Category Management

Category Management approach usually applied in a trade

chain
What is Category Management?

Category Management is a retailing and purchasing

concept in which the range of products purchased by a
business organization or sold by a retailer is broken down
into discrete groups of similar or related products; these
groups are known as product categories. It is a
systematic, disciplined approach to managing a product
category as a strategic business unit.
Brian F.Harris
 Why?
1970
• Small stores
• Less than 400 feet squares
• 200/300 SKUs
• Growing consumption
• Unstructured chains

2015
• Multi format stores
• More than 30.000 feet squares
• More than 20.000 SKUs
• Oversupply
• High competitiveness
 So..

• In a competitive business just organized and proficient

chains will stay on the market.

• A huge complexity behind the workflows impose to

approach the business considering each category as a
single business, in order to decrease the whole
complexity.

• So it's important ensure a managing system for each

category through strategies of pricing, promotion,
assortment and exposure aiming achieve results of
sales and margins.
 Steps:

Definition Define segmentation and products for each category.

Assign a specific role for each category, considering our customers

Role
needs and behaviours.
Category Flow

Evaluation Evaluate gap and opportunities for our categories compared with the
market

Targets Set a clear and achievable target for each category in terms of
sales and margins, considering market trends.

Strategies Set strategies of Assortment, Price, Promotion and Visual

Merchandising in order to achieve sales and margins targets

Actions Apply strategies and processes.

Execution Ensure a correct execution for each strategy and a total

engagement of every department in the processes.
 Definition

Definition Departement

Role
Family Family Family
Category Flow

Evaluation

Category Category Category

Targets

Strategies Segment Segment Segment Segment

Actions
BranBdrand

Execution SizeFormati

SKURseferenz
e
 Definition:

Departement Families Categories

Alcoholics Spirits Flavoured Spirits
Brandy
Vodka
Whisky Segment
Canadian Whisky
Rum
Irish Whiskey
Gin / Genever Other Whisky
Tequila Scotch Whisky
Wine Still Light Wine US Whiskey

Sparkling Wine
Fortified Wine
Light Aperitifs
Other Wines
Beer Alcoholic Beers
Non-alcoholic Beers
Cider
 Definition:

WINE

STILL SPARKLING FORTIFIED

RED WHITE

Light Grapefruit Light Herbal Light Citrus Medium Rich Creamy

Floral Grassy Lemon Perfum Floral Nutty
Vermentino Sauvignon Blanc Pinot Grigio Tokaji Chardonnay
Verdicchio Verdejo Garganega Viognier Soave
Greco di Tufo Gruner Veltliner Fiano Roussanne Cote de Beau
Pinot Blanc Chevemy Silvaner Marsanne Macconais
… … … … …
 Definition:
EAN code is a European Barcode (UPC in USA)

May be 13 or 8 digits

Is printed over the products and is read by POS.

 Definition:
So, the first step is to understand characteristics
and values of the Category focusing our
attention in each segment, in order to define
specific strategies for similar groups of products.
 Role:

Loyalty Driver
Definition (Frequency, Sensibility
of consumers)

Pasta
Role Gelati
Category Flow

Routine Destination
Evaluation Biscotti
Caffè
Succhi
Targets Birra
di frutta
Verdura
Strategies Surgelat
Te
Convenience
Dolci
a Occasional
Actions Pesce
Surgelato

Execution
Profit contribution
(Margins,Contribution)
 Role:
The Role of categories is set considering:
-the importance for the customer (frequency,
sales, price sensibility)
- trade interests (margin, profit, contribution)

The role may be customized for:

- area
- store format
- seasonality
 Role:
Loyalty Driver
(Frequency, Sensibility
Of consumers)

Pasta Milk Yougurt

Beers
Cookies
Coffee Oil
Water
Wine

Mozzarelle Omogen
Sugar
Salt
Bread
Aperitifs Tomatoes sauce

Champagne

Profit contribution
(Margins,Contribution)
 Role:
Loyalty Driver
(Frequency, Sensibility)

Routine Destination
• Daily needs • Loyalty and sales
• Store Traffic • Need for
generator differentiation
• Price • Competitive
Competition advantage

Convenience Occasional
• Occasional needs • Emotional
• Niches purchasing
• Service for • New
markets
consumers • Customer
Satisfaction

Profit contribution
(Margins,Contribution)
 Evaluation:

Definition
Fair Share

Role
Category Flow

Evaluation

Targets

Strategies

Actions

Sales
Execution
Market share
 Evaluation:
Comparing internal and external data it is possible
to find points of strength and points of weakness:
- Market Share for each category (Fair Share);
- Market Share for leader brands;
- Market Share for private labels;
- Frequency and Sales in cut prices;
- Number of SKUs in each Category;
- Price Average;
- Margins;
- SKUs opportunities in the market;
 Targets
:
Targets Tree
Definition
Category Category Category
Role
+ 5%
Category Flow

Evaluation

Targets
Segment Segment Segment
Strategies + 11% + 6% + 3%

Actions

Execution + 11% + + 6% + + 3% = + 5%
 Targets
: in terms of gross margin (sales
We have to set targets
x margin%). Managing the sales mix is the best way to
achieve our targets. So we need to influence the sales
of every brand.
 Strategies:

Definition
TRAFFIC Strategies for increase the number of
customers in the category
Role
Category Flow

FREQUENCY Increase the number and the ammount

Evaluation of purchasing for each customer

Targets Keep a good profitability, through

PROFIT discounts and contribution
Strategies
Increase net turnover through a bigger
PRICES share of premium products.
Actions

Get more loyalty dispensing

Execution ENTHUSIASM
informations, tips, interactions
 Strategies:
Every strategy should be declined in 4 kind of actions:
Assortment, Price, Promotion, Exposure.
Depending of the role we can identify:
Price: Medium competitiveness Price: High competitiveness
compared with compared with all the competitors
main competitors

Promotion focus on cut prices Promotion deep cut prices

Destination
Routine

Exposure spaces in line with Exposure overdimension the spaces.

sales. focus on the
focus on margins. niches. best areas.

Assortment number of products in line with the Assortment Number of products

market. specific role for cheaper higher
products and private labels. than the market.
Many premium brands and
exclusive ones.
Price: Less competitive than
main competitors Price: Medium competitiveness

Promotion No promotions Promotion few promotions

Convenience

Occasional

good margin

Exposure Worst store areas Exposure correctly dimension the spaces.

good areas.

Assortment narrow assortment Assortment narrow assortment

no private label private label in core
no premium prices segments deep of premium
prices
 Strategies:
Every strategy aims to decrease market share of
unprofitable brands, improving share of profitable
ones.
How? Defining promotions, prices, and exposures in
order to influence the consumer choice.
 Actions:

Definition
Category Plan

Role Number of products,

Wideness of category,
Category Flow

Deepness of
Evaluation category
mechanics,
frequency,
Targets deepness

Strategies Shelf
Extra Shelf
Promotion
Actions al
high competitiveness,
medium competitiveness,
low competitiveness
Execution
 Actions
Frequency of actions:

Reviewed each 6 months allow you to drive

seasonality and change of consumption

Planned every year have a great impact on sales,

so is very important in negotiation

After every Category Review (every 6

months) we need to set new exposures,
both for shelf and extra-shelf.

Every week we need to change our competitive

positioning, comparing our price with the
main competitors
 Execution

Definition
Category Review

Role
Category Flow

Evaluation Test

Targets

Strategies Roll-out

Actions

Execution Monitoring
Category Management

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