What is Category Management?
To find out what Category Management is, we must first define a category.
In a majority of cases, a category is perceived as a group of products used by customers for the satisfaction of similar needs. Within the framework of a category, products can differ in dimensions, price, brand, etc.
Considering the yoghurt category, the category perceived in the narrow sense of the term includes only traditional white yoghurts, starting with cream ones up to those low in fat. By adding fruit ingredients, the concept of the category is extended as a majority of customers perceive fruit yoghurts as substitutes for white yoghurts. Additional extension of the category is created by adding yoghurt drinks that are perceived as “yoghurts if you have no teaspoon”. In the widest sense of the term, the yoghurt category may also include soya and other vegetable products satisfying similar needs of customers, which however are not yoghurts by nature.
The next step of Category Management is to understand the mechanism of the customer's decision concerning purchases of a given category. The decision-making process is usually analysed by observing customers directly in the store and by direct surveying. The result is recorded in the Customer Decision Tree (CDT).
This is an example of the decision tree for the Yoghurt category for a small store with conservative customers. You must realize that even the same customers within the framework of the same category may decide differently in different situations (weekend shopping vs. quick shopping for breakfast), in various life roles (shopping alone or with children) and that decisions trees change in time. For this reason, there are no general-purpose customer decision trees and it is necessary to approach the problem on a case-by-case basis.
Once the category has been defined, we can start managing it.
First of all, we must assess how important the category is from the point of view of the trader.
The most important for the store is the destination category as it refers to a category of products for which the customer is willing to come to the store. This category includes products often bought and important for the customer. Such products must have the best position on the shelf. The customer should be given the opportunity to select from alternative products always at the best price. This is the most important category as it decides on whether the customer will choose the store as destination for his/her purchases or will go shopping somewhere else.
The routine category refers to a category that the customer purchases on a regular basis and therefore, we should always offer a sufficient assortment clearly visible on the shelf at affordable prices. Shopping for this assortment has become a routine, which is not much of a burden on the customer who wishes to have everything immediately available and at a reasonable price.
As far as the seasonal/occasional category is concerned, here the customer is motivated by their current need, which means that it is important to follow trends to be able to prepare a pleasant surprise for him/her.
The convenience categories refer to impulse purchases because of which the customer would not normally go to the store. They are characterized by a low loyalty of purchasers.
The importance of such category must be taken into account within the floor-plan of the store and they need to be placed in a suitable manner.
After the arrangement of the aforementioned categories, we can proceed to the preparation of planograms. The required information includes the technical specification of equipment that is available in the store.
Equipment is often the factor limiting the final display. Therefore, it is necessary to document all types of equipment on which the respective category will be presented before the preparation of planograms. In this phase of Category Management we cannot progress without relevant software that allows information from all stores to be processed. The advanced software applications, such as Quant, allow such information to be entered directly in the field, which simplifies and accelerates the process to a great extent.
The preparation of planograms comes after the analysis and selection of products. High quality analysis on a regular basis is possible with secured daily transfers of sales data. In such a case, it is possible to work on the Day-to-Day Category Management.
When preparing planograms, the customer decision tree needs to be incorporated. The process starts with the preparation of the most common (or also the largest or smallest) version of planograms. This version must be further adapted to all different items of equipment for which the given category is intended. Software applications like Quant will provide considerable savings of time and labour as they are able to prepare the hierarchy of all required versions of planograms automatically and generate planograms based on the template and selected rules for various widths of the equipment.
The rules may define e.g. a number of days for which the stock on the shelf should be available. For example, in the case of yoghurts, the aforementioned rules should be derived from the frequency of supply (the minimal number of days for which the stock is available) and warranty period (the maximal number of days for which the stock is available). Based on sales data provided by individual stores, the sophisticated systems will prepare the number of positions for products in individual planograms reflecting sales in each store. Based on a single template, planograms for the equipment with the width of 25 cm, 40 cm, and 80 cm are prepared.
A key moment is the publication of planograms for the stores and their implementation. If this step is not treated appropriately in terms of processing, the result of the entire demanding task may not be obtained. The possibility to compare changes easily in the previous and new displays comes as a benefit. Time savings in the order of minutes per store have a significant positive impact on the entire chain.
If it is possible to implement planograms easily thanks to mobile devices, time spent in the office on printing planograms will be saved.
With major changes in the display of important categories, photographic feedback that quickly reveals potential areas for improvement is invaluable. If implementation is performed using mobile devices, photographic feedback is available in a few seconds.
The key benefit of the planogram rests in the fact that it provides the personnel with information on the position of each product. If the personnel have at their disposal the information that the product is to be displayed in the category of yoghurts on the first shelf in the second position on the right and should have 4 positions, the process of displaying speeds up enormously. In addition, a plenty of other processes, such as the implementation of SELs (Shelf Edge Labels) in stores, may be linked to planograms. Information concerning the positions of the products may be then placed directly on the SEL, which considerably accelerates the personnel work when arranging the SELs. The SELs may be prepared prior to rearrangement itself making the work with products in racks more efficient due to the information on the SELs.
The key to success is correct communication with stores. Major changes should be explained to the personnel to give them time to adapt to innovations.
Mobile devices can reduce the time spent in the office. The entire implementation process can be easily executed directly from a tablet and/or mobile device.
Among the main benefits of Category Management are in particular:
• increase in turnover and other indicators on which Category Management is focused (profits, etc.)
• easier stock management
• accelerating the process of opening and reconstruction of new stores
• assortment able to respond to local needs