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CHAPTER

The Evolution of Category Management and the New State of the Art

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erating, while consumers were p~<::oIl!ing. more .. diY~J:s~_and.demand:;:~ing.Oth~~~l;s-;~~ ~rtrad~'~uch as -~arehouse clubs were emerging.
-.~..,----;-' . ~ ~.:~~ .*'" . - ..

nthe early 1990s, grocery retailers

in the United States were New products were prolif~

ready for a better way to run their business. Margins of about 1

percent at that time were unacceptable.

Wal-Mart was getting ready to roll out its supercenter format that cOm6lnecrtll~--ret-~il~r's tr~diti~;;irg~"i-tffarmercha~nd1;';;t;;~;ith a full-line grocery store under one roof. Clearly, a dramatic change was needed. Retailers sought a way to improve margins and compete more effectively. They wanted to reconnect with consumers and satisfy their needs, or face the prospect of an eroding shopper base. Given the endless variety of new products pouring into the marketplace,
-~ . .-' "'.-' -. ',"". -. ... '~"I' .... ,....

retailers \~~t~o
"'-'~.-" .~ . , .,

ensl~He~~;t
.. . ,

14

In the Beginning-The

Purpose of Category Management

their shelves were stocked with products that con.:.YII!~r~ JY~.D~~d to Euy.M~inl~:they wanted to~t~Yinbii;i~s;. . ---~

Birth of the Eight-Step Process

Many progressive retailers and manufacturers realized that there .nt- ale was gold in the reams of data available from re

~s. Was it possib e to figure out which products to stock in a certain store? CJ).UkLanalysis of the data tell retailers how to customize the shelf sets in alLthe stores of a chain according to
c" .. ~--.._

what shopp-ers were buying and wanted to buy? C~t atld-~-~tain specific niches of high-value shopp~rs?

-:-------...

The answer was yes. The way to do it was a process called category management that was developed in the early 1990s by The Partnering Group (TPG),~;~~~;~lt~i~~gl~A

----.

few ~~~

tar1efs~Eegan testing the process. Soon the manufacturers

jumped

on board with advice and support. They then started to help other retailers adopt the principles as welL In no time, category manage. ment was promoted enthusiastically and became a must-have pro<_ ._~. __","","'.' =.........,.;;:4 ... cess for retailers and manufacnuers.,
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TPG's process, which is now considered the traditional form of category management, consists of eight steps:

i Category

I! Category

definition role

Category assessment

4. Category scorecard

fl'j Category strategies

11.

Category tactics

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The Evolution of Category Management and the Nev: State of the Art

15

7vPlan implementation

&:Category review
Early Practitioners
The retailers that pioneered category management are among the largest chains in the United States. ~'was one of the original practitioners. Others included Kroger, Albertson's, and Publix. SU .... PERVALU, the first wholesaler to practice category managem~nt;.,. Oro'light~he process to smaUl~Lde,p_~de~tretailers. '6~.the manufacturer sidel..Phillip Morris and the Coca ... Cola ~:::.J ::c:::::;: Company were early s~pporters otcategory management. The latter developed a training program about the process that is still distrib . uted to retailers. It helps them understand what category manage . ment is all about and what Coca ... Cola's role in the processis. Some of the early practitioners saw nearly immediate benefits ~ through reduced inventories and increased sales. For others, it t;ok more time. But -word soon spread about the potential of this new process.
t.:-.~ ~-::----,(a . ' \ _---. _ . __ -,~~::e 'l!l~...

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----~--------------

Evolution of Category Management

The original version of category management started a revolution in the way retailers operated their b~ess-~. More and ~ore retail ... ers built their businesses around its principles through the 1990s. )' Eventually, however, the process proved to be too complicated (1 rf~1 'j for many retailers to adhere to. There were too many detail~ and ~ !: .-- ..----I ~~was too cumbersome and unwieldv, Too much coordi: natj.on_was needed, froIll too .~L d~partments such-;; logistics

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........

