to check category sales dynamics vs same period last year and previous period, to find which metrics drives changes and can explain category uplift/decline, and to compare your products/brands with key competitors.

If you have retail chains level data, like in household panels, you can also review a category performance in different channels/clients to sharpen your category development plan accuracy.

4) Category Objectives & Benchmarks

Setting goals together with the retailer is an important part of a successful category development strategy. How we can understand your customer’s strategy? First of all, you can just ask them! 😄 It sounds too naive, but it’s the most effective way.

Then examine Customer’s public materials — financial reports, website etc.

At this stage the most important goal is to set actionable and measurable objectives to describe your overall strategy. SMART system will help you to define your objectives in a right way.

«Ideally speaking, each corporate, department, and section objective should be:

Specific – target a specific area for improvement.

Measurable – quantify or at least suggest an indicator of progress.

Assignable – specify who will do it.

Realistic – state what results can realistically be achieved, given available resources.

Time-related – specify when the result(s) can be achieved.»

5) Category strategy — A long-term plan of actions designed to achieve a particular goal or set of goals or objectives

Develop your strategy based on target goals to have real-life working plan instead of just big talks. It happens all the time — real actions and strategies are not answering the main business goal and objectives, and are just named and wrapped according to a general idea. Why it happens? Because it’s a real challenge to develop strategy in accordance with SMART goals. But without it pushing your strategy towards your company’s goal will be a dead end.Consider the various instruments and methods that your business can initiate within category management and what the ideal in-store category activation looks like.

6) Category tactics Category tactics are various steps of company’s strategy on the road to your key goals. Like in SMART objectives defining, you tactics should be measurable, have precise deadlines and have clear definition of done.

4P is a fundamental model for category tactics development. «The four Ps of marketing are the key factors that are involved in the marketing of a good or service. They are the product, price, place, and promotion of a good or service.»

7) Plan implementation is always different, just follow several important rules from below: — Always make your implementation plan customized for each Customer and each category development plan — Stay focused on the main goal — it’s easy to get distracted in cross-functional processes — Make sure that your plan is executed within the deadlines

8) The main tasks of the category review are to understand the current status of the category and identify opportunities for further growth. If necessary, you can always go back to the beginning and start from the step 1 and develop new enhanced plan to get success.

Why Shopper is a King?

Shoppers vote for your products and your category with their money — they are the main judges, who you have to take in consideration.

Many brands and companies forget about shoppers, their needs and motivations. It’s important to change your focus and give your shoppers what they need.

Category manager always deals with shopper and consumer, as knowing your shopper is a must for finding opportunities for category development.

If we make our decisions based on shoppers and consumers views, we have more chances to make decisions that will positively impact the category performance.

Without understanding shopper behaviour, a path to purchase and a decision making process category management will be about sales and promoting your brands instead of an exponential growth opportunities search.

Shopper plays 3 key roles for our strategy

  1. What products and services we create and sell — our Products & Servises have to meet shoppers needs

  2. How we sell products in-store & online via relevant execution & path to purchase

  3. How we interact and collaborate with Customers — win-win joint strategy

It’s important to remember, that a shopper is not equal to a consumer!

Our goal is to make the shopping process as painless as it possible to win shoppers hearts and build loyalty — and we can help shopper on each step of decision making process.

The average shopper shops a category for 30 seconds to find an acceptable solution to their needs… before moving on.

We can loose our shopper on each step of Shopper Funnel!

How Category Management works with Customer Marketing?

Customer Marketing creates value by integrating consumer, shopper and retailer insights to engage the shopper at the point of purchase decision and win their purchase & loyalty.

Category management serves as as internal consultant to enhance marketing activations efficiency and accuracy on different stages.

Accurate targeting

First of all, all targeted KPIs for Shopper Marketing team should be aligned with Customer (retailer) strategy via Sales team & Category Management teams — CatMan develop joint category development strategy with Customer, and have to check if Marketing activations are inlined with this strategy.

Imagine if category manager is focused on activating purchase frequency with Customer, while Shopper Marketing offers a mechanic to drive category penetration.

