CPGmatters: What Marketers Need to Know About Today's Category Management Process
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
Category management has historically been a defined eight-step process that has been somewhat tactical and was very much influenced by the Efficient Consumer Response initiative of the 1990s. Many of the benefits were supply-side driven and/or distribution driven. Yes, CPG manufacturers achieved retail improvements, but they often came at huge costs in man hours and were driven by how the retailer defined the category, not by the consumer.
But the paradigm of category management continues to change. Retailers are poised to integrate manufacturers' consumer data with what they know about their shoppers. Meanwhile, many CPG companies have vast amounts of consumer and shopper research that give them incredible insights about how, where, when, and why consumers buy and use their products. Unfortunately, that information often never gets leveraged or becomes actionable.
Integrating the use of consumer and shopper information with go-to-market information benefits the CPG manufacturer in many ways. First, this information serves to align marketing and sales internally on the role of the marketing mix. Externally, it gives the retailer a better understanding of how the category is organized from a consumer perspective and where the growth will come from. What makes these insights actionable for the retailer is the integration of information such as promotion response, shelving and assortment with consumer and shopper data.
The manufacturers' knowledge estate may take on many forms and be in different levels of development, but it consists primarily of:
- Competitive Frame: What does the product compete with at broad level and what products can be substituted for its use?
- Purchase Structure: How are the segments of this category organized and how do shoppers make their purchase decisions?
- Need States: What is the attitude and usage information that defines what needs the product fulfills and the important benefits it provides?
- Channel Switching: Leveraging panel data to determine what causes shoppers to switch brands and channels and where they go when they do switch.
- Promotion Response: What is the role of trade promotion for merchandising and what is the most effective use?
- Shelf Management and Assortment: What is the best way to organize the shelf based on how the consumer shops the category? What selection of products best fulfills their needs?
In sum, the face and direction of category management is changing. It is morphing into a more consumer-centric "shopper management" approach. Most importantly, this metamorphosis is an integrated activity between the combined knowledge estates of the manufacturer and the retailer.