ecr europe forum ‘08. the moment of truth – putting category management into action at store...

1

The moment of truth –

Putting category management into action –At store level

2

Crash Course - Objectives

• To have a clear understanding of the values of working with category management on store level

• Understand what it takes to move from project to process

• Get a clear understand of how to measure and manage sales and profit

effectiveness

• See the true value of working proactively whit P.O.S data

3

Subject

Content Expected output

Understand Category management issues and opportunities

The business to business to consumer market Category management models and steps From continiuosly improvements to Joint Category management – Focused at partnership

Give the participants a broad overwiev of the issues and opportunities in relation to category management in FMCG See the value of implementing category management the right way

Category management from project to process

A way of working in the FMCG industri – A shift in pradigme Group discussions at the table

Understand the category management could and should become a way of working and not a project retated to individual parameters

From data to relevant business knowledge

Effective POS- data analyzes and tools Build on cases: Market potential - Issues and opportunities Reasons – Objectives Actionplan - Implementation – Cockpit and review procces Combined with 2 small workshops at the table Focusing at understanding potential and impostnat tools

Understand that managing kompleks data sources could become simple asking the right questions using suffient tools

Next step

How to go from project to process Group discussions at the tablefilling in a small questionare

What will be step 1 in your company

1

Category management issues and opportunities

2

The business to business to consumer market

CONSUMER MARKETING MANAGEMENT

Moment oftruth

TRADE MARKETING MANAGEMENT

Manufacture Chain POP Consumer

3

The Business to Business to Consumer market

• We are actually selling 2 types of products!

• The consumer product – covering consumer needs

• The business product – covering business needs

4

The Consumer Product

The value is basically build on taste, feelings and perceptions

• Consumer evaluation

• Ability to create consumer loyalty

• Ability to create consumer trial

• Ability to create consumer knowledge

5

The Business Product

The value is basically build on facts

• Business evaluation

• Ability to create chain and store turnover

• Ability to create chain and store profit

• Ability to create chain and store profile and image

6

ECR & Category Management

E fficient

C onsumer

R esponse

Though cooperation to fulfill

the needs of our common consumers – better, faster

and at a lower cost

7

Category development

How can we grow the cake together – optimizing the moment of truth

Win for chains and stores

Today's

Solutions =

Sales &

Profit

Future potential

Win for manufactures

Win for consumers

8

Category developmentCategory Management

� Right assortment

� Right prices

� Right promotions

� Right place & space

� Right NPI’s

Category Management

9

Cooperation at several levels creates the best results

KAM/BUM

Sales Rep

/ Merch.

Chain

Store/POP

Consumer

10

Cooperation around the moment of truth

KAM/BUM

Sales rep / Merch Store / POP

Consumer

Category manager

Chain

Sales management

District management

External dialog

Internal

dialog

Dialog

Store/POP

External dialog

Internal

dialog

11

Data / knowledge sharing is a must to create best practice solutions

Knowledge and understanding becomes key to success

Knowledge sharing creates synergy

Manufactures knows a lot but not enough

Retailers knows a lot but not enough

Efforts Results

12

Category management / category development – Put to work !

+ 4,5 mio

Category profit - One chain - Remarkable results in one category

13

Category Management process – ECR Best practice

Category Definition

Category Role

Category Assessment

Category Objectives

Category Marketing Strategies

Category Tactics (initiatives)

Implementation Plan

Ca

teg

ory

Re

vie

w

14

The “joint” Category Management model

Joint basic plan

Category definition and structure

Tactics assessment

Category management

&

implementation plan

Ca

tego

ry re

vie

w

Tactics optimization

Retailer strategy definition

Asso

rtmen

t

Spa

ce

Sto

re L

ay

ou

t

Com

mun

ica

tion

Pro

mo

tion

Pric

e

Sto

re D

eve

lop

men

t

pro

gra

m

• Specific objectives

• Strategy

• Action

• Alignment – Go/No go

• Joint objectives

• Priorities

• Cooperation

15

Focusedat

Discounts

Focusedat

Improvement

Focusedat

Partnership

Limited cooperation(low priority)

Limited cooperation(low priority)

Traditional negotiations Key Supplier cooperation Category Management

Investment by Retailers

Investmentby

Manufacture

(Human

Resources and

Financial)

Basic Customer

management

Advanced Customer

management

Category management

Assess and develop co-operation

16

Continuously focusing at improvements

Tactics assessment

Tactics optimization

Asso

rtmen

t

Spa

ce

Sto

re L

ay

ou

t

Com

mun

ica

tion

Pro

mo

tion

Pric

e

Sto

re D

eve

lop

men

t

pro

gra

m

• Specific objectives

• Strategy

• Action

17

The Classic category development dilemma 1 -Contribution formula

• Are we going to increase traffic, attract the ideal shopper profile and perhaps

more loyal shoppers?

