next generation of category management

Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.1

Shopper & Category Development

The Next Generation of Best Practices Category Management

The Partnering GroupDr. Brian Harris John Clutts

Hallmark Cards Inc.,Wayne Strickland


Scanning

Space Management

Category Management

ECR Category Management Best Practices

Next GenerationStore Designs

ShopperMarketing

Retail Marketing - The Big Waves

1975

1989

Today

1985

20001995


Category Management

Concept introduced in the late 1980’s

Category Management has had global acceptance since it’s introduction

The 1995 US ECR Report documented the Best Practices definition and business process


Adoption of Best Practices Spread Quickly

Ado

ptio

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1993 Today

The Best Practice Model provided a Platform for Global Adoption.


It Spawned Related Best Practice Reports

1997 - Category Management – Building Organizational Capability

1999 – Micromarketing – A Tool for Category Management

1998 – Category Management in a Direct Store Delivery Environment

1998 – Advanced Category Management – A Pizza Category Case Study

Many other US and International reports followed.


Category Management Filled A Need

Products were not viewed as consumer-centric categories

Lack of a formalized business planning process

Underutilization of consumer research, data, and tools

Data mining was in its infancy

No formalized & balanced view of business performance

Non-collaborative supplier relationships


It Remains A Top Priority

98% of retailers and 89% of manufacturers consider Category Management critically important.


Key Reasons why CM Has Worked

Provided foundation for strategic retail marketingCategories as SBU’sAligning Company to Company strategiesBalanced portfolio of Category RolesLinking Category Strategies and Tactics

Brought consumer focus to Retail Marketing and Merchandising

New Category Definitions and StructuresConsumer-driven Strategies and Tactics


Key Reasons why CM Has Worked

Provided a new and more effective model for collaboration through better information sharing

Expanded organizational capabilitiesNew skills and talentRoles and accountabilityScorecard-based performance

Delivered superior resultsRetailers and ManufacturersSales, Profits, and ROI


Industry Results

Retailer RevenueGrowth

11% 10%

Source: ECR Industry Report 2000

Retailer ProfitGrowth

Grew SalesImproved ProfitabilityIncreased Market ShareImproved Operational EfficiencyOptimized Store AssortmentsCreated a basis to evaluate new items

Category Definition

Category Role

Category Assessment

Category Scorecard

Category Strategies

Category Tactics

Plan Implementation

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Category Management Results

Source: Business 2.0, Feb 2003 & 2002 Cannondale Studies

Sales growth attributed to Category Management + 14% Retailers & Wholesalers

+ 8% Suppliers

Category Management is now standard practice at nearly every U.S. supermarket, convenience store, mass merchant, and drug chain.

And its use is growing because it works – at least from a dollars-and-cents standpoint.


Why CM Hasn’t Achieved It’s Full PotentialInconsistent top management support

Used more as a tactical tool than an competitive strategic advantage

Scorecards have not changed enough to motivate and reward new behavior

Too project oriented – not a “continuous” process

Work cycles too long and time intensive

Process to data focused and template driven – not enough emphasis on insights


Why CM Hasn’t Achieved It’s Full PotentialToo much reliance on manufacturers – lack of retail ownership

Too headquarters focused – not enough store / shopper focus

Inconsistent implementation at store level

Pipeline of new people not well maintained

Lack of software supporting tools, especially in promotion and pricing tactics

New trends and competitive challenges have emerged


Trends Shaping The Next Generation of Category Management


Scanning

Space Management

Category Management



ShopperMarketing

Retail Marketing - The Wave Continues

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1989

Today

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Best Practices Have Evolved

Category Management is more important than ever, and it has evolved to reflect the

changing times.

A “Next Generation” approach of Category Management has emerged to address the new needs and opportunities.

IndustryTrends

Category Management Experience


Shopper and Category Development


The Philosophy & Objective Remain The Same

“A Distributor-Supplier Process of managing categories as Strategic Business Units,

producing Enhanced Business Results by focusing on delivering Consumer/Shopper

Value.”

Consumer/Shopper

RetailerSupplier


Shopper & Category Development

Key ElementsStreamlined, robust for all categories

Consumer & shopper insight driven

Shopper centric strategies

Loyalty Marketing integration

Breakthrough, differentiated initiatives

Global & local application

Emphasis on implementation


The Evolution of Best Practices Process

Category Definition

Category Role

Category Assessment

Category Scorecard

Category Strategies

Category Tactics

Plan Implementation

Cat

egor

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evie

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Insight Generation

Strategic & Tactical Planning

Initiative Development

Plan Launch

Category Definition

Category Role

Plan

Rev

iew


Best Practices Enhancements

Category Definition

Category Role

CATEGORY SUB-CATEGORIES SEGMENTS SUB-SEGMENTS

Definition & Role remain an important elements of the

process.

