We’ve Done Category Management – Now What?

Category Management What's NextI met a client in China last week who was telling me of their success in conducting category management programs with two major multi-national retailers. “The thing is, we’ve been doing this for two years and we ask ourselves, now what? Our partners are supportive but they keep challenging us to come up with something new”.  I started reflecting on their options and what guidance to give.

Thinking about the situation, the people I met where in a fortunate situation – first their experience was positive: the retail partners had delivered a reasonable level of implementation (c. 50% – which is great for China); both sales and market share had grown and the retailers remained engaged. Second, buoyed by a positive experience, the company had gone on to invest in deeper research into shopper behavior  in broader capability in managing large data sets. The management team I spoke to was convinced that the next step was to secure more category partnerships with key retailers. I’m not so sure, here’s why:

Is extending category partnerships always a good idea?

Working with key retailers is resource hungry: No company has infinite resources and finding good people with the right blend of competencies to steer their way through a major piece of joint-working is difficult. Presumably any business that has a successful relationship with a small group of customers already is likely to want to maintain this. So extending the number of relationships will require more resources or require the existing team to put less focus on existing relationships. The reduced level of focus this inevitably leads to is unlikely to deliver better results than those the team delivered before.

Category management is not the only way to get things done: The magic of category management is that it’s such a powerful vehicle for common languages and objectives. Successful projects deliver what retailers need: category growth, improvements in category margin and improvements in category efficiency. They also deliver against manufacturer’s goals: increased sales, improvements in market share and better returns on investment. Empowered with two years of learning, data and a proven track record of delivery, my client has a great opportunity to persuade other retailers to make changes in-store without the need for expensive joint-working programs. A more efficient route to getting progress would be to convert all of the understanding the business has into great selling stories, and have the account team drive execution in the traditional way.

Key retailers are not necessarily the biggest priority: In China, key multinational retailers have tended to cluster in grocery supermarket and hypermarket channels. This is the case in many markets globally. It’s often a ‘default setting’ of the CPG industry to assume that big stores=big opportunities.  And yet, its these large formats which seem to be most hit by slowing consumption growth – it appears shoppers globally are choosing smaller, more local alternatives and switching gradually to alternative channels (6% of China’s housewives now buy all food online).  Further despite the onslaught of the big box, many markets have a thriving independent sector.  What if the bigger prizes lay beyond the walls of Tesco and Carrefour?  I believe if you have limited resources, they should be focused on the largest prizes, so I’d want to be assured that that was the case.

So what will I advise my client, and indeed anyone with the same questions about category management programs? First, know you priorities. Before extending a category management program make absolutely sure that that the retailers you might work with operate in the channels you would prioritize. A priority channel is one which not only attracts a large volume of shoppers; it is also one where your target shoppers shop and where they can be influenced to buy more. Secondly, review your approach. It is cheaper to persuade a retailer to change using data and insight than it is to conduct category management programs. Insight-based selling should be the default approach to getting things done. Lastly pick your partners carefully: I’m pretty certain most will agree that retailers don’t make great bedfellows. Retailers who implement what is agreed are a good place to start but more is needed for partnerships to work in the long-term. Partnership is two-way, so a great partner doesn’t leave everything to you, they work with you, bringing ideas and concepts to the party.  If you are left being challenged to deliver “something new”, perhaps the retailer you are working with isn’t actually your partner at all!

Featured image: Flickr

Advertisements

Shopper Marketing Revolution or Evolution?

Shopper Revolution or EvolutionI blogged a couple of weeks ago about whether shopper marketing meant the end of category management. With thanks to POPAI this turned out to be one of the widest read posts I’d ever written. I was also excited by the level of comment it provoked. Some wholeheartedly rejected the idea that that Shopper marketing was anything more that the logical evolution from category management, whilst others passionately argued that the two were separate and that shopper marketing was an entirely new discipline.

So which is it? Well, as a co-author of an upcoming Shopper Marketing book, I wear my heart on my sleeve. In our book we argue that consumer goods businesses have been challenged to respond to three distinct era’s in their development. The first was the era of the consumer-led manufacturer, when the concepts of contemporary consumer marketing were born. This era lasted from the end of the second world war until the early 80’s and was marked by the dawn of ubiquitous mass media, the creation of consumer brands and the beginning of the consumer culture.

As media fragmented, brands proliferated and retail began to concentrate, the era of the retailer began. Brands found it increasingly difficult to reach their consumers and the idea of marketing at retail came to the fore. Manufacturers created trade marketing functions and embraced category management as vehicle for engaging with retailers.

