We’ve Done Category Management – Now What?

Category Management What's NextI met a client in China last week who was telling me of their success in conducting category management programs with two major multi-national retailers. “The thing is, we’ve been doing this for two years and we ask ourselves, now what? Our partners are supportive but they keep challenging us to come up with something new”.  I started reflecting on their options and what guidance to give.

Thinking about the situation, the people I met where in a fortunate situation – first their experience was positive: the retail partners had delivered a reasonable level of implementation (c. 50% – which is great for China); both sales and market share had grown and the retailers remained engaged. Second, buoyed by a positive experience, the company had gone on to invest in deeper research into shopper behavior  in broader capability in managing large data sets. The management team I spoke to was convinced that the next step was to secure more category partnerships with key retailers. I’m not so sure, here’s why:

Is extending category partnerships always a good idea?

Working with key retailers is resource hungry: No company has infinite resources and finding good people with the right blend of competencies to steer their way through a major piece of joint-working is difficult. Presumably any business that has a successful relationship with a small group of customers already is likely to want to maintain this. So extending the number of relationships will require more resources or require the existing team to put less focus on existing relationships. The reduced level of focus this inevitably leads to is unlikely to deliver better results than those the team delivered before.

Category management is not the only way to get things done: The magic of category management is that it’s such a powerful vehicle for common languages and objectives. Successful projects deliver what retailers need: category growth, improvements in category margin and improvements in category efficiency. They also deliver against manufacturer’s goals: increased sales, improvements in market share and better returns on investment. Empowered with two years of learning, data and a proven track record of delivery, my client has a great opportunity to persuade other retailers to make changes in-store without the need for expensive joint-working programs. A more efficient route to getting progress would be to convert all of the understanding the business has into great selling stories, and have the account team drive execution in the traditional way.

Key retailers are not necessarily the biggest priority: In China, key multinational retailers have tended to cluster in grocery supermarket and hypermarket channels. This is the case in many markets globally. It’s often a ‘default setting’ of the CPG industry to assume that big stores=big opportunities.  And yet, its these large formats which seem to be most hit by slowing consumption growth – it appears shoppers globally are choosing smaller, more local alternatives and switching gradually to alternative channels (6% of China’s housewives now buy all food online).  Further despite the onslaught of the big box, many markets have a thriving independent sector.  What if the bigger prizes lay beyond the walls of Tesco and Carrefour?  I believe if you have limited resources, they should be focused on the largest prizes, so I’d want to be assured that that was the case.

So what will I advise my client, and indeed anyone with the same questions about category management programs? First, know you priorities. Before extending a category management program make absolutely sure that that the retailers you might work with operate in the channels you would prioritize. A priority channel is one which not only attracts a large volume of shoppers; it is also one where your target shoppers shop and where they can be influenced to buy more. Secondly, review your approach. It is cheaper to persuade a retailer to change using data and insight than it is to conduct category management programs. Insight-based selling should be the default approach to getting things done. Lastly pick your partners carefully: I’m pretty certain most will agree that retailers don’t make great bedfellows. Retailers who implement what is agreed are a good place to start but more is needed for partnerships to work in the long-term. Partnership is two-way, so a great partner doesn’t leave everything to you, they work with you, bringing ideas and concepts to the party.  If you are left being challenged to deliver “something new”, perhaps the retailer you are working with isn’t actually your partner at all!

Featured image: Flickr