What is Category Management in Fast Moving Consumers Goods
Fast-moving consumer goods (FMCG) companies constantly change their products and services to stay competitive. They also face challenges such as limited shelf space and high competition from other brands. These companies need to manage their inventory efficiently to maximize profits.
Fast-moving consumer goods companies constantly update their products and services to stay competitive. They also face challenges such as limited shelf space and high competition from other brands. These companies need to manage their inventory efficiently to maximize profits and ensure they can get the most of shelf space in the store.
CatMan in the past
In the early 1990s, Category management emerged as a discipline to bridge retailers’ and suppliers’ needs. Many retailers and manufacturers pursued it for faster strategy/opportunity fulfillment, smoother execution, and better results.
Category management is not just about pushing a button or running various reports; it’s about really understanding the customer’s path to purchase and understanding where you can influence that path, or at the very least, understanding how a customer arrives at making the final purchase decision.
The critical components of category management have always been
1. Category Definition
It is the first step because it will help you understand the retailer, their customers, and who buys your brand better. This step will examine the consumer decision tree to determine how customers shop within the category. You will find out which brands, sub-brands, packaging, qualities, flavors, etc., they prefer. You will then be able to define a category or a group of products based on the results.
2. The role of the Category in Retailer’s strategy
The role identifies the importance of the category. Retailers may want the category to attract new consumers, generate traffic, meet their routine needs, or be a destination for special events or occasional purchases. Depending on the type of customer they want to attract, retailers may assign different roles to their categories. There can be four types of roles: destination, routine, seasonal, and convenience.
3. Category assessment
The most time-consuming part of the process is looking at all the data available, including any market or consumer data. It may even require new market or consumer research based on its outcome, but it is not the most time-consuming part of this stage. You will look at sales by category, sub-categories, brands, SKUs, promotions, market growth, decline, and any consumer trend or change in consumer buying habits.
4. Category strategies
The category strategy will define what is needed to achieve the category’s role. Examples of category strategies are; traffic builder, transaction builder, profit generator, share protector, excitement generator, or image enhancer. A combination of assortment, price, promotion, and merchandising tactics will be used to achieve these strategies.
5. Category tactics
Tactics include specific actions that need to be taken to achieve a chosen category strategy. They will look at how effective your marketing efforts were, the type of promotions you ran, how well they worked, how well your assortment changed, how well your communication strategy was, and how well your planogram or fixture changes worked.
This is when new planogram and range assortment plans are developed.
Category Management: recent trends and weak signals
Retailers and manufacturers must work together if they want to understand shoppers, meet their expectations, and offer consistency across digital and brick-and-mortar stores.
Category management has evolved from being a simple tool for retailers to manage their inventory to becoming a powerful tool for retailers and manufacturers to collaborate on creating new categories and products to make the shopping experience more convenient and relevant.
Category management is changing rapidly, and if retailers and manufacturers don’t evolve with it, they risk falling behind. In an omnichannel world, the facets of shopping are changing, and shoppers’ behavior has become with it. As new variables arise and evolve, there is a growing need to focus on physical and digital models to satisfy changing shoppers’ needs.
1. Beyond the recent crisis, retail needs to address old problems still
Pre-pandemic-related challenges are still present, but they’re even more complex than before. Recent history has proven to be a poor predictor of future trends. In addition, managing today’s uncertainties while laying the groundwork for tomorrow’s success remains an important objective.
Understanding consumer behavior has always been a priority, but it has become even more challenging as shopper behavior has shifted.
In such an unrestrained environment, access to action-oriented, current, and relevant insight becomes indispensable. It remains a challenge for category managers at CPG manufacturers and retail stores alike. Understanding consumer behavior and present product performances are crucial for pricing and promotion.
Category managers face a constant challenge in creating stronger manufacturer-retailing relationships. Transparency in manufacturer-retailers collaboration is a priority for retailers. In a recent survey, three out of four category managers claim it is more or much more important than five years ago.
It’s not always a lack of data that prevents effective collaboration, consumer insights, or performance tracking. It’s a struggle for category managers to navigate increasingly complex and granular datasets. Retail category managers also struggle with high volumes of disparate and unstructured data. Tools that can streamline and distill data into coherent recommendations will be invaluable to the category manager of 2022. Ample an opportunity for AI and ML development.
2. Staying Ahead of the Curve
Traditional, backward-looking data won’t be adequate for forecasting and strategic decisions. Developing a vision backed by accurate forecasts is more complicated than ever.
Comprehensive pricing and assortment plans can benefit businesses that don’t have a history of success. To achieve this, the category manager of 2022 will need to understand the consumer decision-making processes in near real-time, spot opportunities for assortment expansion and contractions early, and make decisions based on the most up-to-date data available. It will be necessary to forecast demand based on retailer and manufacturer data. But it will also be critical to use online sales data and promotional responses from third-party retailers, DTC models, and marketplaces, all of which might provide clues on early trends, which are slower to be clear in traditional brick and mortar.
3. Retail is not a channel. It’s an ecosystem
And the shopper is the center of this ecosystem. Retail and category management is evolving, and shopper expectation is changing, but one thing remains constant: the importance of the customer throughout every step of the path towards purchase.
Two panelists put it this way in a recent webinar organized by The Hershey Company:
“There isn’t anyone out there who doesn’t wish to put the customer at the center of all decision making. Getting that right helps everybody”
“Many shoppers are cross-shopping all environments. The way we’re planning the process needs to reflect each of these individual fulfillment models and bring them together to think about the total ecosystem for the retailer.”
4. Mind the last mile delivery changes
The pandemic has shifted purchases online, but it also promoted the development of within-the-hour delivery services, from restaurants bridged into grocery shopping and beyond.
There used to be a divide between a physical storefront and its online presence. Now there isn’t. Almost two-thirds (63%) of food shoppers cross-shop between brick and mortar stores, online, and mobile apps. One in three in-store purchases starts online, and one in four (24%) online purchases start in a store. Therefore, retailers must ensure consistency between their online and physical stores and those of the delivery partners.
In conclusion: Future challenges for Category Management
In the future, the development of retail shopping towards an integrated ecosystem – with the shopper at the center – opens several opportunities and possibilities. But at the same time, other independent trends will play a critical role in the development of category management.
- Blurred Category Boundaries: traditional category definitions are becoming obsolete, and now many brands tap into multiple emerging trends by having a cross-category approach. If you take the Food and beverage industry as an example, we could redefine the role of category based on consumption occasions. Hard and soft drinks effectively source volumes from each other, and more and more spirits and beer brands are launching non-alcoholic lines. At the same time, more and more soft drinks are extending into hard seltzers, hard sodas, and low alcoholic beverages. This makes the category role in the traditional sense less helpful and probably ready to evolve.
- Automation and Live Signals: Both American and European retailers are testing the development of cashier-less stores. Video analyzing tech and app-based checkouts make the shopping experience seamless and convenient. The same tale could be used for creative live signals ready to be converted into action during the shopping experience. It happens online. Why not offline? That would be a game-changer for many promotional activities.
- Data APIs: along the same lines, we know that consumers in-store might purchase in their app, or maybe consumers search on apps before buying in-store. In the foreseeable future, we will probably see the emergence of a data layer in this ecosystem based on multiple apps reselling detailed responses to on- and off-line stimuli to both grocers and manufacturers.