I think many in the consumer goods industry believe that we are still in this era, and I believe they are wrong. For the last few years we have seen a number of signs that the age of the retailer is fading. We have seen e-commerce put huge pressure on traditional retail models, making shopping at once more global and more personal. Concurrently channels have proliferated in almost every significant market offering more choice and convenience to shopper. Finally the dawn of democratized media (note I don’t mean “a democratic media” but rather the opportunity to access and create media in one’s palm) forces the rules of mass-market communication to change.  I believe we are now entering the age of the shopper where the purchasing power of the individual is such that developments in consumer goods are driven by neither the manufacturer nor the retailer but by a much more empowered shopper. It is in the environment that the concept of shopper marketing has been born.

This is a major change in the environment, in the words of Brian Harris, “There has probably never been in the history of consumer and shopper behavior a bigger change between one generation and the next in terms of the aspirations and the requirements of shoppers and the tools and methods they use to meet their shopping needs.” If this is an accepted fact, the consumer goods industry cannot continue to employ strategies that worked in the 60’s and 70’s, nor can it use approaches that worked in the 90’s and early this century. Hence my earlier suggestion that the traditional core of consumer goods marketing; the idea that brands succeed by creating massive awareness and converting this awareness through massive distribution; cannot survive in this new world.

An evolutionary response, one that says we can adapt and enhance our current behaviors, in my view simply won’t cut it. If the controlling factor in the environment is no longer the retailer, then looking to a retail marketing solution is likely to fail.

In my view this is the fault in arguing that shopper marketing is the ‘new category management’. What shopper marketing asserts is that consumers and shoppers are different in their behavior, so different marketing solutions must apply and that these marketing solutions do not necessarily occur in retail. So getting better ‘in retail’ is paradoxically not the only way to enhance marketing to shoppers.

I see shopper marketing as an entirely new marketing discipline that needs to be conducted in conjunction with consumer marketing and customer management. This is requires a dramatic shift in the entire paradigm of marketing itself because it requires companies to think consumer – shopper – customer. This requires the whole organization to change and those at the heart of this change don’t see this as a gentle evolution but rather a significant revolution.

Does Shopper Marketing Mean The End Of Category Management?

Category Management 8 Step ProcessWhilst researching and writing, “The Shopper Marketing Revolution” which I wrote with Mike Anthony, I got the opportunity to speak with and get to know Dr. Brian Harris. Back in 1989, Brian effectively ‘invented’ Category Management by publishing an 8-step process which has guided collaboration between retailers and consumer goods companies for the last 23 years.

I asked Brian what the advent of Shopper Marketing meant for Category Management and his response was interesting. Brian sees Shopper Marketing as the latest evolutionary step of retail marketing, which began in the 70’s with product scanning and has passed through category management, ECR and into collaborative CRM.

In our book we take a different view. We make the case that shopper marketing creates a revolution in consumer goods marketing in general. We believe that the traditional core of consumer goods marketing; the idea that brands succeed by creating massive awareness and converting this awareness through massive distribution; cannot survive in a world of democratic media and dynamic retail structures. We advocate that by expanding the focus of marketing to drive the creation of different consumption behaviors by changing purchase behaviors, marketing becomes more complete and more effective.

So is category management dead then?

Well Brian accepts that the collaborative process he originally created is perhaps a little unwieldy today but he asserts that as a core retail practice category management will continue into the future. We agree; retailers cannot and should not put aside the imperative to grow category sales and we believe shopper marketing enables suppliers to work better with retailers by sharing a common understanding of shopper behavior.

This doesn’t mean that shopper marketing is a “big retail thing” nor does it mean that we advocate “doing category management”. Far from it, but we think many practitioners risk getting hung up as the confuse shopper marketing with category management and this does need clearing up.

First things first, let’s be clear that shoppers shop everywhere and not just in organized supermarket chains. If you really want to create a complete picture of how best to market your brands to consumers and shoppers you have to consider all the environments people shop in from small independent retailers, c2c portals, e-commerce sites and hypermarkets, to name but a few. Category management by contrast is only fully applied by a small group of very well organized (generally grocery) retailers.

Further, category management is a choice, not a business imperative, for most manufacturers. This choice has some significant advantages but comes at a stiff price to. Category management can be an extremely effective way of securing retail implementation from retailers who have a synchronous shopper profile with a brand, but the category management process can be costly and if the chosen retail partner is not effective at implementation this cost can be wasted. Shopper marketing helps make this choice work more effectively.

Companies who want to work really well with their customers using category management today have to start with a clear understanding of which consumers they are targeting and what they want them to do. Knowing this enables them to target shoppers and shopper behavior more clearly and helps define which channels they should prioritize. This makes selecting a retail partner easier and further creates clarity of the outcomes that will work best in retail environments.