CPGmatters: What Marketers Need to Know About Today’s Category Management Process

Discussion
Jan 24, 2012

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.

Discussion questions: How do you see greater leveraging of consumer insights transforming category management? Where do you see as the greatest benefits for both retailers and vendors as well as the largest hurdles in shifting to a more consumer-centric “shopper management” approach?

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19 Comments on "CPGmatters: What Marketers Need to Know About Today’s Category Management Process"


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Dan Berthiaume
Guest
Dan Berthiaume
10 years 4 months ago

With social media and tools for sorting through “Big Data,” retailers and their partners can get more insight into consumer preferences quicker than ever before. The supply chain must become leaner and meaner; perhaps this will be the catalyst that finally moves RFID into the place everyone has been talking about since 2003.

Ryan Mathews
Guest
10 years 4 months ago

At the end of the day, “It is always the shopper, stupid.”

Shopper insights are what’s needed to drive effective category management. Period. Of course driving a category for shopper satisfaction and making a profit aren’t always the same thing.

Ben Ball
Guest
10 years 4 months ago

In the beginning, category management was about the marriage of consumer learning with in-store practices.

Then Brian Harris climbed Mount S-COP and came down with “the templates.” And category management was never the same. Nor did it ever return to its true purpose. It was forever doomed to wallow in a labyrinth of customized syndicated data bases and automated template tools. And the industry benefited, a little, and wasted money, a lot.

A renewed focus on the consumer aspects of category management is certainly a breath of fresh air. But we wonder if it comes too late. Shopper Insights has already stepped in to fill the void of consumer (“shopper”) behavior created by the template team. Most of our CPG clients have already split the two functions — labeling Shopper Insights “strategic” and Category Management “tactical.”

There is absolutely nothing wrong with the philosophy espoused by Paul Thompson in his article — but we fear it is already too late for category management to carry that water in the industry’s eyes.

Camille P. Schuster, Ph.D.
Guest
10 years 4 months ago

Sorting through this data to create actionable consumer insights is a challenging job requiring cross-disciplinary participation. Each department, functional area, marketing research team, customer service department, and brand or category manger has a contribution to make. Very few companies have a consumer department to gather and analyze this diverse level of data with the responsibility of communicating the consumer insight to decision-makers.

Having individual departments analyze “their” data is only the first step. If it stays in separate departments, companies do not get a well-rounded understanding of their consumers. Once each company has a well-rounded view of their consumers and good insights, then collaboration between suppliers and retailers has the potential to better determine assortment, development, and promotion of products that are unique to the products being sold at a particular retailer.

David Biernbaum
Guest
10 years 4 months ago

Consumer goods marketers and manufacturers need to be fully prepared for category reviews, and even more so to present new items for category consideration at any given retail entity. In addition to what the author outlines above, marketers also need to fully understand the cost of doing business with major retail chains, including the cost for acquiring significant data, and the cost for retail promotion. I have seen some of the most innovative entrepreneurial inventions get lost in the process because the marketer was ill prepared for the meeting with the retailer.

Mark Heckman
Guest
10 years 4 months ago
Most retailers are typically ready and willing to leverage CPG research, whether it is called “shopper marketing” or some other trendy name. The real disconnect has typically been the distrust retailers have in executing action that more often than not is skewed to benefit a particular brand, rather than the overall category. In Paul Thompson’s very well written post, he correctly cites the benefits of using shopper research for both CPG and retailer. But unless this research is devised and executed in context of the retailer’s existing category imperatives, it will likely become another Power Point deck that ends up on the bottom of stack of the many opportunities that retailers consider every week. With that said, I think there is much to learn in-store, not just in the traditional areas of shelf management, assortment, and promotion, but also how the shopper traverses the store, interacting with displays and aisles. While much has been learned about category dynamics, we know very little about “where” in the store various categories and products should optimally be placed,… Read more »
Dave Wendland
Guest
10 years 4 months ago

“True” category management has been assumed focused on the consumer and the shopping experience, but never before has data to support decisions been so readily available. I agree with David Biernbaum that including shopper insights as part of ALL product presentations from suppliers and taking these into consideration when evaluating and assigning shelf strategy will drive category growth. For retailers willing to really connect strategic (shopper insights) with tactical (category management), positive results will ensue.

