Where is the Shopper In Your Category Management Approach?
By Sue Nicholls, CMKG October 2016
Many of us forget the shopper in our category reviews, business reviews, assortment discussions, space planning, store brand decisions, internal presentations …
I work with many different retailers and suppliers in Canada and the U.S., and a common and recurring issue is that most continue to forget the shopper in most of the work that they do. Even though we talk about the importance of the shopper, and even though we are spending more than ever trying to understand the shopper, scratch below the surface of most category reviews, business reviews, assortment analysis, space planning, store brand perspective and the shopper is missing or at best, there may be glimpses of them but with little influence on the recommendations or decisions being made.
I’ve been talking about this to our students and our clients for years now – asking “where’s the shopper?” We’ve become so tactical in our approach to category management over the past 10 years, with little thought for retail strategy, the target shopper, and how to best satisfy the shoppers’ needs. The biggest problem is that shopper insights and shopper marketing have been kept separate from the category management process, which limits access that even some category management folks have to this important shopper information. Without the shopper piece being included as part of category management, its results are always going to be limited.
The good news is that the category management recently released a new and refreshed approach to category management – called CatMan2.0 ™. The industry expressed a need to improve the process that was developed in the 1980s and make changes based on the significant changes in data and technology, shopper path to purchase and the retail industry. The biggest (and most positive) change that I saw in this new approach is about the shopper – and the need to integrate shopper insights and shopper marketing into the category management process, with shopper insights being added to the category assessment step, and shopper marketing being added as a new tactic (alongside efficient assortment, shelving, pricing, promotion and product supply). This includes a recommendation for manufacturers to incorporate the shopper insights/marketing team into the category management team (for many organizations it resides in the marketing department).
“Good category plans that incorporate Shopper insights frequently result in double digit sales & profit gains for Supplier and Retailer categories.” (Category Management Association’s CatMan2.0 ™)
So who doesn’t want double digit sales & profit gains? Beyond that, here are some other important considerations: a) the shopper owns the wallet that drives sales and profits for both retailers and suppliers; and b) the shopper is “owned” by the retailer, so shopper insights teams need to have an innate understanding of each retailer’s unique shopper, which ties in with their unique category management process, which ties in with category assessments / tactical analysis / category plans, etc. etc.
Even when the shopper insights are available for integrating into category management, many organizations struggle with how to integrate it. They still keep the shopper separate in the analysis and need to start to weave shopper through every part of the category management process. Following are four ways for retailers to integrate shopper into their strategy and processes that will help to move to a more shopper-focused category management approach.
- Inject Shopper into Category Roles
Category roles are a requirement in category management. Their purpose is to give retailers the opportunity to answer the following questions*:
- Which categories will cause your target Shopper to choose you as the principal source of the items you choose to sell?
- Which categories will you use to create distinctiveness and drive both traffic and loyalty?
*(CMA’s CatMan 2.0)
The opportunity is for retailers to look at their existing category roles (or to develop them if they don’t currently have any established) that incorporate the more traditional measures like $ sales and profit, and combine them with metrics that tie in their shopper, like percentage of shoppers who purchase the category (penetration), # of visits by category (# of trips), basket worth of the category, total expenditures of the category shopper, etc. These measures are available through panel data and/or through the retailer’s shopper loyalty data.
- Inject Shopper into Retail Store Clusters
Some retailers continue to group their stores based purely on volume and location (e.g. A,B,C,D). This is not store clustering! Other retailers have adopted much more sophisticated approaches to cluster their stores using multi-variant clustering approaches that consider the shopper, even down to a category level. Many retailers are between the “ABCD” approach and the more sophisticated multi-variant approach.
The opportunity is for retailers to a) develop shopper-based store clusters; and b) manage their business at a cluster level (including business results, category assessments and analysis and tactical decisions). Suppliers need to inform retail category managers of different shopper preferences in categories that require an individualized approach for improved shopper satisfaction (CMA’s CatMan 2.0).
- Inject Shopper into Category Strategies
The retailer’s strategies, which include the category role (no.1 above) and retail store cluster definitions (no.2 above), drive the outputs in the category plan. Before developing the category plan, a category strategy needs to be set, which complements the category role that has been defined for each category.
CatMan 2.0* recommends more creative or insightful and much less mechanical strategies, with 5-6 strategies per category. They may include emotion (e.g. pet / baby / beauty), providing education (e.g. oral care / consumer electronics), saving time (e.g. breakfast snacks), safety (tires). Suppliers can play an important role in helping Retailers keep category strategies relevant and forward thinking, based on the changing Shopper, evolving attributes and new Shopper insights. This is where the supplier’s valuable shopper insights and the retailer’s category shopper can start to connect.
- Inject Shopper Through Category Decision Trees
The term consumer decision tree has been replaced by category decision tree (CatMan 2.0 ™) (the good news is that it’s the same CDT acronym). Their conclusion is that the term consumer decision tree is incorrect because it is actually a shopper making the decision (who is not necessarily the consumer of the product). Think of pet products or baby care – the tree should be about how the shoppers think and act, even when they purchase on behalf or someone or something else.
The CDT is one of the most critical shopper pieces to incorporate in your category management foundations, starting with its influence in both category definitions and segmentations. CDTs can be developed in many different ways, and the cost to develop a third party CDT for one category can range in cost from several tens of thousands to half a million dollars (depending on the methodology and approach). Once a retailer decides on the CDT for a category, by incorporating these shopper-based segmentations into their data (through fields assigned at the item level), the shopper perspective gets injected into shopper into category assessments and business reviews, tactical analysis and recommendations (including assortment / innovation, space management / planograms, pricing and promotion, product supply).
What’s next? Look at your current category management approach and determine how you can improve the focus of shopper within it using some of the examples above. retailers who dust off their category management process and make changes using the recommendations above (as well as others suggested in CatMan2.0 ™) will ultimately win with their shoppers through increased shopper satisfaction.