fusion point research Marketing Research Reports

Marketing to Category Management in Retail

Understanding Their Role

Categories are groups of products, for example “Salty Snacks”. Underneath the main category are subcategories like “Potato Chips”, “Pretzels” and “Popcorn”1 , and then each subcategory contains several brands such as “Lays”, “Doritos” and “Pringles”. Retailers use category management to view these groups as separate business units, as opposed to trying to handle thousands of individual brands or SKUs. If the process is managed effectively, it can translate into increased productivity and higher sales.2 Category management activities include:

 

  • Clearly defining the category.
  • Building a strong understanding of customer needs and buying practices.
  • Looking for growth opportunities within the category.
  • Developing the category’s strategy including merchandising, pricing, and assortment plans.
  • Setting sales targets for the category using KPIs and scorecards.
  • Creating category tactics including shelf layout design and marketing promotions.
  • Analyzing category performance and making necessary adjustments.3 4

 

Category management is often a cooperative function between retailers and suppliers. The suppliers have more knowledge specific categories since their focus is much narrower than the retailers who handle, in some cases, hundreds of categories. Some retailers have opted to use one major supplier (called a “Category Captain”,) to manage a category, including competitors’ products. However, retailers must make sure their reliance on this supplier does not lead to opportunistic behavior where the chosen provider pushes their products at the expense of total category sales.5

 

“For the past 20 years, category management has been embraced by consumer packaged goods (CPG) brand owners and retailers alike for its ability to increase profitability.”- Gordon Wade, Category Management Association.6

1 See, as an example: www.nacsonline.com/Research/Documents/NACSCategory...

2 Kurtulus, Mümin, and L. Beril Toktay. “Category Captainship vs. Retailer Category Management under Limited Retail Shelf Space.” Production & Operations Management 20, no. 1 (2011): 47 – 56. EBSCOhost(57291866).

3 Wang, Steve. “Category Management–Common Language between Retailers And Manufacturers.” Nielsen. 2014. Available at: www.nielsen.com/tw/en/insights/reports/2014/catego...

4 Berman, Barry, and Joel R. Evans. Retail Management: A Strategic Approach 12th Ed. Part 6. Edited by Pearson Education, Inc., Prentice Hall., 2013.

5 Gooner, Richard A, Neil A Morgan, and William D Perreault. “Is Retail Category Management Worth the Effort (and Does a Category Captain Help or Hinder)?.” Journal of Marketing 75, no. 5 (2011): 18 – 33. EBSCOhost(64342080).

6 “Achieving Category Management Mastery.” Real Results Magazine, Volume 8, Issue 2, Available at: http://jda.com/realresultsmagazine

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Retailers group products into categories to make merchandising, marketing and analysis more manageable. This is done collaboratively with suppliers.
fusion point research Marketing Research Reports
Retailers group products into categories to make merchandising, marketing and analysis more manageable. This is done collaboratively with suppliers.
  • Clearly defining the category.
  • Building a strong understanding of customer needs and buying practices.
  • Looking for growth opportunities within the category.
  • Developing the category’s strategy including merchandising, pricing, and assortment plans.
  • Setting sales targets for the category using KPIs and scorecards.
  • Creating category tactics including shelf layout design and marketing promotions.
  • Analyzing category performance and making necessary adjustments.