David Zahn
Guest
10 years 4 months ago
In response to the question posed: “Where do you see the greatest benefits for both retailers and vendors as well as the largest hurdles in shifting to a more consumer-centric “shopper management” approach?” we as an industry are getting better and better at autopsies (looking at PAST PERFORMANCE and trying to assess why business HAPPENED) rather than healthcare where we are more goal-directed and meet objectives (influence performance to create situations). The eight-step model does wonders in making sure technicians “touch all the bases,” but in the execution of it, we lost the qualitative aspects of being merchants. Now, the pendulum is swinging and we are wanting to get closer to the shopper/consumer. The ideas work well, but the implementation has lagged. Until we can wrap our heads around understanding the motivations of behavior (why this store vs. that, why that product vs. others, what “jobs” are being fulfilled, what frustrates and what delights, and on and on), we will collect data and disseminate various truths — and argue whose report is more godly .
Gordon Arnold
Guest
10 years 4 months ago

After sifting through this information several times it seems to me we need to do a better job of both collecting and understanding consumer information. The separation from customer needs and store layout is getting wider in the age of information. I wonder why….

Ralph Jacobson
Guest
10 years 4 months ago

There is no shortage of thought on “Big Data” in CPG and retail today. While there is some innovative activity going on out there around the globe, including Hindustan Unilever in India, Inditex/Zara, Spain, etc., there are still billions left on the table in missed revenue opportunity. And not just in grocery!

Some examples of how to address some gaps in consumer insights and help drive profitable category growth are: 1. Understand the brand’s ability to meet the needs of consumers and what programs are driving profitable volume;
2. Create early insights into consumer response to new products in near real time;
3. Understand and engage consumers. Deliver personalized consumer dialogue at the speed of conversation;
4. Automate 1:1 consumer dialogue to develop granular segmentation and achieve significant category productivity gains

These are just a few high-level ways innovative companies are leveraging the tools available today to evolve category management throughout the world.

Lisa Bradner
Guest
Lisa Bradner
10 years 4 months ago
I think one word in this question speaks to the problem: “management”: the notion that if we can just get enough data we can manage consumer, and shopper expectations appropriately. As several people have pointed out already we live in a shopper empowered world where shoppers have their own unique path to purchase and can even be lured out of a store they’ve entered by a better deal or product. As retailers and marketers, we should be thinking about shopper satisfaction, shopper empowerment and aligning to shopper needs. This shift reframes the knowledge estate listed. Good content but instead of thinking “competitive frame” for example, as a product question think of it as “what else might the shopper buy instead of this product and how else might they want to use it?” When thinking “purchase structure’ lead with:” how does the shopper want to purchase and does my planogram and layout align to that?” It’s a subtle but important shift in how we think about all these things to truly put the shopper in the… Read more »
James Tenser
Guest
10 years 4 months ago

Shopper and Consumer Insights are immensely valuable inputs to our category and promotional planning processes. The bullet points enumerated in Paul Thompson’s article do a fine job of illustrating how much knowledge potential exists.

As ever in Category Management, however, we tend to focus so intently on inputs that we overlook the importance of follow-through and understanding outputs. Implementation is the poor stepchild of CM. The addition of new Shopper Marketing insights does little to change that except maybe make it harder.

If the goal is better performance, then we must take active steps to close the implementation gap, understand cause and effect, measure the ROI contributions of our actions and feed those insights back into our planning.

It’s not just what insights you put in your plan, it’s what you do to actualize that plan that ultimately determines success. In-Store Implementation needs to be baked into the Category Management process just as much as Shopper Insights.