16

In the Beginning-The

Purpose of Category Management

Problems even developed on the manufacturer's Thei"i"pri~ary job was developing relationships, manufacturers

side \\Then sales,

/"

people were asked to learn the jri~ricC!fi~sofEt~K~~.Y managemen~ moving pr~~~ts,

(

and building the top line. They weren't analysts. As a result, many created category management depa_~tl!lents-staffed with analysts to support the salespeople. But even then, training somebody to be capable.with the entire category m,~I)~g~.!,I$1lt~t2W; .~..u__ cess rema{ned~a-da~~ting task. _
~~"""'drM~ __ ~"""""""'~"'W~ __ .6-' .. ~~ L.;...... ~~~~

Nfeanwhile, some larger manufacturers way to simplify matters. - They restricted their proprietary

came up with their own mana e E~.uL!.Q-.--tlle__

larger retailers; that is, they invested most _ of their time and effort on ---:;--""':'--~::::::--:==----- .-. " . - . -- -..~..full, time account teams foi1llEIrlargest
. ~:..""~--. .qt"-----

-----------,.

categor

customers. Smaller chains

received less interest and support.

Role of Technology
The development of technology and its steady growth spurred the use of the process. But the journey from the beginning to today was full of obstacles. r
.;

':'.

~-.

In the early days, the software_~12lic~!i.9Jl~Jor category man,

a~ement required too much number crunching. i~l to customers, salespeople were sitting computer pulling data, putting Instead of talk, a personal behind

ating

it on Excel sheets, and then ereThe process was te, num-

Power Point slides for a presentation.

dious and time consuming. The pro$l&.m0(98.ta overload and the time sp_entcrunching bers lefto a major change in c~tegory management. Companies

were fOled to strean1line their 8pproach to data analys-is and de,

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The Evolution of Category Management and the New State

of the Art

17

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velop appropriate applications for the job. Proprietary systems emerged that simplified and quickened the process for many practi .. tioners. Training focused on working with user..friendly template ..
_. __ . _._ " _........:.;",. _ ~ _ .__ ."~ _r ~'."'._ _-

-.

~_. customized software as oppo~ed to a p70cess of pullingaaraand learning to manipulate it. "
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Category Management Today

Many retailers and manufacturers refined the process of category management over the years. They still began with the traditional eight steps, but developed processes with fewer steps while keeping --------.- - _ _---to the objectives of the original version. The resulting processes are shorter, tight~!.t_and easier to absorb and act on. Some processes ----" ha~e-(ive steps, others have six. The "standard" ~t .. stei1=i*Bss has become less of a standard and more of a starting point. In addition, in some organizations the sequence of steps has been rearranged compared to the original eight. &QLexample, financial
_ .... .. .
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" t~rg~!.~_~~~Jigjnglly-_dDne" after, th~~~~~sI?t;nt st.~bN?w some cOiIm1!Di~~.,.are ~~.!.,!~~iJ:l& off with their f~na~i,~~ar~~.~~_~aying,

"11:S~.~ __ lY~1,,-%~<;",vva!lt jg,~pieie![~t:Mio-ao-~essment.

..

o~ ;~~ w~3!E.~eEs.~~~~ose t~~ Let's lo~k at the gaps and then figureout what are the strategies and tacticsthat we ...are going to use meet _---_ ----.,... --.-.,

-.~.

'-"'-"'.-

to

--.

" th .?se,~C:lrg~ts. ~Many executives start off with the :etailer's goal and financial fibjectives. "Wh,at are we__ .t~y}p.K._l.o,_~chieve? What margin 30 we 1 "." ---... --'--_ want to hit? What's our growth rate? What are our shopper goals? H6'' w many more shopper;cl~'~e want to bring int; our stores?" They believe that such variations make a lot more sense than starting off by defining the category and its role. Trading partners

18

In the Beginning-The

Purpose of Category Management

already know that information and skip over these preliminary steps. Others have dropped the scorecard down in the sequence, arguing that financial targets cannot be set accurately until the other steps are completed. Today, major manufacturers have a whole suite of applications ,that any executive can use effectively. Armed with sophisticated tools, salespeople find the process user friendly and easy to implement.

,,(

Consumer-Centric Process
In the early 1990s, everyone involved in category management fo, cused _on~e data and what the numbers revealed about product movement and the category. Surprisingly, they forgot that the con~ sumer drives what happens in the category. While always part of '7 the process on paper, the - consumer got l<?~tamid the accumula, ,..'_. tion of data. -r.... . . '--'":".-..

ii\ -~

-.

