Category Management – What’s Next?

October 26, 2017

Category Management Association

Strategic Collaboration for Shopper Satisfaction

About Category Management Association

Serves as an unbiased central resource for industry information on Category Management and Shopper Marketing at the same time that promotes the best practices in the industry.

The CMA is the only organization that certifies CatMan professionals through industry-wide standards.

Their members include Retailers, Manufacturers, Brokers, Solution Providers, Universities Independent consultants, among others..

CMA’s approach encompasses a wide range of strategic views and planning functions

Members

Educational Advisory Council

DePaul University, Florida State University, Northwestern University, St. Joseph’s University, St. Catherine’s University, Texas Tech University, University of Pittsburgh, University of Southern California, University of Texas at Tyler, Western Michigan University, Xavier University

Manufacturers, Brokers, Retailers, Universities, Consultants, Solution Providers and many others.

CMA LATAM Overview

Category Management Association has influenced in Latin America since 2004, but it wasn't until 2010 that opened its office in

Mexico, and from 2016 establishes operations in El Salvador, Colombia, Chile and Peru, from where it has coverage in Latin

America.

Since 2010 some of the activities developed by the team are:

+ 1500 attendees in more than 5 conferences organized by CMA (Mexico, Central America and Colombia)

+ 1200 professionals have attended seminars and workshops: Mexico, El Salvador, Costa Rica, Peru, Colombia, Bolivia and

Chile.

+ 3000 attendees at the plenary sessions of ANTAD, FENALCO, GS1 events.

+ 60 active members.

+ 80 hours webinar with participation of more than + 1000 attendees

+ 60 certified professionals.

+ 480 hours of Best Practices for retailers and manufacturers.

+ 50 Participation in magazines, newspapers, essays on related topics.

+ Synergies collaboration on joint projects.

Main Approaches:

Membership• Online Resources• Discounts• Job Posting• Networking• Webinars• News

Conferences• Case Studies• Panels• Solution Demos• Training• Trade partners• Trends

Best Practices• Focus on improvement.• Proven.• Practical approach• Function and strategy• Costume made.

Certification• Professional• Corporate• International • Modular.• Inclusion of skills and experience

Membership.- Individual or corporate members have important benefits like online resources, discounts in our events, and can participate in our weekly webinars.

Conference and Events.- Through conferences, educational lectures, case studies and panels, knowledge and interaction among professionals is encouraged.

Best Practices.- The CMA promotes and diffuses, through best practices, techniques, processes, skills and tools that enable manufacturers and retailers to continue their improvement in Category Management and Shopper Marketing.

Certification.- The CMA is the only organization offering certification according to objective, industry developed standards.

Category Management Association aims to establish industry standards in Category Management, Shopper Marketing and Shopper insights worldwide.

Collaborates with Manufacturers and Retailers to establish platforms of these disciplines to improve business results.

Only organization that certifies training programs worldwide.

¿Questions?

Muchas gracias Thank youmuito obrigado 非常感谢

ขอบคุณมาก

شكرا جزیال

heel hartelijk bedankt

большое спасибо どうもありがとうございました Dankon tre multe

Vielen Dank

Contac us:Patricia MecenLatin America Conference DirectorCategory Management Association Skype: paty.mecen2Email: pmecen@cpgcatnet.org

Luis Eduardo Herrera AmparanExecutive Vice president LatinoaméricaCategory Management Association Skype: lherrera.cpgcatnetEmail: lherrera@cpgcatnet.org

http://www.catman.global/

New CatMan 2.0™ Process

✓ Examine the Scorecard✓ CatMan 2.0© : Ensure alignment with Shopper Insights at all

points

The End State Vision for CatMan 2.0™

Content differences includes:

• Advances in data and analytics

• Advances in shopper insights and marketing, need state marketing

• Success models and content learning across the process

• Enhancements in organizational skills and capabilities

Format and functionality includes:• Organization of a digital CatMan Knowledge Center

managed by the CMA

• A taxonomy derived from the basic seven step process

• A querying and search function

• Continuous updating from all CPG community stakeholders

A digital resource offering the latest advancements in category management. CatMan 2.0™ differs from CatMan 1.0 in two important ways: Content & Functionality.

Grocery Headlines – Do Not Look Good• The Grocery Industry Confronts a New Problem: Only

10% of Americans Love Cooking– The supermarket and grocery business is likely to suffer strong

headwinds in the future, due to long-term shifts in consumer behavior. Although many people don’t realize it yet, grocery shopping and cooking are in a long-term decline. They are shifting from a mass category, based on a daily activity, to a niche activity that a few people do only some of the time.