Dennis Serbu
Guest
Dennis Serbu
10 years 4 months ago

Category management works. We have the science, but we still need the art. This stuff is not necessarily generic across categories and there needs to be specific category knowledge and experience. Retailers would be wise to get the manufacturers out of it. I see far too many examples where the category partner does not act in the best interests of the shopper, the category or the retailer.

It is about the shopper. They are telling us things and we are ignoring them in favor of vendor payments.

Winston Weber
Guest
10 years 4 months ago
I am fascinated by the aforementioned comments. Recognized as one of the original architects of category management, I publicly stated in an article I wrote for GMA in 2007 that it was time to retire category management. I believe that retailers and suppliers must build upon what they have learned and move on. In today’s shopper centric environment, category management has too many limitations for a retailer to remain competitive and produce the desired results. These limitations include: a) Not positioned to focus on shopping experience and solutions. The planning process is too narrowly positioned by focusing solely on a category without including those aisle, department and total store factors that can influence merchandising solutions and the effectiveness of the shopping experience. b) “Silos” prevent optimizing complimentary category merchandising. Retailer organizational structures are typically compartmentalized into departments such as grocery, HBC, GM, meat and produce. This is a huge barrier to optimizing complimentary category merchandising. c) Store operations is not aligned with category management. It excludes the necessary structure and process alignment with operations to… Read more »
Brian Harris
Guest
Brian Harris
10 years 3 months ago
I’m not sure that historical reviews of any management method are productive but it is interesting to point out that Category Management has now been an accepted practice in our industry globally for over 20 years. In an industry where new ideas and methods come and go quickly this is truly unique. Having said that, let me make two comments. First, like any good method Category Management must adapt to the changing environment. And it has. The new methods are strongly shopper centered and designed to maximize the joint value of consumer and shopper insights. In the end, it is the power of these two complementary perspectives that uncover new thresholds of opportunity in a category. The new shopper and category development approach is delivering impressive results and resuscitating Category Management methods in a growing number of retailers and manufacturers. 20 years ago we had virtually no shopper information — today we have an abundance. Today’s Category Management methods have evolved to capitalize on this opportunity. Second, a point I’ve made so many times over… Read more »
Zel Bianco
Guest
10 years 3 months ago
I agree with many of the comments that have already been posted, including that combining Shopper Insights with Category Management and POG information is not easy — but it is being done. Companies cannot make this happen when Category Management and Shopper Insights are in separate silos. They have to be integrated. By that I mean, the people and the data. We are doing this with a number of our clients and, again, it’s not easy but it’s worth it. The other critical piece of what Paul mentioned was that even the companies with extensive Shopper and Consumer Insights do not have an easy way to get them to the folks who are presenting to the retailers. We see this all the time. What good is having all that information and not using it? These insights were gathered at great cost and never make their way to the account people who meet with the retailer. That’s just crazy. We have developed a method through the use of a merge engine that allows the Sales/Category Management… Read more »
Chris Hoyt
Guest
Chris Hoyt
10 years 3 months ago

Ben Ball and Win Weber below say it best: Category Management isn’t the vehicle and desperately trying to make it so to justify organizational misalignment and poor initial decision-making is wasting everybody’s time.

Robert Dyer
Guest
Robert Dyer
10 years 3 months ago

Category management has always been inclusive of consumer insights as part of its analysis set. I don’t see any shift in focus to a more shopper management approach, unless the retailer/vendor ignored that information and focus in the past. The category management process steps were broad and subject to interpretation and various levels of execution against them, based upon expediency to get the actionable work done. What has changed is a higher level of availability of shopper data, either directly from a retailer’s shopper database or a syndicated data source. The tools to access this information have improved also.

Ken Dailey
Guest
Ken Dailey
10 years 24 days ago

I would agree, but start with the end in mind, last bullet, and go from there in a marketing mindset. Keep it simple, and go up the ladder step by step as needed.

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