,.

-~

~ ~ ~ ~ l\ ~
~;

---The biggest change in category management over the years has been mo~ of a foclls on the consumer. By the late 1990s, manufacturers wer~ giving retail~L~ _data that was ffi()re COnS!)tIl~9Ij~rt:eq. F6r exampLe, there was consumer data coUected from a .a~el of . ,...... ~"households. Analysts could work with data on an account,by: ascQuriLbasis~which was not possible in the early days. Other new sources were demographic/psychographic data. A new ~b?pter in category management was unfolding. It include~mponents designed to make the process less product, centric n;~Lnd more co nslnner ,centri c

-<==:?-

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The E'I.'Olution of Category Management and the New State of the Art

19

~ .

S ..... egmenting and targeting consumers to get the right products in front of the right shoppers in the right stores Clustering categories stores based on the s%les potential of brands or

. Demand.gapping, or determining
ing sales and potentiaLsales -Developing

the difference

between exist-

in a category

a marketing plan for each significant customer group

Retailers also j umped.on.hoard st~ted

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with the focus on consume!s and shopper data collected by a store's

looking to incorporate

loyalty carclpr~<1faffi:-While its use is still relatively new, this creates another whole new dimension in terms for category management .
.I

These new sources of information tives understand The new mind-set: that consumer

contribute

to embedding the Today, execu-

cc?:r2~.l!.~er ~s the centerpiece of category management. behavior

c;.hanges the categories. consumers

If we're not getting a fair share of the category,

chances are we're not doing a good job of understanding and satisfying their needs.

Beyond Supermarkets
Category management

! .-

began as a process for supermarket

retailers.

Before long, it was clear that its benefits were applicable to other classes of trade. Wal,Mart from general merchandise was using the process before expanding into grocery via its supercenters. Drug,

store chains adopted the practice, as well. Even Peapod, the online grocer, uses category management.

20

In the Beginning-The

Purpose of Category Management

(

Today, the practice has expanded well beyond consumer packaged goods. Retailers as diverse as Home Depot (home improvement) and Borders (books) employ category management.

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Role of the Retailer

If the consumer is at the center of category manageluent strategy, tactics, and financial todgy; goals. the retailer is the linchpin. terms of the objectives, What
-, ;'1::
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The retailer sets the overall tone in to accomplish in the marketplace? in be' category

is the retailer

trying

Does the retailer want to be perceived as a low-price leader, as an. upscale purveyor of goods and services, or as something tween? The decision has implications role, strategy, and tactics. The retailer's role has a number of key components cuss in the next sections. that we dis~.' for assortments,

,,

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~Strategy
The retailer must cornrnunicate C..Q[QorClte. goals and category strat_~4~.+~.:,:"
~ __ .-..--. .. ---.,.--" _. ~-.!!'""'::""-~.. .
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egy to the vendor partners, Without such communication, traalng .p~"ft~~~s ;;~; ~~ in different directions rather than effectively work, ing together. A mutual understanding' category management. , lays a solid foundation for

P
~.I-

I
~etermines Process
should be followed! How What version of category management

many steps to the process? Retailers proficient in category manage,

The Evolution of Category Management and the New State of the Art

21

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ment typically tak~ .the JeaQ. and inform s\'!pj)liers. However,some ? ~'~~==---=,:::::,,"-==- ... ---'~.. retailers defer to their trading partners ancffheir expertise.

