- Talk to your consumers.
I have probably participated in thousands of Category Business planning sessions across virtually every category, and in only a handful of plans has anyone bothered to actually talk with consumers. Almost every business plan incorporates consumer panel data and manufacturer research, but these sources rarely tell us WHY consumers are buying what they buy. Consumers want to talk and its amazing how seldom we give them the opportunity. EVERY Category Business Plan should begin with a day in stores talking with category shoppers. Will this data be statistically significant? No. Might the perspectives gained bias an otherwise purely data-based analysis? Yes, and that’s exactly the point. I have witnessed dozens of erroneous assumptions drawn from data that would have been immediately questioned had the team talked with real consumers. We’ve all been brainwashed by our companies and our experiences, so we need a little reality check from the people that buy our products. The best way to get that fresh perspective is…[Warning: sales pitch coming]…by using CM Solutions’ in-store research services. We’ll talk to your customers and help you understand what’s really driving category behavior. And we can do it in a statistically significant way. But, even if you don’t want this kind of powerful insight, don’t miss the opportunity to just go into stores and talk. You’ll learn a lot and the shoppers will be thrilled to have their voices heard.
- Let the Category Managers actually manage the category.
I am very alarmed by the trend among many retailers to remove pricing and other tactical decisions from the control of their Category Managers. New price/promotion optimization technologies from companies like DemandTec and KhiMetrics are powerful tools, but to use them outside the category planning process (and away from the CM’s desk) is just plain nuts. It is common for a Category Manager to sub-optimize pricing in one segment or brand to achieve a broader objective. Such decisions will never make sense to a software algorithm. I’m not suggesting that Category Managers should autocratically make all decisions for the category, but they must have the power to implement the tactics they have identified as crucial to achieving their objectives. Otherwise, why bother giving them the objectives in the first place.
- Stop worrying about fair share and be different.
Category Management was never about copying the tactics of others in the market, but all too often, that’s what it has become. The overdependence on “fair-share” and averages has produced ineffective homogenous strategies. Just because Kroger or Safeway promotes Pepsi 12 packs 24 times a year doesn’t mean that’s the right answer. Looking at fair share is fine, but only when it is used as a tool to be different. If you have your fair share in every category, guess what, you’re average (and you’re not going to last in the long run). Power lies in deciding where to have MORE than your fair share and where to have LESS (and you must have both). Consider one of my favorite aphorisms; “Different isn’t always better, but better is always different.”
- Spend 20% of your time planning and 80% executing and measuring.
I’ll begin with some Category Management blasphemy…most of the time you spend analyzing a category is a waste. That doesn’t mean you shouldn’t analyze, but you should be acutely aware that no historical analysis can be perfectly predictable. The power of CM lies not in its predictive power, but rather in its production of a plan that can be used to evaluate performance on an ongoing basis. Even the best Category Business Plans are nothing more than a best guess of what might happen. They can only create value when the planned activities are executed and measured versus expectations. Consequently, the most effective Category Management processes emphasize implementation and review, not assessment. Assess quickly, create a good plan, and get on with implementing and reviewing. That’s where you make money.
- Look outside, not just inside.
Retailers are addicted to shopper card data. Why? I think it’s because it’s readily available, it’s their’s, and they understand it. It is valuable, but for goodness sake, most of a retailer’s shoppers buy from other retailers too. Knowing that the top 10% of your shoppers contribute most of your profit is WORTHLESS! It’s a mathematical truism. What’s even more frustrating is the notion that, “We need to move more of our shoppers into the “top” category.” You can’t! That group is usually defined as the top n%. You can raise the average spend among those in the top 10%, but you can’t have more than 10%. OY! What retailers really want is for more of the people that don’t spend most of their money with them to begin doing so. By definition, that means those folks are spending their money OUTSIDE the retailer. So, at best, internal data is marginally helpful in figuring out what to do. Consumers have an ever broadening set of retail options. You’re fighting for their food budget which is increasingly split across numerous outlets. Trying to convert your shoppers that buy two yogurts a year into ones that buy 20 yogurts a month, like your “tops”, may be missing the real problem. A lot of your shoppers are probably buying their yogurt at Trader Joe’s or Costco.
- Think about the type of trip, not just the category.
People go to grocery stores to buy groceries, not just peanut butter. But, when creating a Category Business Plan for peanut butter it’s all too easy to forget that this chunk of products is only a small part of why shoppers come to the retailer (or don’t). If we discover that we sell PB to only 15% of consumers in the market we panic and begin to plan more promotions. But, if the retailer has only 12% market share that may not be too bad. More importantly, can we really grow the peanut butter category effectively by trying to attract new shoppers to the retailer? I’d be more concerned about understanding why we weren’t getting more “staple” trips that include such items. Maybe the broader promotional strategy of running ridiculously cheap soda and chips is just bringing in shoppers for a “cherry-picking” trip on their way to their preferred “full-basket” store. If you don’t fully understand the types of trips and shoppers the retailer is getting across categories, you can never completely understand what’s going on in any individual category.
- Train your people
When was the last time you were trained in Category Management, or data analysis, or sales? You probably don’t remember. For most people it was when they first took a position related to CM. They were sent to a week long seminar and learned how to “do Category Management”. Unfortunately, those seminars stink. They have NOTHING to do with reality. [Warning: slipping into selling mode again] CM Solutions provides numerous seminars in Category Planning, Data Analysis, Assortment, Sales, and Marketing Strategy that can immediately boost your team’s capabilities and drive sales and profits. And don’t underestimate the value of software classes (particularly Excel, Work, PowerPoint and Outlook). Most of us spend a lot of time using these applications and stronger skills can dramatically increase productivity. Whether you exploit our courses or someone else’s, it’s probably time to freshen up the skills of your team. You won’t regret it.
There you have it; the 7 things to transform CM in ’07. Give us a call and we can help you leverage them to transform Category Management into a money making machine for you and your trading partners.
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