Harvard Business Review, Eddie Yoon, 9/2017

Think about this…• Brand Struggles

– Relevance and your future– Private Label is the new normal

• Partnership – Retailer expectations– Put up or Shut up!

• Implementation– The goal rarely accomplished

• Bad Research– Do you really work for you company?– Do you have viable processes?

in-store

point-of-purchase

post-purchase

pre-shop

retailer choice

store experience

store dynamics

store atmosphere

shopping style

shopping basket

shopping routein-store advertising

list-building

channel choice

media consumptionneeds & attitudes

occasion

familial legacy

shelf layout

signage

promotions

pack standout

pack communication

product satisfaction

family satisfaction

recommendation intent

re-purchase intent

loyalty

GAP ANALYSIS consulting & assessment

CLOSE KNOWLEDGE GAPSidentify right methods & technologies

ANALYTICS & DATA INTEGRATION

RECOMMENDATIONS

CREATE & TEST

shopper type by category

Category Definition

Category Role

Category AssessmentCategory Scorecard

Category Strategy

Category Tactics

Plan Implementation

Category Review

Displays and In-Store Ads

Deals

Social Media Relationship Marketing

Search Engine Optimization

User and Advocate Created Content

Apps/Shopping Tools

CatMan

Shopper Marketing

Shopper’s Path to Purchase

The Integrated Path to Purchase

©

Research Methodologies – Qual and Quant

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In-depth qualitative discussions that are conducted among pre-recruited respondents based on desired criteria (e.g., specific demographics, purchasing patterns, stores shopped, etc.). These discussions are conducted in context (i.e., in home, in office, at an event, etc.) based on desired learnings.

In-depth qualitative discussions that do not have to be conducted in a specific context to reveal relevant insights. Can include various formats: one-on-one, triads, etc. and be conducted in-person or via phone.

In-depth qualitative discussions that are conducted at the moment of truth: In the store. Typically conducted among pre-recruited respondents based on desired criteria. May be combined with an in-home ethnographic portion (e.g., home-to-store). Ideally, shopping is directly observed by the ethnographer, but may also be conducted as a debrief session.

Engagements with research respondents typically prior to in-person research (e.g., FGLLs, Ethnographies,) but can also be a stand-alone methodology. Online diaries typically run for multiple days—weeks and provide a longitudinal view of behavior (e.g., shopping pattern over time, meal creation, etc.). Homework surveys are typically shorter.

Ethnographer observations of activities of interest to identify opportunities and challenges in flow, processes and procedures, etc. May include: shoppers, store employees (stockers, at checkout, in deli, etc.), service providers (phone operators, call center reps), etc.

A primarily quantitative methodology, with some (limited) opportunities for open-end qualitative responses, conducted by stopping shoppers while in store and asking for participation.

In-depth qualitative discussion conducted with a pre-recruited group of respondents based on desired criteria. May include homework that must be completed before the group session to facilitate discussion and group activities.

A quantitative methodology that can be conducted among general (Gen Pop) or targeted respondents based on desired criteria.

Exploratory research, product usage and experience, customer/user experience mapping, and to understand: satisfaction and loyalty, media consumption, channel/retailer choice, list-building and couponing, household dynamics and family decision-making, cultural context, need states, household inventories and pre-planning Exploratory research

Exploratory research, shopper journey mapping, and to understand: in-store navigation, store environment, selection and purchasing decisions, at-shelf interactions (endcaps, products, displays, etc.), promotional interactions, shopping basket, packaging influencers

Collect background information that can be explored further in qualitative interviews (if necessary), engage and build rapport with research respondents

To supplement other research methodologies and uncover additional unmet needs and wants that may not be articulated by research participants

Validate and quantify learnings from qualitative methodologies, especially about store experience, attitudes, preferences and behaviors; Preferred methodology for developing CDTs

Test and/or refine concepts identified through exploratory research, explore attitudes and behaviors, confirm hypothesis identified via data and other insights, develop response lists for quantitative methodologies

Validate and quantify learnings from qualitative methodologies including attitudes, preferences and behaviors; Can be used to develop CDTs

Pre-Shop and Post-Purchase

Any can be discussed, also for research outside the Path-to-Purchase In-Store and Point-of-Purchase

Any can be discussed, also for research outside the Path-to-Purchase

Most typically in-store, also for research outside the Path-to-Purchase

Primarily In-Store and Point-of-Purchase, can cover some Pre-Store such as pre-planning, list making, etc. Any can be discussed

Any can be discussed, care must be taken when covering in-store experiences in the distant past

8+ weeks 6+ weeks 8+ weeksTypically in conjunction with other methodologies

In conjunction with other methodologies 6-12+ weeks 4-6 weeks 6-8 weeks

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Category Reinvention Process

Internal AlignmentGetting ready to “do” Category Management 2.0

Purpose• Identify the strategic issues around which the trading

partners must align internally

• Describe the data and insights which the trading partners need to assemble prior to engaging in joint business planning

• Provide examples of best practice approaches relevant to internal alignment

Importance of Internal Alignment• You prepare to do category management before you “do”

category management

• Manufacturers– What is the definition and CDT?– What is the proper Role?– What are your success models for tactics?