4athers Data
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The retailer gathers relevant data for category management applications. Th~data,..11nancial~1J,az .a,!lg..J2~t haps shopper data at_heredfrom their O~Il 10yal~.Y .s~4.e~ognHIls an",.~,,~.~:'~..2J.~naw:l.WQ,..h~~Ik~t\p.g. infclt:w.atio~pani~s . like ACN ie~ From manufacturers, the retailer obtains addidonal information. In some cases, the _manufacturer plays the .." . lead role in gathering data. Mining this d~~i~l~~_significant
iOw;
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insrgl~I~Q9l~i~_~onl!m~E~~!h~iLP!!Y!Di~p~~~n~es~"--~-'One of the most underrated measures is called ~~~Qn~eq~pUsing-co s er panel data at the account level, Buyer Conversion says, _ ay, Mr. Retailer, you've got 100 shoppers. coming into your store every day. Of those 100 shoppers, we know that 80 of them Q~Y soft drinks. And of the 80 who buy soft drinks, 40 buy soft drinks in your store. So that means the other 40 are buying soft drinks somewhere else. But they're still shopping in your store.'J What a powerful consumer insight! T~e retail~r ~as ~C!tegory shoppers in thesto~~, but they're notbuyi~g soft .9rinks there f<:)f soIileTeason.:T~eY'~e-buyi~i So th.~,,~tr~t~~y. i~, ~~.~uring OUt1iow .to gkl those 40 category shoppers to buy the category-in theStOre. this is a targetedstrat~-gy;"1)eca~se th~ ShOPP~'~sare r~;dy in the store. The retailer must convince them that buying soft drinks there is a better value for them versus cherry picking elsewhere.

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ar--

22

In the Beginning-The

Purpose of Category Management

Ensures Retail Compliance

Who is responsible for the execution of the plan in the store? The
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.--

answer varies according

-

to the retailer. Among those getting in . direct sales __ n' _ ..-

"-"'-~- --.,-~~

"~.

volved to ensure retail compliance are a manufacturer's

-

force, sales agencies reJ2resenting the manufacturer, service organizations Regardless the retailer, and ~yen the.store"s cferks.

merchandising
<

:(

(MSOs) hired by either the manufacturer

or

_-----.iI!J

of who is responsible, here's the bottom line: Category in the store, and substandard re.

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shelf sets are often not maintained tail compliance undermines

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the best- laid category plans across the

.

"!j,!
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industry. This problem concerns trading partners, and finding a so-

lution remains a priority.

Ultimate Decision Maker

For category management commitment.
~.......

to be effective, the retailer must make a

'~-''''.-~-

Managing categories as independent

..

~~ ..

"""'-"'''''-''~~

"---~----'-~~ . .,,-- -..:

.. ~-~ -...

..... -...--,...

only part of the process. What does the data_I~ye.aU Does iL!!!.9:~~h._ up with the retailer's goaITritEe w.ark~tplQ.:~.? If pot, what.~~pp~ns?
------------..j

business units is ~--.-.--~

..
-~-

Retailers determine the destination categories, if any, to promote;thati;'those categories that will draw sfioppers speci&ally to the store. Manufacturers de~atio!l~at.e.gQries, can suggest which categories should be dep~!lchng oris"1iU1umber a~d-a~~~;c~~~.~s-

~ __ ~h<?J2P.er~~J~~~.~he .!@~i1!garea:. But the final is the r:ta~~ . Actually, the retailer ultimately makes all the decisions-or at least should take responsibility trading partner. for decisions made jointly with a

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The Evolution of Category Management and the New State of the Art
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Role of the Manufacturer

Category management gives the retailer a c~eative and comprehell' way to run a business. The manufacturer can be a valuable busi---sive '" .,---,...., ness partner by providing support. How much? That depends on the retailer and the level of expert .. ise in category management. Retailers with a solid category management process and clear vi, sion for deployment are probably the top volume customers for most manufacturers. They will lead the category reviews and set strategies while manufacturers playa subordinate role, even though they are represented by a full category management account team. For exam, ple, grocery chains such as Kroger and Safeway have their ,.**own __
~....-_. ~ r;

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__

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structured

~T;~~
:f

ca~2!'X II}Jn.~~!nmL .. QrQ~_s~,_ anufactllfers "they are role play~rs. ':r! .

can,

..

Ot~er retailers have a less defined process. They IO..Qke t.o tl~~~!!!.?.!l: ufacturer, their wholesaler, or a sales agency:to take the le.adby mak, in~commendations, ~r~v-idi~g consumer i~sigh~s, and eV~!l. actual template~; .~""""" For example, among the questions these retailers may have:
.. oS: 'It ...... - ; . PIC'> . -5 -~::fIQI1i!:iIItik#i A A iN. '!j .w.e.

How many people should be covering categories? How many categories should there be? Are the product mix and the actual category set adequate? Are there enough facings to avoid stock outs?
o

Should the pack size be increased?

