CPGmatters: Philips Takes Category Management to New Trade Channels
Through a special arrangement, presented here for discussion is
a summary of a current article from the monthly e-zine, CPGmatters.
Both
Kohl’s and Best Buy have set formulas for merchandising in their stores —
and neither includes CPG-type category management. So in looking to establish
its Sonicare and electric-shaving product lines in the process, Philips used
a reverse approach than manufacturers typically take with retailers in establishing
influence over how they merchandise and manage categories in the store.
“We went from
the top down — from the shopper-insights piece down
to the data piece,” said Peter Naumann, Philips’ director of category-development
management. “At a Kroger or a Safeway, you build up your category-management
engagment with data pieces and by analyzing shares and then you get to the
resulting shopper insights and get asked to do higher-level strategic management.
“But with these retailers, we did shopper observations that led to merchandising-strategy
suggestions first. We flipped the model on its ear.”
In the absence of
pre-existing data that would help Philips explain how it could help either
retailer, Philips talked with Kohl’s and Best Buy shoppers both in-store (with
the retailers’ cooperation) and in other settings
to understand their views on such issues. Armed with insights based on that
information, Philips obtained and got buy-in from chain management to present
ideas for tinkering with how merchandise in the relevant categories — both
Philips’ and
competitors — might be rearranged and enhanced to appeal more to what
shoppers were saying.
With Kohl’s, Philips came up with some ideas for promotional
strategies for the relevant categories with advice on how to exploit the fact
that sales in the power-shaving segment, for instance, is heavily driven by
the Christmas season.
When it came to Best Buy, power oral care and power shaving
devices were placed in the back, and both types of products displayed statically
in their boxes. Philips suggested that Best Buy move the merchandise set forward
and allow shoppers to “play” with the merchandise a bit, with shavers
out of their boxes and connected via their power cords to electricity.
“We could show them the lift that this approach historically gives retailers
and how shoppers are looking for that extra level of engagement, and how it
improves the shopping experience and conversion,” Mr. Naumann said.
The
upside-down category management was a daring but, considering the history of
category management outside of CPG brands and perishables, maybe the only option
available to Philips.
“The perception is that you can’t do category management unless
you’re
in the CPG category — very fast-moving goods — or you’ve
got a lot of syndicated data about your product sales,” Mr. Naumann said.
“Category management has grown up typically in places where data is more
available, where analytics are more possible and more enabled, and where retailers
have tended to want to drill into it and have the conversations you need to
have,” said
Joe Beier, executive vice president of GfK Interscope, which advised Philips
in the effort. “Retailers dealing in categories outside of that bull’s-eye
have been slow to adapt.”
Discussion Questions: Why has category management faced slow adoption outside traditional CPG channels? What do you think of Phillips approach to getting a foothold in Kohl’s and Best Buy? Can you suggest other techniques when shopper insights data aren’t available?
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9 Comments on "CPGmatters: Philips Takes Category Management to New Trade Channels"
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A wealth of data about Shopper/Consumer Insights exists within low ticket/frequently purchased products, like CPG. That data has been shared, in varying ways, among manufacturers and retailers as a matter of course.
The buy/sell side of other manufacturer/retail relationships can get a bit contentious, as to who might “own the consumer.” When the understand among these two forces is properly focused on the fact that the “consumer owns them,” the two concerns can begin to do a more effective job of making use of CPG strategies.
The sporting goods industry has done an effective job in this area, as has the lawn care industry. Both manufacturers and retailers have taken the time to address ‘Attitude’, ‘Behavior’, and ‘Future Plans’ of the consumer. That approach flexes the ability to support product, merchandising, shelf space, pricing, and product movement to the benefit of all parties–most importantly, the consumer.
Funny enough, the shaving/personal care displays were the ones that got my attention the most when I recently toured Best Buy’s new connected store prototype. So much so that I asked an associate if they were yet another new category. Nope. They just brought them out from the back-of-store shadows. Now I know the back story.
To me, the Philips’ breakthrough was a supplier taking charge of a category that is core to them yet peripheral to specific retail customers, and two retailers collaborating to bring items to their full potential, even if it meant breaking policy. When retailers bury entire categories, lackluster performance is a fait accompli; there really should not be any dead zones in a well-designed store.
Kudos to Joe Beier and Philips for applying “upside down category management.” If this seems hauntingly familiar to other category management veterans, it should. The concept was used to support the pre-ECR report “Variety or Duplication: A Process to Learn Where You Stand,” published in 1993 by FMI.
As lead researcher and author of the work, I can empathize with Mr. Beier’s challenge in gaining support for a planogram decision process that is first driven by consumer input (we called it the “decision tree”) and second by data rather than the other way around.
Key learning from history: too many items which are interchangeable in the consumer’s mind (duplicates) can actually hurt category sales. Takeaway: increasing variety based on the consumer’s definition can increase sales.
The report should be required reading for all category managers and new product development teams, in my humble opinion.
Sounds like category management or basic business planning to me. Looking at the category roles and consumer decision tree or whatever you wish to call that type of information is a key as well as illustrating the market opportunity. I would look at retailers who have failed to better answer the question of why category business planning is slow to be accepted. A similar change of merchandising happened with light bulbs in the DIY channel–years ago–it’s good to note that initiative and common sense merchandising works.