Category management is an essential aspect of retail and procurement strategy that allows retailers to optimise their supply and retail processes to maximise profits.
The category management process involves splitting products, and sometimes brands, down into unique groupings and have each function as an individual strategic business unit. This allows each section of a retailer to be managed more efficiently – something that benefits both the retailer and the retail customer (and in some cases the retail supply chain as well.) Good category management is generally good for business.
There are six distinct steps (or eight depending on who you talk to) in implementation of category management for retail. The first of which is to define the individual categories. This is most effectively done using shopper analysis and insight to understand how shoppers view and interact with certain items. This is perhaps the hardest step in the development of a category management strategy, as there are so many different factors to consider – including how different types of consumer will interact with the same product categories.
Once a category has been defined, its role within the company needs to be understood. Is this a destination category for the retailer – do people come to the store specifically for this category and does the company hold a large market share in this category? Or does the category fit a seasonal requirement such as raincoats and swimming costumes? The role the category plays within the retailer’s aims heavily dictates the rest the category management plan.
The third step is insight generation. This step combines customer data, industry trends, shopper analysis, purchasing patterns and any other piece of relevant information together to build a strong picture as to how customers, products and categories interact. The better the research the easier the planning and delivery process will be – proper insight and strategic understanding is the most important resource available to retailers.
Once data has been examined, sales analysed and roles understood, it’s time to start the strategic and performance focused category planning. This is the way a retailer will actively deliver their new approach to a category. This approach could be price based – using special promotional pricing to increase sales of a category – such as a buy-one-get-one-free offer. Alternatively the category plan could focus on marketing and advertising – using in-store and external marketing to drive category growth. In many cases the final strategy will be a combination of many different elements.
The final two steps of category management are planning the final implementation. Developing the initiative – calculating the pricing and scheduling of the campaign as well as planning the actual launch itself – allocating resources, liaising with category managers and suppliers and every other practical aspect. If a company has gone through all of the above steps but not taken advantage of the opportunities offered, not provided improved sales and generally not made a profit because proper planning did not take place – then everything else was for naught. It is vital that actual practical implementation is planned as well as the theory.
After all the steps are complete and new category strategy is active, it is vital to undergo a review. This brings together all of the responsible groups – including the category manager or category captain – to examine every step in the development of the new strategy and the ultimate results, to understand how the brand or retailer can improve that process and add more value going forward.
Are you looking to improve your category management processes? Do you need better insights to create better results? Why not talk to the shopping insight experts at SBXL? You can call us on 01543 255 259 or send us an email at email@example.com