CATEGORY MANAGEMENT

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CHAPTER 3

• CATEGORY MANAGEMENT

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LEARNING OBJECTIVES

• Introduce category management as an evolving
  consumer-led approach to retail product
  management
• Become familiar with associated product
  management systems, such as ECR and QR
• Introduce the concept of a category and the
  category life cycle
• Consider the implications of CM for retail buying
  organisation structures and supply partners
• Outline the limitations of CM

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CATEGORY MANAGEMENT DEFINITION

• the strategic management of product groups
  through trade partnerships, which aims to
  maximise sales and profits by satisfying consumer
  needs (IGD, 1999)
• KEY PHRASES
• a strategically managed product group (defined by
  shopping behaviour)
• relies on trade (supply) partnerships
• aims to maximise sales and profits (of group
  rather than item)

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ASPECTS OF CATEGORY MANAGEMENT

• A philosophy
• A process
• An organisational concept

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CATEGORY MANAGEMENT AS A PHILOSOPHY

• Products are considered as a way to satisfy
  consumer demand
• Demand-pull rather than product-push
  (forecasting)
• Product features and procurement (buying) becomes
  part of, but not focus of product management
  process
• Suppliers are integrated in category management
  process, some become category champions

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DEFINING A CATEGORY

• A category should be established by the way
  consumers buy the product
• Usually products in category are reasonable
  substitutes for one another (e.g. fruit yoghurts)
• Sometimes a category is defined by products being
  complementary (e.g. exotic foods)

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THE ROLE OF THE SKU WITHIN THE CATEGORY

• When defining the category individual roles of
  SKUs (stock keeping units, or product items) are
  acknowledged
• traffic builders
• sales and profit generators
• excitement creators
• reinforcement of retail brand
• Products without a clear role should be
  eliminated from category

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THE STRATEGIC ROLE OF THE CATEGORY WITHIN A
RETAILERS PRODUCT ASSORTMENT (TABLE 3.2)
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PRODUCT CATEGORY LIFE CYCLE

• The category life cycle is more useful than the
  (individual product life cycle) to the retail
  product manager
• The different phases of the category life cycle
  have implications for category management

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IMPLICATION OF THE CATEGORY LIFE CYCLE FOR
CATEGORY MANAGEMENT

• Insert Figure 3.1

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CATEGORY MANAGEMENT AS AN ORGANISATIONAL CONCEPT

• Category management brings a stronger marketing
  orientation to product management
• More cross functional role tending to reduce the
  role of buying and augmenting the role of
  merchandising
• More involvement with store level product
  management, e.g. space allocation, display and
  in-store promotions
• A team organisation that spans across suppliers
  and retailers boundaries (see Fig. 3.3)

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THE RETAILER-SUPPLIER INTERFACE

• Insert Figure 3.3 and acknowledgement

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CATEGORY MANGEMENT AND ECR (Efficient Consumer
Response)

• Truly responsive product management requires
  retailers supply chain (as well as retailers
  buying organisation) to be responsive to consumer
  demand
• CM is usually part of responsive supply chain
  management (e.g. ECR)
• a seamless interface from customer purchase to
  manufacturing schedules (Lowson et al, 1999 40)
• ECR aims to maximise customer satisfaction while
  minimising supply costs

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THE PRINCIPLES OF ECR

• Insert Figure 3.4

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THE SCOPE OF ECR

• Insert Figure 3.5

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INFORMATION FLOW AND DATA TECHNOLOGY

• Development of ECR has been dependent on enabling
  technologies
• Data management and sharing across parties in
  supply chain is a requirement for ECR

Insert fig 3.6
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CATEGORY MANAGEMENT LIMITATIONS

• Category management relies on theory and jargon,
  many well-run retailers have adopted the
  principles of CM and ECR without the help of
  consultants
• Change in organisation not always possible due to
  skills shortage
• Retailers often have difficulty accepting
  suppliers as partners
• Efficient ranges have danger of becoming boring
  and looking like those of competition
• Smaller suppliers can be squeezed out
• Smaller retailers may not have resources to adopt
  CM