If retailers are not well versed in category management, there is

temptation for ~u~~ctu~F~ t~2.usht~~~r:..?wnagen9a for the cat, egc:ry II ~~~r~:\ t lurrv of .iar., will present ;1 convincing case . ......-'-

24

In the Beginning-The

Purpose of Category Management

What is a 20,store operator to say when dealing with a representa .. tive of a strong national brand? Strong ..arm tactics should be avoided. Such actions give category ~bcrd-Ilame. --~;;~ct[y~~ th;proc~ss ~ollttFie category, withT~di~id~;i ~s

rron:e

s~porti~g'th~'~~~.bI~~m~~~-_~f ~~~gory ~bjectives. Regardfess of the nature, qua ity, an amount of support, all manufacturers should come to the table equipped to do the ,{aVowing:

J Understand

the retailer's strategy. Every retailer has an objective in the marketplace. It may set out to be th~~p~~ Martfoi e irlgcusto~erserv.i~.:.. (Lunds and Byerly's in Minneapolis). The retailer may want to be known for meat (Stater Bros. in southern California), for a full and diverse assortment of products (ShopRite .in-New York and New Jersey), for ethnic products (Caputo's in Chicago), for or.. ganics and healthful fare (Whole Foods), or simply for fun (Stew Leonard's in Connecticut) ..

ari"'upsca 'oEerat9;~i:Stan

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The manufacturer needs to upderstand what the retailer is trying to accomplish and what strat~g'LL~ used to re~ch that 9b~ctiy~ . ~ understanding is the starting poin~~~ndfoundation of cat, orymanagement. Support retail strategy. The manufacturer presents all of the programs and promotions for the year for evaluation QY.JQ.ere: ~. . _"~'1~ . _ . .......'-_. - ...... faiTer.'Is there a fit that benefits both parties? Plans that bene .. fit only the brand and not the category and store will be obvious. They should not be considered if the manufacturer wants to re~ain a valuable partner. The rule is: category first and hrand second .
....~ '....,. -

~_S&iia...

...

_-------

The Evolution of Category Management and the Ne'1.v State of the Art
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Let's say the retailer wants to increase shopper traffic by leverag-:--_~-~. . ~ )"-' .. . " 1o\I_~"'-!'J,.--",..,..u".,,",,-:>o~

ing3h~ .~,tQI~.~~ a marketing I?e9i~1Jl.A manufacturer's protn6IToris~ -.. _ ~"-_"-",,,,;,, __ ~_:---_,,.-.....r~ --- ....... vn.."'._
lIir.:!I?*F~-~~~~::-~i

"

'-"-"d'~~~'~~"".~

~b~:~ld:~~us..,2!t~tiI}gJ.n.:tQf~. t;.xcJl~~eEi=:v1E~~~!ldingthe re' tail image. If a promotion deals with, say, Cinco de Mayo-;the

rraarng"~'--

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partners can both benefit. An elaborate presentation with product. samplings and strolling mariachi players-preceded by considerable advance publicity-will create a festive mood, increase traffic, and "satisfyshoppers. There will be sal~s lifl~)l\Jn~..Y.~r.9:ll Mexican foods -~ ~~~
..

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their own strategy_ Manufacturers should share their corpo-

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rate strategy with retail customers. 'fIley don't always do so. Nfore "-~ import~nt, they, shoukl determ.i~~ if thei~ strategy meshes with that of the -retailer. Sometimes it doesn't and that can lead"to conflict and a breakdown of the trading partnership fOT 'category" management.
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If a salesperson is trying to drive brand volume and a retailer is trying to drive shopper traffic, they have to figure out how to do .9tl?together.l]ley should""itrive,fo.,LCOmmollgroun,. ItJllay notke b~e...m1JSbbe..mutuaLundet:S.tatldi.llg-3.Ud..share.cL.gQals ..
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In a perfect world, the manufacturer walks into the retailer's office and says, "We understand where you're going. We want to ~hare our strategy and objectives with you. We can work together. "

Category Captain
When category management first started in the early 1990s a re1

26

in the Beginning-The

Purpose of Category Management

rushing in with their programs. Each presentation context, rationale, and recommendation.