• Are we going to guarantee a more effective use of the shopper-flow by raising

the average basket (or profit)?

Hvor mange forbrugere

kommer i butikken ?

==XX X

How

many?

How

often?How

much?Which

profit?

Store

profit

18

Clarify areas of alignment

Manufacture Chain / POP

1.

2.

3.

4.

1.

2.

3.

4.

19

Focused at partnership and cooperating around category development

Banner/Chain X

Situation today Situation year 1 Situation year 2 Situation year 3

Business as usual Preffered partner adding volume Preffered partner adding value Increased customer loyalty

% Turnover Profit % Turnover Profit % Turnover Profit % Turnover Profit

Total category turnover 100 10000 1800 100 11000 1980 100 11000 2145 100 11000 2178

Preffered partner share 30 3000 600 30 3300 660 30 3300 825 35 3850 963

Competitor 1 20 2000 400 20 2200 440 20 2200 440 18 1980 396

Competitor 2 10 1000 200 10 1100 220 10 1100 220 8 880 176

Private label 40 4000 600 40 4400 660 40 4400 660 39 4290 644

20

Category management = Category development

Yes we know that it is a valuable opportunity

The key challenges are clear

It only works when you can go from project to process, Categorymanagement has to become the way you run your business.

Category management is not brand management

Category management involves many employees at several levels at yourCompany, requires a sufficient management and knowledge sharing structure –Billions of data is involved

You need true cooperation throughout the whole value chain

It is only working when it is working at store level

If it is not working for you, you are probably making it to academic

21

The moment of truth –

Putting category management into action –At store level

22

Crash Course - Objectives

• To have a clear understanding of the values of working with category management on store level

• Understand what it takes to move from project to process

• Get a clear understand of how to measure and manage sales and profit

effectiveness

• See the true value of working proactively whit P.O.S data

23

Subject

Content Expected output

Understand Category management issues and opportunities

The business to business to consumer market Category management models and steps From continiuosly improvements to Joint Category management – Focused at partnership

Give the participants a broad overwiev of the issues and opportunities in relation to category management in FMCG See the value of implementing category management the right way


A way of working in the FMCG industri – A shift in pradigme Group discussions at the table

Understand the category management could and should become a way of working and not a project retated to individual parameters

From data to relevant business knowledge

Effective POS- data analyzes and tools Build on cases: Market potential - Issues and opportunities Reasons – Objectives Actionplan - Implementation – Cockpit and review procces Combined with 2 small workshops at the table Focusing at understanding potential and impostnat tools

Understand that managing kompleks data sources could become simple asking the right questions using suffient tools

Next step

How to go from project to process Group discussions at the tablefilling in a small questionare

What will be step 1 in your company

1


2

Copyright ® Gordios Retail Innovation A/S

The business to business to consumer market

Consumer marketing

Manufacture /

Supplier Chain Store / POP Consumer

Moment of truth

Trade marketing

Purchase /

Category

management

3


Overall category management objectives

• Category development – Grow volume, Grow value, Grow loyalty

• Transform the strategic frames of the business plan to a category plan which could and should be implemented a round ”the moment of truth”

• Use fact based decision process using sufficient tool’s managing bill of complex data

• Continuously focus on best practice in store solutions – recognizing different shopper behavior

4


From projects to process

Potential

Issues

Review

Store / POP

HeadquarterObjectives

Reasons

Action plan

Cockpit

On going analyses Dynamic planning Execution

Category Definition

Category Role

Category Assessment

Category Objectives



Implementation Plan

Cate

go

ry R

evie

w

5


Category Management proces

Potential

Chain strategi

Category role

Issues &

opportunities

Review

POP

Head quarterObjectives

Reasons

Action plan

Cockpit

Joint ”plan” Analyses Planning Execution

Common

Platform2

3

1 4

5

6

”Once”

Very often”Seldom”

6


Joint basic plan – Common understanding

• Retailer category strategies

• What, combined with objectives

• Category rolls

• Category definitions

• Structure and decision trees

• Best practice tactics – Tactograms etc.