Greater focus on strategic alignment and Destination

categories.

Performed as needed



✔ Key opportunities versus “boiling the ocean”

✔ Heavy emphasis on shopper understanding

✔ Business question driven versus templates

Insight Generation



Plan Launch

Plan

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✔ One step Strategies/Tactics for optimal linkages

✔ Greater focus on the consumer and shopper

✔ Tactical Blueprints✔ Framework tactical guidance of

initiatives

✔ Mechanism for core and local planning

Insight Generation



Plan Launch

Plan

Rev

iew


CoreCategory

Business Plan

Market“A”

Market“B”

Market“C”

Plan Localization

80%

20%

Core PlanningLocal Planning

Local Tailoring

Tactical Blueprint

Local Tailoring

Tactical Blueprint

Local Tailoring

Tactical Blueprint



✔ Rigorous cost/benefit analysis & prioritization

✔ Formal identification of plan requirements✔ Secures commitment and

resources

Insight Generation



Plan Launch

Plan

Rev

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Importance of InitiativesBring innovation to lifeCreates a focus on implementation and success measurement



✔ Detailed implementation planning tied to each initiative

✔ Formal approval & executive commitment process

✔ Improved scorecard target setting & measurement

Insight Generation



Plan Launch

Plan

Rev

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✔ Plan review focused on initiative results as well as total category

✔ Continual evaluation and adjustment

Insight Generation



Plan Launch

Plan

Rev

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Moving Beyond Traditional Category Plans

Insight Generation



Plan Launch

Category Definition

Category Role

Plan

Rev

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TraditionalCategory

Plans

PortfolioPlans

ShopperSegment

Plans


Wayne StricklandVice President Category Management


Category Management At Hallmark

Hallmark has been successfully practicing Category Management for years

Drove growth through collaboration with our customers

With the ever increasingly competitive market, we recognized the need to take it to the next level

Took steps to enhance our Customer Marketing capabilities and adopted this new process

Revitalized our focus on driving Shopper focused solutionsEstablished a rigor in the organization for converting consumer and shopper insights into action


Our Path

Assessed our current capabilities and challengesRefined many of our internal processesReorganized our Customer Marketing TeamApplied the new processTaken the new capability to our customers delivering innovative shopper focused solutions

Along the way, we had some key learnings.


Hallmark’s Top Ten Learnings

1. Top of the house support is critical2. Scorecard is a must to track and drive performance3. Courage and discipline to stay the course4. “Research” and “Insights” are not the same5. Everything starts with the Consumer & Shopper insights6. Cross-functional alignment the customer is essential7. A common / shared scorecard with the retailer keeps

everyone focused on success8. Customer Teams must become business partners with

the customer9. Develop the corporate capability and establish training

programs that continue to grow the organization10. Category Management is a “way of life”, not a project


Insights To ActionMany shoppers are short on time and patience

Many consumers did not know this customer carried Hallmark – very important to core consumersShoppers only taking a couple of minutes to find the right cardVery convenience driven shopping tripWhen they find the right card they stay in the store longer

Sections can be difficult to shopOften organized by lineA single occasion (eg. Birthday) can be found in numerous locationsDisplay units designed to maximize inventory more than to showcase product

Insight Generation



Plan Launch

Plan

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Two Shopper Focused Strategies

Insight Generation



Plan Launch

Plan

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Convert The Shoppers

Simplify the shopping experience making it easier to find the right

card.

Build The Shopper Transaction

Encourage the purchase of complimentary products both in the

section as well as the rest of the store.


Scanning

Space Management

Category Management



ShopperMarketing

1975

1989

Today

1985

20001995

Retail Marketing - The Big Waves


In Summary Shopper & Category DevelopmentStreamlinedInsight driven strategies“Selective set” of tactics tied to each strategyEnables differentiating initiativesClosely ties implementation to initiativesFocused on driving sustainable resultsHeavy emphasis on plan executionShopper is at the heart

Insight Generation



Plan Launch

Category Definition

Category Role

Plan

Rev

iew


Upcoming FMI Report

Shopper and Category Development

The Next Generation of Best Practices Category Management

Publication: Fall 2008

next generation of category management

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