Reinventing Category Management
Category management is yesterday – shopper centricity is tomorrow.
That was one of the messages coming out of a session I attended at FMI Connect here in Chicago last month, when a panel of experts discussed the results of a Food Marketing Institute/Deloitte study revealing that the vast majority of retailers are clinging to category management standards at least two decades old.
Considering how much the world of retailing has changed in the last five years, let alone the last 20, I found that revelation to be quite scandalous.
Yet 85 percent of retailers have made little or no changes to the standard seven-step category management process, according to the study. All the retailers and CPG companies surveyed believe change is necessary; most think it should be built upon the existing category management foundation.
Thought leaders participating in the study say most current efforts are “not adequately integrating shopper insights,” must have “a blend of shopper marketing, digital marketing, shopper insights, promotional performance and loyalty” and “a much deeper degree of collaboration” between retailers and CPGs. Further, merchant trade groups “need to be redesigned around customer centricity.”
And therein lies the key to retailing’s future.
Industry pundits are preaching solutions – don’t sell ingredients, sell the meal – and for good reason: It’s how grocers can establish their relevancy – their reason for being – to shoppers who aren’t shy about dividing their grocery dollar among multiple channels. You can buy products anywhere, but where can you find the experiences, the solutions, that will make your life easier?
A look inside PG’s 68th Annual Consumer Expenditures Study tells part of the story, which really isn’t a surprise: center store is dying. After two decades of supposedly cutting-edge category management techniques, the overall grocery-food category hit zero percent growth in 2014, after a steady decline. Shopping center store is a chore – folks are shopping it because they always have, not because they understand the synergies between multiple-store categories that can satisfy their need states, and that's because most retailers and their CPG partners are not doing a good enough job to truly sell the whole store.
There’s a reason industry leaders like Kroger are doubling down on investments in shopper insights. But most retailers rely heavily on business partners and third parties to provide such data, the FMI study notes, suggesting that retailers are basing their decisions “on magazine articles rather than talking with the consumer.”
Well, this magazine is telling you to talk to your shoppers – engage them by any means necessary, using their preferred media.
Other study revelations: Decision support is still a fragmented, unstandardized function at most companies; retailers lack confidence and ability to discern useful insights from the data they use; retailers feel manufacturers fall short in providing chain-specific research, especially for smaller chains; and only a small portion of retailers and manufacturers have been applying digital insights to the category management process. Really?
In advance of a more comprehensive report of its findings expected this fall, FMI advises retailers and suppliers to ramp up their focus on the shopper, establish a relationship more conducive to sharing insights, and concentrate less on the “what” and more on the “why” of shopper decision-making.
“Shopper centricity,” the FMI/Deloitte report concluded, “will have as great an impact on the grocery industry going forward as category management did 25 years ago.”
So, in the spirit of being “ahead of what’s next,” PG will be keeping shopper centricity top of mind as it reviews the entries in this year’s annual Category Captains Awards, for which we are currently accepting nominations.
Look beyond your brand. Look beyond the product. Look beyond the aisle. How are you helping to provide solutions that encompass the entire store?