• Assortment

• Place & Space

• Prices

• Promotions

• Communication

• NPI’s

• Overall implementation plan

• Process and responsibilities

7


Step 1. potentiale

Category importance and chain potential

• Consumer perspective

• Category impact on primary target group

• Category trends and market options

• Category consumer positioning

• Business perspective

• How important is this category to turnover, profit and image enhancing

• Competitive overview with focus on complementary and substitute competition in

the category

8


Step 2. Issues

• What are the issues and opportunities optimizing this category on a day

to day basis?

• Prioritize business issues

• Profile, Consumer flow, Average purchase, Profit pr purchase

• Where do we see those issues

• At segment or brand level

• At HQ level / Chain level or individual store level / regions etc.

9


Step 3. Reasons

• What are the reasons to our “on going” issues and opportunities • Focus on manageable variables

• Chain level ex:• Assortment – Wide and depth, brands etc.

• Price levels – shelf and campaigns

• Promotions – Relevance, quantities, qualities

• In store space and place management

• Store level ex:• Consumer flow

• In store placement of category and products

• Implementation quality

• Out of stock / shelf

• Local activities / local competition

• Regional demographical differences .

• In store attitude and merchandising

10


Step 4. Objectives

• What are the overall objective of the category

• Focus on the “contribution formula”

• What specific objective are we working with in relation to the P’s

• Products (Assortment) price, place etc. the “engine”

• What is our potential

• Focus at the “spread” in store effectiveness

11


Step 5. Solutions and action plan

• Which issues should be solved in which sequence –Prioritizing against issues and objectives

• Which objectives should we have solving specific issues

• Which specific actions do we need to take and who will be the “on going” responsible

• Create a dynamic action plan giving an overview of – What, how, where, who and when

• Agree on a review/adjust sequence of meetings

12


Step 6. Cockpit, managing on going implementation and review of the category development process

• Development and implement a joint cockpit

• Which KPI’s should we focus on developing the category – Sales and profit

effectiveness

• How often should we update our cockpit

• Who should have access to the cockpit

• Agree on review meetings

• Status on our action plan – Focus on exceptions and “red areas”

• Decide on needed adjustments to our plans

• Focus for the coming period

• Updating our best practice understanding if appropriate

13


KPI’s and Assessments

• Sales effectiveness• Turnover / 1000 customer in the chain/store

• Profit effectiveness • Turnover / 1000 customer in the chain/store

• Loyalty• Loyalty to the chain / store – Number of potential customers who decide to buy in this chain / store

• Loyalty towards the supplier – Supplier category share of total category sales in the chain / store

• Category importance• Category share of total chain / store turnover

• Category share of total chain / store profit

• Supplier importance• Supplier share of total chain / store turnover

• Supplier share and total chain / store profit

14


Cockpit

15


KCRS case - chain scorecard

16


Targets Strategies The supplier and the 4 P’s

Assortment Price Distribution Merchandizing Space and positioning

Promotions

Increased turnover Build customer flow

Focus on top 10 of the category

Shelf prices on market level or lower

Minimize space share and use C positions

Sharp price promotions Currently advertised

Multi sales and complementary sales

Develop a wide and deep assortment covering all sorts of demands of the category

Shelf prices on market level of top 20 products. Relatively high prices of marginal and niche products

Optimize shelf position – A positions for marginal products.

Promotions on marginal and niche products – Theme advertising Focus on great activities

Increased earnings Profit maximization Focus on items with high contribution per unit. Delist marginal issues and articles with low contribution per unit

Optimize sales prices Disproportional space for high-marginal products. A-position on the floor for high-marginal products – No display of products with low contribution

No price promotions only theme and idea promotions on high marginal products

Increased loyalty Image build-up Maximize assortment focus on all what is in the category

Shelf prices on market level of top 20 products. Relatively high prices of marginal and niche products

Optimize space based on the market position of the individual products. Extra space for new products on A positions

Use a wide palette of promotions Advertise currently and where possible

Events Focus on new products from the whole world

Optimize sales prices Optimize space based on the market position of the individual products. Extra space for new products on A positions