Customer will certainly doubt your teams strategy. Always be sure your x-functional team speaks one voice.

Execution support

Category manager is responsible for developing shelf layout standards based on category layout guidebooks. If marketing activation consider additional promo-equipment with promoted brands, category manager supply marketing team with the layout guidelines.

Post-evaluation

After marketing activation period category manager participate in post-analysis to identify if the targeted KPIs were met. In close collaboration with Analytics & Insights departments category manager estimate activation’s impact on: — Category sales dynamics vs pre-period / last year — Customer market share for promoted category / brand — Impact on shopper behaviour KPIs

What data is essential for Category Manager?

Category managers works closely with analytics and insights teams to understand consumers and shopper behaviour and market and category trends — all business decisions in category management are data-driven and have strong analytical argumentations. There are four the most used types of data, which cover most category manager’s needs:

Shopper & Consumer studies

For category management shopper & consumer are kings, because knowing your shopper is a must for finding opportunities for growth. Insights department is responsible for regular market researches updates, usually the cycle is once per 2-3 years, because shopper’s and consumer’s behaviour and habits don’t change in a short period of time. Key studies: U&A (usage and attitudes), Purchase Drivers & Barriers, Layout tests, Segmentation, Shopper Decision Tree (one of the most important study for Category Manager)

Retail Panel Data

What is Retail Panel data? It’s an actual snapshot of actual shopper purchases from a store. – Typically done as a representative sample of stores in a Channel and Geography – Captured via barcodes on product, Cash Slip or through an audit

It can be used for:

  • Industry trends, Channel and competitive analysis
  • Customer opportunity analyses: understand which levers to play
  • Category/Segment under-/over performance
  • Assortment performance
  • Distribution optimization
  • Promotional effectiveness
  • Pricing analyses

Retailer sell-out data

  • How is category performing within its mega-category?
  • What is the total category performance vs. customer vs. market
  • What vendors are driving gains & losses?
  • What segments (pack/flavour) are growing/shrinking & represent biggest opportunity?
  • What are the best selling items (size & velocity) and the fastest growing/declining?
  • Did the category gain or lose space, assortment, or merchandising (support / quality)?
  • What is happening with price? What were the price changes?
  • What key players are driving gains or losses on the above?
  • Did we gain/lose displays/display inventory vs. competition?
  • Is this similar to what is driving the category/segment in the market?

Customers’ internal data can be a great resource

Two types of data are typically available:

Scan and Loyalty Card data

Sometimes own Customer research is available. It can provide more depth and detail than syndicated resources.

Key business indicator for Customer Reporting – Gross Margin, Out of Stocks, etc.

Loyalty cards data helps to describe sales shifts with shopper data — what is shopper KPIs dynamic within your category / your Customer?

Key shopper KPIs: penetration, purchase frequency, basket size in #items / value, category share of wallet in Customer etc.

What is Path to Purchase and how to use it? What is a Shopper’s Funnel?

The Shopper’s Path to Purchase was developed to identify a shopper’s full journey towards a final purchase decision and it’s estimation as a number of steps with key influences on each of them. On each level there are purchase barriers, when we can lose our shopper, and also there are opportunities to influence on his behaviour and help a shopper to make a decision.

3 key phases of the Shopper’s Path to Purchase: Pre-Shop, Shop and Post-Shop.

Shop is a classical Category Manager’s zone of responsibility. Pre-shop and Post-shop are not less important, but they follow further after deeper category management development in a company.

Consumer/Pre-shop consists of two levels — Demand Moments and Store choice factors

Consumer Demand Moments are moments of consumption / usage.

How can we use Demand Moments for Sales / Category Management?

Consumer / Demand Moments

  • Who is a Consumer
  • Why he/she consume our products
  • What a consumer knows about a category / brand

If we know key demand moments, we understand how and when people consume our categories and brands.

It’s not enough to just know the profile of your shopper and social-demographic characteristics for an accurate targeting — you have to go far beyond that.

