What dictates good category management?
In any sector that requires products to be developed, marketed and sold to consumers, the company that creates the original product must communicate with a team of many different people including retailers and the consumer market, all while staying ahead of the competition.
Whether it’s the healthcare industry, a producer of food or a company that develops household products, a vast selection of considerations work toward the task of getting a product to market and into the hands of customers. But how exactly can a business operate in an effective manner while selling an extensive range of similar products?
One of the most popular methods of selling multiple products is through the use of a functioning category management strategy. Retailers use this mindset every day to correctly associate, for example, toothpaste, mouthwash and floss in the same section in a total oral care approach, and by businesses understanding this approach and using it to their advantage, they can make it possible to section off all products into relevant categories, assess the performance of competitors and heighten sales figures.
What is category management?
Applicable to any industry that focuses on supply and demand, category management is a calculated approach that is implemented to gain an advantage over competitors, develop effective and collaborative relationships and take more control over important investments.
Within this structure, the spend of the business is sectioned into areas that contain a similar selection of products, heightening the business’ opportunity to consolidate and enhance the efficiency of the service being provided and how much it costs to make the sales side of the business function.
What is the category management process?
In the application of category management, a business will typically go through a process made from a number of core principles. These often include:
1. Definition – What are the categories, how are they defined and, as a result, what products fall into this category?
2. Analysis on product delivery from space on shelf – Demonstrate that a product is meeting the needs of each retailer’s specific consumers in terms of positioning and pricing.
Look at the space the product occupies in width and depth, its cash margin to the retailer, its predicted rate of sale backed by compelling in store marketing and consumer marketing plan. Advise what should be taken off the shelf to make room for our product.
3. Changes – Consider making alterations to products from trade customer feedback as they also provide data and insights to how categories work within their stores. Be mindful of having a targeted channel strategy as fits the product.
4. Ongoing application – Watch your category for changes in space allocated, new products entering, retailer change of promotional strategy, changes in consumer behaviour – for example due to economic factors. Range reviews are a time of both opportunity to improve shelf space and position but also to defend your listing.
Why is category management important?
Many businesses choose to implement category management as a way of approaching their company’s procurement process in a strategic manner. Not only does this mean that businesses can conduct in-depth market analysis to determine what their target audience wants, but also use this information to make accountable decisions based on credible data.
Additionally, the concept of category management has developed to offer even more benefits. Through a change in technology and more of a focus on strategic marketing, category management has evolved from solely being a method of identifying assets as categories that can be separated, differentiated, organised and analysed to being utilised for improving the experience of consumers, identifying target audiences and offering them a product or service that they will engage with.
How to implement a category management strategy
Category Management is an integral part of bringing a product to market and defining your brand strategy. It is a collaboration between sales and marketing.
The process of implementing a category management strategy within your business is as follows:
1. Delve into data –
Conduct a category assessment by looking at the data you have to work with. At this point, you should also consider carrying out quantitative and qualitative research and refer to all relevant areas of market data.
2. Understand the concept of shopper versus consumer –
During any exercise in the application of category management, it’s important to weight up the shopper and the consumer while acknowledging that they’re not always the same.
Take dog food, for example. The owner of the dog is likely to want their dog to eat food that doesn’t carry any significant health risks, is suitable for the breed of dog and offers value for money, whereas the dog is more inclined to want food that comes in high quantities and tastes good.
3. Formulate crucial insights –
Through understanding the consumer your product appeals to, you can identify patterns in their behaviour, work out why these patterns happen, predict changes that may happen in the future and, as a result, alter your approach to capitalise on their wants and needs.
In any research exercise into insight, you should consider the process as a conveyor belt that plays out from left to right as follows:
|Identify a question you want to answer||Gather information to understand what is happening||Understand why the action is happening||Identify why it’s important and what it means as a result||Plan your next steps, whether it means making changes or adding new components to an existing strategy|
4. Define your categories –
Categories are groups of products that should be easily recognisable to consumers. A key part of category management is the task of defining each category and making sure that this process is carried out in an effective manner.
During the process of defining your categories, you should base decisions on consumers, retailers, brands and regulations, and more specifically focus on how each of these areas may associate and interpret each product.
5. Segment each category –
Once you’ve established your categories, you can begin to group similar products together within each category. Factors that may be used to link products together and within specific categories include:
- Formulation and ingredients
- Importance or urgency
6. Understand category roles –
From a strategic perspective, each category will have a specific role to play for the retailer and its customers. By gauging the role of each category, you can begin to understand where it fits, why it’s important and how best to measure its success.
Common category roles include:
Excitement creating: generates interest and enthusiasm from customers by offering an innovative product, service or experience
Image enhancing: boosts or reinforces the image of the store or brand in the eyes of customers
Profit generating: attempts to increase profit made from the product, category or store
Traffic building: attracts customers to the store
Transaction building: aims to increase the amount of money spent by customers in specific products, categories or stores
Turf defending: fights to show superiority over competitors of the same or similar products and categories
7. Produce category vision and drivers –
With an eye on the future, planning a category vision allows you to envisage the direction the category is expected to go in, the life cycle it may have, future changes that may occur and any features that may improve its value in future years. When this has been established, you can then consider components that will help to make the vision a reality in the form of category drivers.
8. Plan your category management strategy –
In order for your category management fundamentals to be effective, you need a strategy in place. Using a mix of routes including several potential variables, your strategy can account for many different outcomes. During the creation of this strategy, you should aim to be as detailed as possible.
A key part of building your category management strategy is understanding the people that are likely to buy your product. As such, you should consider key factors around your average customer such as their:
- Shopping frequency
- Likely spending amount
- Basket conversion
- Desired store size
9. Assess customer tactics –
Tactics are a required method of meeting customer needs, and by approaching this in a strategic manner, you can find ways to engage with your target audience and generate sales. For this to work, you will need to understand the sorts of products, services, prices, promotions, packaging and events that your average customer would be most drawn to and interested in.
10. Begin strategy implementation –
When you’ve carried out all of the necessary planning and preparation, it’s finally time to implement your strategy and allow it to take effect. However, there are a few tips that may help this process. For example, you should:
Appoint someone to run the management and regulation of the strategy
Set the wheels in motion at a suitable time
Create a thorough brief detailing every part of the strategy
Ensure that every step is monitored and measured
Anticipate any potential issues and provide contingency options
Decide on timescales for your team, retailers and customers to review the effectiveness of the strategy
11. Review performance using scorecards
Using digital scorecards, review the performance of your strategy on a short-term and long-term basis to check for positives, negatives and any necessary changes you may want to make. You can then continue to utilise and update this process, keeping all data to see how the performance of your strategy plays out and make any alterations to improve its effectiveness.
Applying category management can be a long and difficult process for any industry, but if you’re looking to incorporate this feature in the marketing of a pharmaceutical product, Ceuta Healthcare can help. Simply get in touch through the ‘Contact Us’ page, explain the issue you’re having and someone will be in touch to offer expert advice.