Develop activities and events about new launches

Maintain loyal customers

Develop a wide and deep assortment covering all sorts of demands of the category

Shelf prices of top 20 under the market price

Optimize space focus on the best positions for top 20 products

Pay day promotions focusing on stock loading

Ex: Best practice tactogram – Developing the engine

17


Promotion and communicationCategory RTEC/K-

Snacks

Date: 30.06.07

Segment Objectives Type of promotion

Split of investments

Promotion material/ In-store communication

Placement of promotion

Pricing Amount of promotions

Comments

All Family

Drive frequency of purchase in HH with kids from avg 2,5 to 2,8 times per year by end of q1 2008

FMIO (free mailing in offers) communicated in-store. Cross promotions with fruit manufacturer

Suppliers pay POSM 50/50 split of price reduction

FMIO Cross category benefits

End gondola End gondola+fruit department

Soft price reduction

4 per year

K-snacks

Build penetration to 10 % by the end of Q4 2008

In-store promotion focusing on communication

Supplier pay for POS material

Brand communication. Demos.

Traffic spots Close to shelf

Normal 5 per year

18


19


Execution

• The category management mind ship

• A way of working

• Common knowledge and understanding – a key treads whole

• Same view on “development” and management

• You need a cockpit solution “to take off”

• Agreed and formalized review process

• Focus on exceptions and prioritize

20


Execution

• Focus on exceptions !!

• Reasons related to plan or execution

• Are we doing what we have agreed

• Do we understand the “engine” - Developing and implementing best practice

• Prioritizing focusing on utilizing the potential of what we have created

21


Group discussions

Are your company working with the category management mindset?

Do your company have “cockpit” solutions and are you working with the

same data base though out the value chain?

Do your company have and agreed process related to execution and review

process?

Discus what you see as the main barriers to develop common category

management results what it will take to create “excellence" in your opinion

1

From data to knowledge –

Using a cockpit solution developing thecategory on a day to day basis

2

From projects to process

Potential

Issues

Review

Store / POP

HeadquarterObjectives

Reasons

Action plan

Cockpit

On going analyses Dynamic planning Execution

Category Definition

Category Role

Category Assessment

Category Objectives



Implementation Plan

Cate

go

ry R

evie

w

3


Potential

Chain strategi

Category role

Issues &

opportunities

Review

POP


Reasons

Action plan

Cockpit


Common

Platform

”Once”


4

The full effect of Category Management isn’t proven until it works on

store level!

Category

development is

done store by store

5

Ranking analyses and the challenge of successful development

GoalX+10%

The average of the chain in

the category

StoresN

X

Relative effectiveness – Sales / profit

1

6

Tools and models in our cockpit

• Customer scorecard

• The contribution formula

• Ranking- and quadrant analyses

• Store descriptions

• Chain / Store action plans

• Using POS data, Nielsen and GFK as

main sources to common knowledge

7

Customer scorecard - catman@solution

8

What and where are the issues ?

• What is the issue ?

• What is the most important Issus ?

• Consumer flow, Shoppers, sales pr shopper, average purchase, profit etc. (%) ?

• Where is the issue ?

• At segment level/ brand level SKU level / Campaign level / Normal sales ?

• Head quarter / Chain / Region / Store level

• (indkøb/kæde) og/eller butiksniveau ?

9

Contribution formula

Average

sales

Contribution

ratioContributionx x =

Number of

Visitors

Number of

Shoppers

• are we to create customer flow / attendances?

• Attract the wanted customer profile

• More customers in the store or perhaps more loyal customers

• Ensure that the visiting customers buy ”customer hit-rate”

• are we to ensure a more effective use of the customer flow?

• by increasing the average sale per attendance (sell more or sell out)

• by getting a better earning on the sold units

• by increasing the sale on the goods with the best earnings

10

Averagesales

Contributionratiox x =

Number of attendances

Contribution

The turnover

• Increase number of

attendances in the

store

• More custom-ers in

store / Increase ”cus-

tomers hit-rate”

• More loyal customers

/ more often

• The right customers

• Sell more to the

customers in the

store

• Have more

customers in store

buy in the

department

• Buyers buy more +

extra/ more

expensive

• More loyal to

category

• Sell better

• Sell goods of high

profit margin

Focus on The Earnings of the Category / Store defining the issues and opportunities

11

What is the issues ?

Avargepurchase

Contributionmargin

Contributionx x =

Number ofcustomers

in store

Turnover Contribution / purchase

Need more toBuy category

Need to buyMore of category

Incre

ase p

rofi

t

How do we utilize the shopper flowto sell more and to increase our profit Buy improving our coverage of consumerneeds

12

What is the issue ?

• If the goal is to increase profit in store – what to analyse?