had a different

The retailer rightly won-

dered, "Who's right and who's wrong?" In many cases, the rationale for the plan seemed solid, but in others it didn't. Retailers eventually selec!~d one manufacturer as a trusted pa~~~ ..~,C2E.!~DY th~}~H~y~d h~d~~~~ resources, wherewithal, and commitment to grow the category. That co~pany came to be called the categori captain. ~~ ;.
~ ... "'-.....J'"~~
~~~_-.~_..,.'a$~_.~;O\'r-~.~)oo.o,""'~."'""'-~-~~t64l~~

~~,~~~~~9 be reliei~s,~~

_#~--.~ ..,. -

That didn't mean. ..that .thc.other three or four manufacturers competinginthe ~ .. ame c.<g~gQ[y" were--.excludclitQll~theprocess. ~;;lids~WSJrhey ~ If the captain was doing a Th~y'b~~~me E~egory"-;d;isor~

the category captain's refommendation. thing that perhaps was missed.

good j~b, the advisor merely provided a little twist or added someThe use of category captains and advisors has increased over the years. Today, most companies use them. The larger retailers typically appoint trusted partners and call them a captain, advisor, valuator,' consultant-and sometimes nothing at all. The retailer still has one partner to rely on for advice about the category. Large man; ufacturers to, an..a.c..c.....o.unt_to_Qffe,L.&dlt.egQJ:Y ad--., . ~~ have. .teams ..assigned ... vice and actuall deYcl.9J2.J?lillJ9gnlmS.~lligg.rpS thq.t ~hoVlho'Y, .. "-. at~d .~~ere r ucis.shculd.h pla. ~d,..Qns~.tan.shelves. for Q timal
..

-~~

s~ They sometimes operate out of permanent headquarters. The largest manufattl:!f~.yvith to be the category c.~~,_~b-at's

offices at the retail

the targest brands is often chosen

not...alvgys t~ ~.'1~~.:.,.A smaller

-su~

ring more resources to the table and earn the title-

especially if it is_~Jlthus.iasti~aI1d ~JearlY..b.5!~!h~.b~stinterests of the retailer in mind.

The Evolution of CategoTY Management and the New State of the Art

27

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The choice of this trusted partner should take into account the following: ~lity to think strategically: Retailers should work....... closely with _._------ -manufacturers who think strate~Ly. And that goes beyond ; thinking about the cat~~ory. IS%.!..~ thinking about the implications for the department, the store, and the retailer's shopper base. .
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bility to be unbiased: Manufacturers must be unbiased.Jnsteaq of pushing i!l2.r@ds!,a category captain luUStfocus on the categ(;r)T:....,.That can be very challenging, especialiy ii~he vic~ PreSident of sales insists on meeting quotas for the month. Under those circumstances, it is difficult to talk strategically about competitive brands. It is more difficult for category ~ ~~~~~
-.~

aptains to delist ~he}~n , ~ cat~gQ[y':"- ';, '. ~lity

~r~I1;dsfo.!~",greater

goocLQi~

to access relevant fuJormatiQIJ; Captains must bring the retailer relevant information. The kinds of data can .,.-----~~ include
___ --.. zc:::. _

con~umer _panels, _~!!1. c~n~~m.~!~foclJ_grouQs, and other research. Their recommendations must be based on solid, sUQQoIredfacts.

f;

..

To be effective in meeting the needs of retail category managers, the top charac~ristic~o.Lan. effective ,slJJ2piier are accur~_cy! timeli-,....

n~~.t9i~tQ~}1Jf~1!!~~?!:;._ r~spo~~"~~J..~ ~~>i=~!.~a!.i':~~L The ..best suppliers have an intense focus on supporting the initiatives of t~e~r .
Tv.. __ . _ ... ..----

own comlD'L while working within the "retailer's strategic framework ~~ ..9E!~~ _s~l~_~n.g, profit .. ~qU?r~._in.~he~_?tC?r~s. Suppliers b~~;g a category perspective and not solely a brand" outlook.
-....-------------.-.--..-----. -----_ c-------- _
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must

28

In the Beginning-The

Purpose of Category Management

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Supporting Players
Using the principles of category management is not confined (CPG) manufacturers. to operate a business packaged goods in the
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to retail chains and consumer

There is a host of other players contributing'

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to the design of category plans and their implementation store. Here is a look at their roles and importance.

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~lesalers
The primary business of grocery wholesalers is tQ wareb.CL~ .ncrs.and deliver them to independent retailers. They also su12121;: ad::...
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vertising and marketing support and marketing advice. - In addition, WholeSalers-can pro~icie a 'full c=;~egoryman-

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agement services to the independents ..~;fgpuf8:cturers. ~ducJ.

