Category management, one of the most successful business processes developed in the 20th century, is about to change.
The completely modernized version, CatMan 2.0, now being introduced to the industry, will dramatically impact consumer packaged goods retailers, manufacturers and solution providers, and provide a more relevant and seamless experience for the shopper.
As with CatMan 1.0, CatMan 2.0 will continue to create comprehensive plans to meet shopper needs in a superior manner, ultimately creating better working relationships and business results for retailers and manufacturers. Category management will continue to be a holistic approach based on facts, insights, sound strategies and proven tactical models, but what will CatMan 2.0 mean for retailers’ businesses?
Why Change CatMan 1.0?
CatMan 1.0 needed to be modernized because everything in the marketing environment has changed since the early 1990s, when CatMan 1.0 was developed. Specific changes include:
Data: There are infinitely more data — both qualitative and quantitative — than in the early 1990s. We have point-of-sale data by individual store location, down to the level of individual items. Household panel data are much more robust, reflecting more than 100,000 panel respondents, thereby permitting much more granular analysis of particular value in calculating leakage between banners. Loyalty card data are now shared by retailers having nearly 50 percent of all-commodity volume in most categories. Other major retailers have developed surrogate loyalty data using charge cards or sophisticated basket analytics.
A tsunami of data from social media is now available, along with various proprietary studies made possible by the ubiquity of addressable respondents of every imaginable description and the low cost of internet-driven studies.
Analytics: In the early 1990s, when CatMan 1.0 was developed, analytics were relatively primitive. Time series data, which drive so much of today’s analytics, weren’t available in the abundance that they are today. Moreover, computer hardware and software were still challenged to make sense from the limited data then available. Today, laptop computers have infinitely more analytical horsepower then many mainframe computers in the 1980s.
Software analytics packages have improved to the point where sophisticated multi-variate analysis revealing the relative response of multiple, simultaneous marketing stimuli can be purchased off the shelf. Presentations of remarkable sophistication can be assembled rapidly and then continuously updated by banner and category from multiple data sources.
Retail Diversification: Supercenters have grown dramatically, and the dollar channel, hard discounters and warehouse clubs have also grown to complement traditional supermarkets and drug chains. There has also been explosive growth of online commerce, both of the pure-play variety and of click-and-collect services from existing brick-and-mortar retailers.
Success Models: Category management practitioners have developed a more detailed knowledge of what works in assortment, pricing, in-store merchandising and promotion. These success models have become so ingrained in the category management practices of many retailers and manufacturers that practitioners hardly realize this knowledge didn’t exist as recently as five years ago.
Shopper Diversity/Empowerment: Today’s shopper is more diverse demographically and attitudinally than ever before. Importantly, today’s shopper is empowered with significantly more information about the choices available to meet her needs. The ubiquity of internet-enabled information about virtually all aspects of any given category has revolutionized the marketing environment.
How is CatMan 2.0 Different?
Most of the changes reflect the enormous improvements in data and analytics; some reflect whole new process steps that were either ignored or underdeveloped in CatMan 1.0. There’s also a big difference in presentation format. Unlike CatMan 1.0, which was presented in a static printed monograph of some 80-plus pages, CatMan 2.0 is offered in a more contemporary digital format that can be keyword-searched by practitioners. Listed below are a few examples of the scores of improvements in CatMan 2.0:
Process: CatMan 2.0 adds three important steps to the original seven-step process: (1) an upfront internal alignment step discussed below, (2) a new “assessment why” section addressing the development of shopper insights, and (3) a new tactical step described as shopper marketing and the path to purchase. In addition, the new process dramatically enhances many of the practices in the familiar steps of assessment “what,” strategy and deployment, as well as suggested approaches to developing the ROI of category management.
Internal Alignment: CatMan 2.0 addresses this issue by creating an entirely new process step that precedes the collaboration between trading partners to create a category plan. In this section, issues are identified around which both retailers and manufacturers must be aligned internally to be effective partners in developing winning category plans.
Assessment “Why”: CatMan 2.0 includes the concept and process for developing shopper insights, or the “why” driving shopper actions during the path to purchase. This addition provides material for the development of robust strategies and shopper marketing programs.
Shopper Marketing and the Path to Purchase: The relatively recent growth of shopper marketing as a marketing imperative for practitioners has confused the community, especially the relationship between category management and shopper marketing. CatMan 2.0 emphasizes that shopper marketing can only succeed if it’s integrated into the retailer’s annual category plan as a tactic with explicit activities executed in-store.
Deploying and Executing the Plan: CatMan 2.0 offers organizational and process improvements to encourage efficient and effective deployment of the category plan, down to the level of the store.
The ROI of CatMan: The single most frequently asked question of the Category Management Association (CMA) is, “What is the ROI of category management?” Answering this question in CatMan 2.0 is even more imperative because of the growth of “zero-based budgeting,” a management approach that questions any personnel or program factor that adds cost to the overall business model.