Category Management is a term coined back in the 90s by The Partnering Group (TPG), but which is now on the lips of many.
Given the excess supply, a declining demand and the massive irruption of private labels, there are not many alternatives for the manufacturer:
1) succumb to the temptation of white label and abandon marketing
2) or fight for our own identity as a brand
It is important to emphasize that Category Management is not in itself a brand strategy, but it has proven to be a successful collaboration methodology between manufacturers who are committed to differentiation and the distributor with the aim of jointly promoting sales, which is what ultimately establishes the best business relationships. Traditionally, sales in an establishment were handled as a totum revolutum. The purchasing manager, the marketing manager, the product display and sale manager were responsible for all categories. Many brands have realized that managing 40,000 references and boosting their sales in this way was a complicated task, even more so in today's times when you have to move much faster, since the other brands do not stop counterattacking.
The key lies in the management of the category as a business unit, understanding the category as a group of products that cover by themselves, or in a complementary way, a series of common consumer needs. This new methodology implies the creation of a common work team between distributor and manufacturer to analyze the products of a category and jointly implement strategies and tactics and execute it to improve its performance from a single point of view.
The first step, therefore, involves Defining the Category. This is not a trivial matter, it is vital for the proper development of the entire process, as it will lead us to our Target Market. Defined the category, the Role of the Category is identified. For this, we must know the banner with which we are working well and we must empathize with its philosophy as well as with its strategic objectives. These 4 role classifications are normally used in their Anglo-Saxon denomination:
The third step is the analysis phase where we must sink our elbows and analyze all the information we have about our consumers (how, when and why they buy from us), market information (how we and the competition are doing), information on the banner by point of sale (prices, margins, turnover and occupation) and finally the manufacturer's information (elasticities and sensitivities to promotions and price, etc.). The incorporation of Business Intelligence systems has made this work easier.
The fourth step consists of establishing control objectives and metrics to ensure proper operation and monitoring. It is called the Category Scorecard and the thresholds and floors that must not be violated are determined to achieve the ultimate objective of improving the results of the category: frequency of purchase, level of customer retention, sales per square meter, sales and contribution to billing total, gross margins, net margins, turnover, return on investment, etc.
The fifth, sixth, and seventh steps are the strategic design, tactical, and execution phase respectively. The marketing strategy is designed with the aim of improving traffic to the category, achieving higher consumer outlays, boosting the image or simply positioning it better than the competition by showing its differential values. The tactic involves establishing the steps to undertake said strategy and the metrics, parameters and work forks to boost sales and consumer loyalty through the appropriate assortment, price, promotion, merchandising and correct management of the supply chain (Supply Chain Management) for each point of sale. Everyone must follow a perfectly defined, supervised and orchestrated choreography. It is in the execution phase, in the day to day,where we play the results and it is where the Management of the Point of Sale affects especially.
The last step is the most obvious and consists of reviewing the entire designed model a posteriori, detecting errors and polishing them for their continuous improvement.
