Key Industry Perspective (KIP)
Category Management
What is it?
In general terms, Category Management is a business process, which enables the
co-management of a product category between the supplier(s) and the customer
(distributor/operator/end user) to deliver shared business goals.
The definition of the "category" may be different dependent on its
position in the value chain. For example the category to be managed could be
defined as "Coffee" by a distributive customer, "Snacking" in a
catered workplace environment, or "Breakfast" in high street
restaurants.
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Why do it?
The aim of Category Management is to deliver sustainable and profitable growth
in the category. This is a long established process for driving top line
product
growth, and has been developed and used by most major retailers and
manufacturers.
This top line growth is achieved through a clear understanding of customer
needs or "customer insight" translated into recommendations on, for
example, product range, promotion or delivery.
In the Out of Home environment, these recommendations must also be based upon a
clear understanding of any operational constraints the end operator or customer
may face.
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What is it not?
Category Management is not a trading tactic focused on profit enhancement
through the auctioning of a category role, range or promotions.
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Is it applicable to the Out of Home market?
The underlying principle of Category Management is to focus on meeting the
needs of the end customer, and this applies to all businesses. In the Out of Home
Market there is clear evidence that key players are benefiting as a result of
using this principle.
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What is a Category Captain?
A Category Captain is an appointed lead supplier who carries out the category
review and leads the process to deliver the plan for the total Category. The
process may be instigated by anyone along the Value Chain.
The Category Captain must:
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have a demonstrable knowledge of customer insight and market understanding |
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take an objective approach to growing the overall category |
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recognise the role of other suppliers in delivering the goal |
The Category Management Process
- Strategic alignment - alignment of business goals, strategies and values between customer and
supplier(s) is essential for Category Management to succeed
- Category definition and role
- Category assessment - evaluate the current category situation/performance
- Category performance, measures, strategies and goals - agree objectives, strategies and plans for the category
- Plan implementation
- Review - review performance against plan
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The Future of Category Management
In the retail environment, Category Management has evolved from a "thing
that I do” to "the way I do business”. It has made that transition because
whether you use a 6 step or a 10 step process, the principle of making business
and category decisions based upon strong customer insight is a sound one.
Focusing on growing top line products through good Category Management will
become an increasingly common theme for the Out of Home industry, as it faces the
double challenge of potential food price deflation and increasing costs.
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Category Management In Perspective
Category Management provides the opportunity to get a greater understanding of
customer needs. In turn this provides a better focussed approach to new product
development and when deployed properly can push sales of the whole category
forward.
There is the risk however of getting caught up in the "detail" which
will impacts its effectiveness, and as a result the associated costs involved
in
the category do not drive any value.
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Last reviewed: 06 Mar 2006
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