• Retailers– What are your Scorecard metrics?– How does this category fit your corporate strategy and target

shopper?

Organizational Design – Integrating Shopper Insights and Marketing into your Category Management Plans

Results from the Category Management and Shopper Insights Conference

Organizational Design SI/SM SM/SI Factors Snack/Bev

CompanyIce Cream Company

Dry/Frozen Foods

Paper Goods Candy Meat HBC

Organizational location

Marketing/brand development

Customer development and pricing

Separate global group

Marketing Sales Customer marketing

Marketing / co-marketing

FTE’s / where 0 / all SM in brand groups

1-2 on account sales teams

2 on account team + 5 in geo regions

1-2 on account 2 people in major accounts

1-2 people also used as analysts

2-3 on account teams

Reporting to / dotted line

VP brand development / brand groups

VP / limited responsibility to brands by funneling data

Senior VP / account team head and sales VP

VP / customer development

Sales VP / market research

VP business development shared sales services

Brand groups

SI FTE’s and location

1/ brand with dotted line to CI

1/ major account on sales teams

1/ major account + 2 regional, report to SI

1/ brand, with dotted line to CI

1/ major account 1/ account team, dual CI/ analyst role/ dotted line to CI

1/ major account/BUDotted to M&CK

Source of budget

Marketing Sales Equally from sales / marketing

Marketing Allocated to Sales from marketing

Marketing Marketing / in-store

Budget as % total marketing

18% total but 50% market research

10-12% 10% but growing fastest

10%+ 12-15% < 10% 15%

Perceived mission

Build the brand in partnership with retailers

Leads customer activation and helps translate the brand to retail

Builds brand equity by collaborating with retailers

Growing the brand in-store

Design, execute and evaluate brand programs in-store

Supports customers by customer research

Interface between brand and retailer

Relationship with CatMan

Help when required

Helps in supporting the CatMan plans

Not much Very little CatMan provides input into SM

Provides research to help with assortment

SM is a subset of CatMan

CatMan is moving towards proprietary SI in department or direct line reporting on CatMan, especially with retailer influence

Organizational Design/Redesign should be based on your objectives• What are your objectives?

• What helps you achieve those objectives?

• What prevents you from accomplishing more?

Organizational Design/Redesign should be fluid• It is more about the integration of ideas than the titles in

the box

Pre-Session attendees listed their top CatMan Objectives

Small base sizes

…they also specified what helps them achieve those objectives…

Small base sizes

…and what prevents them from accomplishing more

Small base sizes

Pre Session attendees are not pleased with their Insights processes, 84% are dissatisfied…

NO84%

Yes

Small base sizes

…they also feel they aren’t armed with the proper tools to grow their business

NO90%

Yes

Small base sizes

…which leads to their company not being organized for growth.

NO69%

Yes

Small base sizes

Most Organizations have SI in their Marketing Department followed by CatMan then Sales with CatMan showing increases over prior year

Small base sizes

“Your” Category Management: Alignment

• Reporting Lines• Data/Reports• Staff/Support• Process

INTERNAL• P

EXTERNAL

• Resources/Process• Roles/Responsibilities• Reward/Recognition• Key Deliverables

YOUR TEAM

Retailer• Involvement/Resp• Data Access• RFP/Pick?• Process

Manufacturer • Reporting Lines• Who do you serve• Confidential• Time spent Internal

INTERNAL• P

EXTERNAL

• Captain• Validator• Challenger

• Who do you serve• Time• Resource to role

choice

YOUR TEAM

The Key Learning’s to deliver Insights

• Having the Right Data/Process is solving 40% of the issue • it gets you to the what…….

•Having the Right People/Training is solving 40% of the issue • it gets you to the why ……

• Having the Right Tools/Data Visualization is solving 20% of the issue

• It gets the other people to the what and why…..• Then you can focus on “How”

Category Definition & StructureWhat defines a category and how is it organized in the shopper’s mindCategory management is “broken” here

Category Role DefinitionsName Definition

Destination

▶Defines the image of the retailer for quality, selection, value, and service.