• Should we use this category to increase number of shoppers and their by

increase turnover and profit?

• Should we chose to optimize utilization of present shopper flow

• Increase number of shoppers in category

• Increase sales pr shopper

• Increase profit pr purchase

• Prioritize one issues and one goal

13

Where is the issue?

• Generel consumer level / Chain level

• Specifick shoper level / Regional level / local level (Few shops)

6.00

5.00

4.00

3.00

2.50

2.00

1.80

Description 1

Description 4

Description 3

Description 2

Description 5

Affectivity of sale

in the store

X

X

X

Ranking analyses - Category management

segments

15

Store ranking – Identifying under

performing stores

16

Creating store segments using quadrant analyses

Salgseffektivitet

05251 BILKA TILST

05252 BILKA SKALBORG

05253 BILKA HUNDIGE

05254 BILKA ODENSE

05255 BILKA ISHØJ

05256 BILKA SLAGELSE

05257 BILKA NÆSTVED

05258 BILKA HOLSTEBRO

05259 BILKA ESBJERG

05261 BILKA VEJLE

05262 BILKA KOLDING

05263 BILKA HORSENS

05264 BILKA ONE STOP, FIELDS

05265 BILKA VIBORG

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

0 500 1000 1500 2000 2500

Salg i stk

Salg pr 1000 exp.

17

Optimizing the 3P’s focusing on Assortment performance / Promotion performance / Space & Place

Salgseffektivitet

05251 BILKA TILST

05252 BILKA SKALBORG

05253 BILKA HUNDIGE

05254 BILKA ODENSE

05255 BILKA ISHØJ

05256 BILKA SLAGELSE

05257 BILKA NÆSTVED

05258 BILKA HOLSTEBRO

05259 BILKA ESBJERG

05261 BILKA VEJLE

05262 BILKA KOLDING

05263 BILKA HORSENS

05264 BILKA ONE STOP, FIELDS

05265 BILKA VIBORG

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

0 500 1000 1500 2000 2500

Salg i stk

Salg pr 1000 exp.

18

The Stores are visited and described

Understanding store segments

19

”Golden rules”…

Creating golden rules understanding best practice

20

Retailnet Tandpleje mod DVH og Føtex

Case

21

Targit – Litas varegrupper – bemærk kun

SuperBest excl. ISO og Dreisler. Forrige 52 uger

22

RetailNet, alle varegrupper mod DVH og Føtex

Case

Se valg

23

Chain: ___________________________

Kardex: ___________________________

Store: ___________________________

Period: ___________________________

Consultant: ___________________________

Enclosure 1: Data from the storeEnclosure 2: Analysis charts with the placement of the storeEnclosure 3: Evaluation charts / platform-

Store plan

WEB based store Plan

• Operational store plan

• Analysis platform

• Store data (POS)

• SWOT

• Store evaluation

• Main problem

• Part problems

• Goals and objectives

• Action plan

• National efforts

• Chain program

• Store efforts

24


Potential

Chain strategi

Category role

Issues &

opportunities

Review

POP


Reasons

Action plan

Cockpit


Common

Platform

”Once”


25

Workshop 1

Discuss and set up a list of variables which create different

“category potential” store by store understanding the ranking analyze

26

Workshop 2

Discus and come up with good ideas of how to use quadrant analyzes

working with category management.

1

Next Step –

How to go from project to process

2

• Please discuss your experience –

• What does it take to go from project to process

• Focus on how to get started

• Please fill the questioner and we will supply the result on our homepage

4

GordioS focus areas

Gordios

Consulting People TrainingKnowledge CubeRetail solutions

CoCoCo IRS

5

Gordios

We support our customers sales and marketing efforts with a clear focus on the

retail market

• Consulting / We develop simple, and effective solutions which deliver measurable results

• People – We make sure that you have the right team in your sales and marketing operation

• Training – We coach and develop your sales and marketing peoples competencies

6

Reference List - Selective

7

The presentations could be found at

www.forum.ecrnet.org – after 6 june 2008

www.gordios.ecr.com – after 29 may 2008

If you want access to a demo version of CatMan@Solution please hand in

your company card to Claus Nykjær or Erik Svendsen and they will mail

you an individual access code

ecr europe forum ‘08. the moment of truth – putting category management into action at store...

Business

consumer market give

review procces combined

working proactively whit

relevant effective pos

company group discussions

store level understand

issues management issues

contribution formula