Again — can you see the difference? 😉

Pre-Store: Store choice factors

Shopper makes final purchase decision in-store. Key store choice factors:

In-store — how to navigate a shopper to your category

  • Impulse vs planned purchase
  • In-store location
  • How to find a category
  • Purchase drivers and barriers

Our brains exclude the least important information. Only 1/3 of store floorplan works efficiently. For other cold zones works the 80/20 rule — about 80% of shoppers visit only 20% of layouts. So how we can convert store traffic into a category purchase? That's the question.

Visibility is the key impulse purchase driver — a shopper have to notice your product among others

Purchase drivers and barriers

It's critical to split purchase barriers between:

1) Consumer's barriers – that's on Marketing Department

  • Don't consider healthy
  • Don't understand why they need this category/product
  • Don't trust a brand
  • Already have at home — to consider a purchase cycle / purchase frequency

2) Shopper's barriers – in-store activations by Category Manager / Sales

  • Didn't find a product
  • Out of stock

Right category location algorithm:

  1. Identify % of plan and impulse to make focus on a main shelf or on a secondary equipment

  2. To check a number of a secondary equipment vs key competitors / channel

  3. To check a floor plan efficiency – how far is your category from core and pre-planned traffic-building categories (Dairy, Fresh, Bakery etc.) of from affinitive categories

Shop: Near shelf — How to lead shoppers into your product purchase?

  • Assortment size / Assortment mix
  • Category Decision Tree and shelf layout
  • Targeted activation via shopper KPIs
  • In-store promo communication, POSM materials

An assortment is an expert zone, and it's not on shoppers side.

What our shopper can tell us about an assortment? Only enough or not enough. Is a needed product on stock or not. And "I found a needed product" or "I didn't find my product".

It's our expertise to reveal what sells and what not, which needs are in a category and what is an optimal shelf layout.

When a person have to many options, he will prefer the safe choice — to choose nothing and switch an attention to something else.

Post-Shop demonstrated shopper’s loyalty and drivers of preference:

  • Loyalty Drivers
  • Repeat Rates & Drivers, Purchase frequency
  • Customer’s share of wallet
  • Products performance

But where are the main bottlenecks?

Category Manager’s key target is to help shoppers with a purchase decision on each step of Shopper’s Funnel.

Shopper Decision Tree study in Category Management

Shopper's decision making process is covered by Decision Tree research — fundamental study for developing an effective assortment and shelf layout. It’s one of the most important type of shopper’s research for Category Manager.

What we need to know about a shopper?

  • How a shopper perceives product's parameters?
  • Which ones of them are the most important for the decision making?

How we use it?

  • Shelf layout developing
  • An effective assortment mix

It's not effective to always transfer Decision Tree results on shelf!

You have to validate it with different layout hypothesis tests in accordance with Customer's in-store environment, basic shopper's behaviour rules and your company's objectives to gain win-win-win solutions.

How Decision Tree results are validated?

  • Real in-store joint layout tests with Customer
  • Layout tests studies with your market research department

What else you have to remember about Decision Tree ranking?

  • An effective assortment = a variety on each step of purchase decision making process
  • Brand is a key in most categories — Big Brands to easy on-shelf navigation

How to build an ideal assortment range with Category Management?

Fundamental approach to build an optimal category assortment is based on shopper’s needs in Shopper Decision Tree. This approach helps to develop a balanced assortment to cover key shoppers needs for an exact Customer / channel.

How it’s done?

  1. Shopper’s decision tree levels weights are estimated on retail panel data / sell out data to understand their sizes

  2. Segments sizes are aligned with an available shelf size:

  • Based on shopper’s needs segment sizes
  • Based on a category shelf size / # facings
  1. Each segment is filled with SKUs based on:

  • Category sub-segments sales mix
  • KVI brands
  • SKUs selling power — sales value / volume per outlet, distribution etc.

Category Management in Procurement

In procurement the role of a category manager is to be in charge of a category strategic plan development for a certain category of goods and services. Category manager have to get a deep expertise of his product categories, market trends and shopper/customer needs to understand where to find growth opportunities.

Category manager segment his portfolio by discrete product groups depending on their common features and functions and then deals with overall spendings by these segments.

Category management in procurement is responsible for long-term strategic goals, while procurement project management deals with short-term tactical goals.