Category Management

Rajnish Kumar

What is a Category ?• A group of products with similar attributes • Distinct from other products but not necessarily among themselves• Can be substituted by each other• Stores, stacked and sold in a similar manner

We can therefore Sum up :

A category is a group of products which meet a similar consumer need so that the products are inter-related or substitutable.

Examples – Juices, Shaving products, Inner wear, Toys and Games

Therefore ,Category Management.. Category Management is a

process of maximizing sales and profits while enhancing product value and customer experience

• It is achieved through active involvement of all stake holders Manufacturer, retailer and customer

• While it is a business requirement for the retailer and manufacturer to partner with each other, the customer is engaged by the retailer in order to understand buying behavior and preferences to achieve more from less.

• The value thus captured is retained partially by the retailer and is passed on in good measure to the customer to gain competitive advantage

• Category management is not an event but a continuous process of course correction through performance measurement and action

Category Management is a Business Process

Define the Category (i.e. what products are included/excluded).

Define the role of the category within the retailer.

Assess the current performance. Set objectives and targets for the

category. Devise an overall Strategy. Devise specific tactics and

Implementation. The eighth step is one of review which takes us back to step 1.

Category Drilldown and Definition• By Brand Branded National Brand

Local Brand

Private Label Economy/Value

Premium

• By Usage Fresh

Canned Juice concentrates

Category Role

Category Role

Retailer View Customer View Example

Traffic Builder

Lower Margin

High Frequency

Saving

Top Ups/Convenience

Fruits and Vegetables

Eggs

FMCG

Cash Cow High Margin

Destination

Aspirational

High cost of acquisition from alternate source

Toys and Games

Home Linen

Branded Luggage

Perception builder

Medium Margin

High Fashion

Value Pricing

Lifestyle

Apparel

Category assessment• Who is the Target customer ?• What Inventory is required to sell profitably• How Much Shelf Space is allotted• If we use the same space for something else

what margins can be generated• Is there an impact on sale of other categories• How much stock is sold on promotion• Shrinkage and pilferage constitute what

percentage of margin• Is there any Non Sales Revenue being

Generated• Is there a Potential for growth

Identifying Gap between current and potential sales

Category Scorecard – taking stock

• Sale Potential vs. Achievement

• Target Margin vs. Achievement

• Target NOM Inventory vs. Avg. Inventory

• Cost of sales

• System requirements – cost

• Manpower allocation

• Is it Profitable to do Business ??

Category Scorecard – taking stock

• Sale Potential vs. Achievement

• Target Margin vs. Achievement

• Target NOM Inventory vs. Avg. Inventory

• Cost of sales

• System requirements – cost

• Manpower allocation

• Is it Profitable to do Business ??

Category StrategyRetailer • Low Margin – High Volume• High Margin – Low Volume • High Inventory – High Margin • Low Inventory – High Turn strategyCustomer• Market Share/Price Positioning • Fashion Driver • Bottom line Contribution• Top Line Contribution

Tactics to achieve Strategy Product based Tactics • Pack of 3 briefs @ Rs 99 with 10 % margin• Rs. 20000 wedding collection Sherwani• Exclusive range of Leather footwear• Fast Moving Consumer goods – Toothpaste,Diapers Operational Tactics • High stacks in the action alley to give feel of plenty• Exclusive Boutique look with pictures of Models• Wide range of Leather Shoes in all possible color,size and brand

options

Key Elements of Category Plan implementation

• Everyone has to be on the same page• Designation of Authority• Systems to be in place• Approvals have to be smooth as per well defined

processes• Clear assignment of responsibility• Mission critical Timelines • Dip sticks for course correction• Pre determined measures of success

Category Review

Can be a 3 stage process :

• Research and opportunity identification

• Creation and implementation

• Metrics, correction and learning

Category Captains

• The best and biggest suppliers having a pan market presence are appointed by several retailers as Category Captains

• The Category Captain will be expected to have the closest and most regular contact with the retailer and will also be expected to invest time, effort, and often financial investment into the strategic development of the category within the retailer.

The Category Captain is often - but not always! - the supplier with the largest turnover in the category.