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gory reviews with wholesalers on behalf of the small retail customers. h~pmcb.lct~th~y.x~~iydi:Qnl..~~Fonda[~p.plieIS
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The wholesalers send shelf sets tQ the retailers who mOdify them, per-

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items that t4eJEJ9I2 sho12~uest. Tht;. retai.~~::ives the manpower t<2_[~~L~h~lvg~_f.IQill~the .. .wholesaler, manufacturer, a _thirdparty service company=or sometimes a combination of ilie "th;=ee-.
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These services are neither mandatory category management

must sign up a~cLP.aya weekly fee for them. Given the complexity of

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and the limited resources of independents,

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nor free. Independents

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it's hard to imagine deploying the process without this help. The task calls jor dealing with several different formats, retail strategies, and even marketsBecause tion center of the number of different re~ that different category taIlers served, a wholesaler must have enough room in the distributo carry. all of the products management plans call for.

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The Evolution of Category Management and the New State of the Art

29

Perhaps the biggest challense for wholesalers is communication. l' . '"' -a.li.tt; ~. They are always looking to improve and speed up the way informa ..'
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tion is delivered to their customers. Shelf sets are us~llLavaila!?Je online, along with any changes that n;d to be made or suggested. "We iook f~;TnP.~t fr9-;~ia~~;;'1;~L ha~I~~QYiJ1Q~ ..----' they want to run their operatio~' says Michael Terpkosh, director ;-rZategory '~ariage~~d~velopment for SUPERVALU, the coun .. try's largest grocery wholesaler. "We have people in the field calling . on them on a regular basis to talk about wb:2-~( happening in the
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store ~~~.:~~s_.~~~d~.!he.~~t~~OIY.f0.~9~~_men~.l?r<?gr~m~.:} t pro~i~~s t~l with the opportunity to give us feedback." -=---.... __ - ,__ "
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Sales Agencies
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Sales agellcies ~9.IJ<_for CPG fJ1anufggl.ITeis~~.I~lylTi~LflQ~~eJJ.ting them--to ~r~rail CllstQmcr~ Sales ~ndeos...J2J:QYJde outSQU~~~E .. , ~:~~.?ndisi3.B.~~r.kti.n~d_pIomolional=~~~~ words, th~ do the work of.a.manufacturer's.direct rept.e..~!1:Lt.~ brand to..-the-retailer. In other sal~_~f.9..!"~~,_~~d",

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They also provide a full slate cl category mang.gem~J1tservices just like a TIlJ!nut<ltlJ!tl-w.Duld. But there is a difference. Since they rep~;;e~t n.!,c!I)y_",manlJfactJJr~r~Jsales ?genc~e~"~~~e R9~itiS2lled to ad~ vise retailers 9lLQiPar.1lUellLoLaisle management in which the principles or disciplines of category management are applied to a group of categori~s~~h-;;~ckiry~'~I~-~dditi;~~";i';;~~'-'they can rep~~~~nt----

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manufacturers in related categories.such as mustard, charcoal, and' relish brands, -salesagencies.can help, retailers put together creati~e'~ -. merchandising themes for seasonal promotions. --. -. "On an everyday standpoint, we manage our business under
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30

In the Beginning-The

Purpose of Category Management

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senior vice president of corporate marketing for Acosta Sales and Marketing Company. "Whenever we go in with a business proposition for a retailer, we try to take category management principles into that dialogue."

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Merchandising Service Organizations

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Called the arms and legs of manufacturers, they specia~~~ .d~tail.Ihey ~re merchandising service organizations (MS~~ played by manufacturers and sometimes retalTers to work in the ey reset shelves"acco T
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cut in~~'?LI2t:Q..ducts.,..set~up-displa'%r-and.Ilerfo.rmJ:.d~ th~te-~ MSOs are perhaps the most- critical player in the execution .of . category management. They carry out -the category plan in tb.e-~. -.
