There is a saying that has stuck with me through the years, it goes something like this: Turnover is vanity and profit is sanity. Undeniably, profit IS sanity and something which all companies look to maximize.
The Category Management Association (CMA) released a paper, Category Management Mastery: The key to growth.
In the report, the CMA outlines how mastering the art of category management leads to growth AND profitability for CPG companies.
It highlights five key areas as methods for achieving excellence in category management and accordingly, improving your bottom line:
1. Assortment customization by individual stores
Retailers understand the need to customize each store to the unique needs of that store’s shopper base.
However, this is no small task. Customizing assortments by store, analyzing their performance, then changing them and maintaining them store by store is a task of epic proportion.
But the opportunity for growth is real. With the right software, data and with a highly-skilled team, even the smallest retailer can win against the giants. Smaller stores will be able to establish a fundamental understanding of appropriate assortments and then action the customization to best suit their shoppers.
2. Supply Chain Complexity
So this assortment customization may improve shopper appeal, however, it creates some hurdles for those in an already complex supply chain. For instance, variations in assortment introduce errors in ordering, forecasting and production.
However, predictive analytics is the very answer for assortment customization’s problems. Keep in mind that for predictive analytics to work, you need data sharing among trading partners. Even the best predictive results are worthless without effective communication across the supply chain all the way to store level.
Therefore, in order to combat the additional complexities that arise due to customization, companies should ensure that there is aggressive data sharing, an investment in better software, and a well-trained and highly-skilled category management function.
3. Managing categories and shoppers across different retail formats
Today we are faced with the connected shopper. The modern shopper uses a variety of retailers to meet different category needs. This results in every retail format leaking volume and profit from their shoppers when that shopper chooses to shop elsewhere for a different category. It’s one of the major challenges facing retailing in the US today.
Keep in mind that retailers, armed with loyalty card data, hold the evidence of this leakage.
They can analyse and understand what categories their shopper is buying elsewhere. They will then be able to act on this data, use incentives and plug the category leakage.
The manufacturer can also profit by understanding these format-specific purchase dynamics. This allows manufacturer’s the opportunity to collaborate with retailers for everyone’s benefit – even the shopper.
4. The Human Resource challenge for category management
For the category management function to thrive, it requires a team that has disparate skills and experiences.
Category management is complex. To be successful, the category management leader must understand marketing and sales, sophisticated math concepts and path-to-purchase ethnographics, corporate strategy, and retail aisle clerk operational issues.
So if HR departments develop career paths that require category management experience precisely because of this complexity, it could be the opportunity for creating a sustainable advantage.
5. Big data and insight generation
Big data. Arguably the greatest marketing opportunity of this decade. However, to truly explore the potential of insights that data can deliver, software with predictive analytics capability is required.
There needs to be an understanding of critical behaviors including buying, social media, mass media consumption and lifestyle.
The data can then be used to understand need states and behaviors at the household level, shopper segments and geographic store clusters and so on.
In practical terms, this means the data must be organized around CATEGORIES.
However, the answer to gaining insights lies not in software alone. There needs to be cross-discipline collaboration from software designers, social media gurus, retailers and marketers.
Such collaboration although not easy, will come to fruition – as the need is great and the rewards enticing.
If you would like to move your category management team towards excellence and grow profit, have a look at our comprehensive mix of accredited training and skill bundles.
Sanity is within your reach.