▶Leads other categories in size, market share, consumer satisfaction, service level, and operating expense.

Routine/Preferred

▶Helps create a positive image of the retailer in the consumer's mind. Important to target consumers

Occasional/Fill-in

▶A necessary commodity to the target consumer's life style.

Commodity/Convenience

▶A limited product range sufficient to fill the target consumer's basic needs within a single shopping trip.

Clear Objectives Aligned Work

Choice Cat Man 2.0 Work Flow

Objective Internal Alignment

Category Role

Category Definition/Decision Tree

People Organizational Design

Purpose of Category Definition & Structure

• Wrong on process = Wrong on results

• Breakthroughs = Big bucks

• Put the shopper first

The right Category Structure can create sales breakthroughs

Prioritize the Attributes the way the shopper does

Category/Consumer Decision Trees

Why do you want a Category/Consumer Decision Tree?• A CDT shows you your shoppers’ purchase decision process in three dimensions:

Selections, Sequence, and Significance

• First, you understand their selections: What choices are they making on the way to purchase?

• Next, you understand the sequence in which those choices are made: What is decided pre-shelf, at-shelf, in-the-moment? Shopper Journey/P2P

• Finally, you understand the significance of each of those decisions: How much does one choice matter relative to the others?

Understanding the purchase decision in this way gives you direction, for marketing, messaging, product development, shelf optimization and more

How do you get a Category/Consumer Decision Tree?• There are a number of quantitative and qualitative methodologies that will help

you uncover the CDT, and they all have the following three major elements in common:

• Shoppers indicate decisions they made

• Shoppers describe the chronological order of those decisions

• Shoppers are asked to rank the importance of those decisions relative to others made in the course of the decision (Max-Diff exercise)

A CDT delivers the actionable intelligence you need to help your shopper on the way to making a purchase. It gives you direction for everything from marketing and packaging

to aisle signage, shelf layout, and assortment

Accurate CDT Research Yields• True decision hierarchy

• Clear and definitive shelf layout preferences

• Potential product and packaging changes

• Future growth white space

Common Mistakes and Misconceptions• A true CDT is called a Selection Tree because it identifies the motivation/why’s

behind shopper behaviors

• A “traditional” market structure CDT is a De-Selection Tree because it is done by analyzing substitutions, not selection criteria. If you only give respondents 3-4 attributes to consider then brand is higher on the list.

• In categories where brand is really high on the tree, shopping is very decisive and fast—often taking 15-20 seconds. Because all the shopper needs to do is identify and grab the desired brand.

• If observed selection takes longer –this isn’t a brand decision and you have work to do. Brand may play into navigation at the shelf, and it is likely something many shoppers de-select, but they are making more complicated decisions than just “not that brand… that one.”

• CDT research should be evaluated and updated as you update your plan and planogram

CDT Case Study: LaundrySub-Category differences in CDT

• A retailer came to us to better understand how customers think about natural laundry detergents

• What we discovered through the CDT upended their understanding of the category

• Previously, they believed that competitiveness lay in brand, but we found that for allergy sufferers, the presence of allergens underlies all other factors

Allergy-free

Brand

Type

Price

Machine SuitabilityRESULT: We re-designed the shelf to create an Allergy-free section, and increased profits by 47%

Finding products without allergens is critical for allergy sufferers, as well as those who are interested in ‘cleaner’ cleaning products

!

CDT Case Study: TiresGender specific differences in CDT

• A retailer came to us to better understand why women weren’t buying tires, despite shopping other categories

• What we discovered through the CDT revealed that women have specific needs in the automotive department that caused them to reject the category entirely

• Previously, they believed that competitiveness lay in pricing, but we revealed that women had to feel that the tires they might buy would keep their families safe, and the retailer’s category presentation discouraged their trust

Clean, Safe Environment

Type

Brand

Price

RESULT: Women tire purchasers now represent 63% of category purchases, up from 11%; Overall sales increased 17%

Women will reject an entire category at a retailer they frequent if the aisles aren’t clean, bright, and safe

!