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ajg~ ~1!d_~,!-,i~E"?l,_.!.h~~ inte_~~.That i;~here the plan often falls apart-usually because an MSO is not patrolling the aisles. In fact, their role is probably under utilized in terms of what they can contribute to the category management process. 'Fh~~e things live _c!D.ljn..-I@a~"~i-me-chat .executives at headquarters rarely ~~e". The MSO is a valuable resource with potentlattnar lla:s.yerto be fully developed.
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Research and Data Providers

Effe~tive a"~_a~ysi~ ~f~~tt:g9ries, !llark~ts, ~~ __ consumersis.made ~~. sjb~~ll~9vJ.skrs OLI~?e~h, demographic/psychographic data, gmL......--.--- --. ....

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I~1f~"c.~~!~_e..Y" Eot"e~ttll,1l.Yfg~tl(1J)la ~_ bi~g,~S~E~!:.J~

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The Evolution of Category Management and the New State of the Art

31

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category management by working closer with manufactures to prepar~ prese~~i9ns-;.L-~;~~~il~~~~------'-- ----.--.-.- -_. --'---" . . '.

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, When manufacturers

are defining what the category hierarchy is,

a data company can provide a persp~~ti;~~~~g~~i~~d~~EY~~t~g-c;ry,

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lQbc~~e~.~rwx:;;>~n.it~L<.1<iJhey can give manufacturers a more in-depth look via examples of the-hi~~ They also provide input about the daY32:.<iaY..i9c .. Q(C.. '!!~Ly.1l1a!l~ger~: ..What should they be looking at? When should they consider changing the product as-(

sortment? How often should they change the planogram? With proper information from research and data providers,. it's a trading partners that analysis. gain a unique view of the market. Then,

matter if interpreting

what the market is saying and reacting to

The Promise of Cateqory Management

Category management retail operation. does more than contribute to the success of a withoutrelving on ~. ~ --.. .... . . ".

It is an essential component.

In fact, it is difficult :

to imagine a retailer winning in the marketplace the direction that this valuable process provides,

Product categories are the building blocks of the store. Category management leverages them to enable retailers to operate effec':1.

tively. Some ~QI~~ may -..-be larger than others and some may~. --"'""""'"'-U- ~" . -~ ~-~~'-~"",,,",",_ ...... conrributejnore -tQ....t~eet:~et-f}.-hge-B\J.t.-a~1--ef.-t:ftefft'"r~W&t...w:~ i~clividually and must CQ1D~ tQg~th~r t.Q~,QTesent a cohesive whole to _------~ . -,* discrimi natlug..,sho.p.pet.&.~Jt

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Expertise in category management help them achieve financial

is certainly a competitive ad,

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vantage. It empowers retailers to make better business decisions that objectives. \'Xlell,managed

32

In the Beginning-The

Purpose of Category Management

will enable retailers to keep their present shoppers and attract new ones. The nature ofthebusiness t~day demands-~;~~gl~;;. -.'"~---~~.-...-...
-~~

So, what's next? A toothpaste an increase manufacturer may be able to help a retailer analyze to the two or the category, determine in sales-for
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shelf space, and eventually contribute that category. Meanwhile,

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three categories nearby-say, analgesics-could

cold remedies, shaving cream, and manu)

be in terrible shape. But the toothpaste

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facturer doesn't know it and doesn't have data to analyze why. , Welcome t9Jhe world of aisl.ein.anagk..meJJ.t~C;lDd_departN~n~.~~an~
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agement. Helping retailers manage an aisle or department . next major step forward in category management.
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is the

Some large man-

ufacturers are already offering these services to retailers. IjQw~v:~r, . ..-. ~.. .. .
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it is largely an emerging practice. .-w'Th~-~;~r~hopp~~~'data from loyalty card programs and.darafrom

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RFID systems are also emerging. The former is already being used by .
such chains as Kroger and Big Y. Both sources of data will contribute to the enrichment continues to evolve. The industry may have taken its eye off the consumer in the early days of data overload and number crunching, Today, the best practitioners gory management. rection tomorrow. Retailers and manufacturers need to pay attention. but that time has past. careare focused on consumer-centric of category management as the process

The consumer now stands at the center of the

process and drives all decisions about the category today and its di-