CDT Case Study: Pet TreatsPet Parents, Boomers, CDT mindset

• A pet treat manufacturer came to us to better understand how customers think about pet treats – their retail partner was losing share

• What we discovered through the CDT helped them see the category the way their customers did: As an opportunity to care for a pet in a unique, personalized way

• Previously, they believed that customers were looking for treats based on the size of their pets, but we discovered that customers started with a goal in mind (entertain the dog, improve his health, show him love, etc.), before looking for the right size/flavor narrowing

Owner Goal

Type

Size

FlavorRESULT: We re-designed the shelf to fit the owner’s mindset, the category grew 8% overall, with 34% coming from a previously unknown segment which focused on healthier treats of all kinds

The owner’s goal is paramount: What the owner wants the treat to do for the dog is more important than other factors!

CDT Case Study: Pregnancy Test Kits• Prior work conducted by the brand and the retailer

indicated brand and price led the decision process, respectively

• In actuality, neither of these attributes were a high priority for PTKs

• Accurate representation of true foundational decision attributes shoppers consider is imperative – Garbage In/Garbage Out (CDT and Segmentation guilt)

Source:

Significant difference at 90% confidence

BRAND AND PRICE DO NOT DRIVE CATEGORY SHOPPER TO PURCHASE -PTK PURCHASERS ARE EXTREMELY FOCUSED ON THE EVIDENCE OF PRODUCT EFFICACY THAT CAN BE FOUND ON THE BOX

QP/O15. Below are some factors that you might consider when choosing a pregnancy/ovulation test kit. Please rate each factor in terms of how important it is when selecting a pregnancy test kit on a scale from 1 to 5; QP/O16-18. Which of the factors is most/second most/third most important?

❖ Indicators of efficacy and usefulness like % Accuracy and Early Detection are very compelling to shoppers in-aisle, and should be emphasized wherever possible

Source:

Significant difference at 90% confidence

PTK AND OTK SUMMARY CONSUMER DECISION TREES: MOST LIKELY DECISION PATHS

QP/O15. Below are some factors that you might consider when choosing a pregnancy/ovulation test kit. Please rate each factor in terms of how important it is when selecting a pregnancy test kit on a scale from 1 to 5; QP/O16-18. Which of the factors is most/second most/third most important?

❖ Accuracy is top of mind for all diagnostics shoppers

% Accura

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Early Detecti

on

Price

PTK OTK

% Accurac

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Category Reinvention Case Study: CDT Changed the Food Storage Category

•

•

▪ Category Issues

✓ 40% of shoppers find the department difficult to shop – time wasted

✓ Shoppers shop category by usage

✓ Shelf merchandising is hap-hazard (Trays/PDQ’s used for some cases – cut case for some, hand stacked for others)

✓ Retailer captures only 26% of category purchases across all channels

▪ Category Solutions

✓ Transition from brand set to product type set

✓ Utilize PDQs

✓ Add category name to Aisle Sign

✓ Fix assortment

✓ Under assorted in sliders in storage bags

✓ Under assorted in foil at the aggregate

✓ Move section near food items to improve adjacencies

✓ Outpost Food Bags to other departments

Category Role DefinitionsName Definition Retailer's Objectives Retailer's Activities

Destination

▶ Defines the image of the retailer for quality, selection, value, and service.

▶ Leads other categories in size, market share, consumer satisfaction, service level, and operating expense.

▶ A primary provider of category products to target consumer.

▶ Driving profit is an important secondary objective.

▶ Continuous, intense management attention.

▶ Biggest investment for inventory, store presence, service level, and expense management.

Routine/Preferred

▶ Helps create a positive image of the retailer in the consumer's mind. Important to target consumers.

▶ Deliver consistent, competitive overall value to the target consumer.

▶ Achieve strong market share and reasonable profit.

▶ Significant management attention and resources to ensure balanced results on the scorecard.

Occasional/Fill-in

▶ A necessary commodity to the target consumer's life style.

▶ Be a major provider of the products in this category.

▶ Deliver competitive value to consumers.

▶ Reinforce the image of the store as the one capable of meeting all consumer's needs.

▶ Allocate resource to drive profit, cash flow, and a reasonable return on assets.

▶ Ensure sufficient level of service.

Commodity/Convenience

▶ A limited product range sufficient to fill the target consumer's basic needs within a single shopping trip.

▶ Reinforce the retailer's image as a consumer-friendly, time-saving place to shop.

▶ Deliver profit and increased market basket size.

▶ Emphasis on time-saving convenience as opposed to price, assortment, or service.

Thank you – we look forward to working with you to build your Category Management plans

Contac:Patricia MecenLatin America Conference DirectorCategory Management Association Skype: paty.mecen2Email: pmecen@cpgcatnet.org

Contac:Luis Eduardo Herrera AmparanExecutive Vice president LatinoaméricaCategory Management Association Skype: lherrera.cpgcatnetEmail: lherrera@cpgcatnet.org