how category management must evolve · “digital based insights are underutilized”...
TRANSCRIPT
TOTAL STORE OPTIMIZATION
Sponsored by:
How Category Management Must Evolve
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Today’s presenters
Win WeberCEO, Co-FounderWinston Weber &
Al McClainCEO, Co-Founder
Graeme McVieVP & GM, Business
DevelopmentPrecima
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Moving Beyond Category Management
Using Total Store Optimization for Competitive Differentiation
How does a Retailer Become Shopper-Centric?
Total Store OptimizationHow Category Management Must Evolve!
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Moving Beyond Category Management
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Category Management has served the industry well for 27+ years but industry dynamics are driving change
Channel of primary store
20
05
20
10
20
15
20
16
20
17
Millennials are different
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32%
32%
35%
Retailers<100Stores
100-500
>500
32%
32%
35%
Retailers<100Stores
100-500
>500
29%
27%
44%
Manufacturers
<5Categories
6to10
>10
29%
27%
44%
Manufacturers
<5Categories
6to10
>10
29%
27%
44%
Manufacturers
<5Categories
6to10
>10
“Time to move beyond category
management”
“Category management has
too many limitations”
“Digital Based Insights are
underutilized”
“Information sharing needs considerable
improvement”
“Change should build
on what we know”
“Decision Support is fragmented & unstandardized”
Retailers and Manufacturers want “Shopper-Centric”
collaboration
Emerging new “food lifestyle” calls for a
shift in focus
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Source: Winston Weber & Associates, Deloitte and FMI 2015 Category Management Study
It is Time for Change: 100% of retailers & manufacturers surveyed said they believe change is required
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To achieve this, retailers need to realize two objectives:
Understand Customer Needs
on a granular, timely & frequent basis
Consistently Plan and Execute Strategy
that best satisfies customer needs
Retailers that Best Satisfy the Needs of Customers will Win
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Using Total Store Optimization for Competitive Differentiation
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• Total Store Insights: identify areas of under-performance by category, customer, store
• Root cause analyses for performance issues– Category drill-downs– Store hierarchy drill-downs– Shopper sales decomposition
• Identification of potential remedial actions
• Total Store:– Growth– Price Optimization– Assortment Optimization– Promotion Planning– Offer Bank (Personalized Marketing)– Supplier Collaboration
How is my Business Performing? How Can I Most Effectively Grow my Business?
Total Store Optimization: key questions
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Total Store Insights Portal
What is driving business performance across the Total Store?Who are our customers & how do they shop our stores?
How is my business performing?
Total Store Insights put holistic and actionable insights at the fingertips of decision makers:
How is my business performing?
Who are my most valuable customers and how are they shopping our stores?
What is driving performance across the total store? What are the sources/causes of under-performance?
Loyalty
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Total Store Growth
Which customers/segs present the best growth opportunities?
Which categories present the best growth opportunities?
Which stores present the best growth opportunities?
Total Store Growth identifies the best customer-driven opportunities to grow the business:
Which categories present best growth opportunities?
Which customers/segments present best growth opportunities?
Which stores present best growth opportunities?
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Total Store Pricing
How do I obtain the right price balance across the Total Store?
Which categories drive perception/volume vs sales/profits?
How should I personalize prices to individual shoppers?
Change in profit $’s
Total Store Pricing aligns strategies and prices across the total store:
Which categories drive perception/traffic/volume and which drive sales/profits?
How do I obtain the right customer-driven price balance across the total store?
How and where should I personalize prices and deliver them to individual shoppers?
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Total Store Assortment
How do I balance assortment decisions across the total store?
Which items are unique/valuable to customers & which aren’t?
How do I successfully manage new item introductions?
Total Store Assortment improves assortment productivity while meeting localized customer needs:
Which items are truly unique and valuable to loyal customers and which are not?
How do I balance assortment across the total store while minimizing risks for sales, profits & customers?
How do I successfully manage new item introductions?
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Total Store Promotion
Which promotions can be fixed by changing their mechanics?
Which promotions aren’t working & should be stopped?
How do I “slant” promotions to loyal customers?
Heavy Promo
Promo at Right Time
Promote Less
Do Not Promote
Ad Count by Recommendation
Current Timeframe Previous Timeframe
Total Store Promotion improves the performance of promotions while satisfying loyal customers’ needs:
Which promotions aren’t working & should be stopped?
Which promotions can be fixed by changing their mechanics?
How do I “slant” promotions to loyal customers?
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Total Store Offer Bank & Offer Optimization:Personalized Marketing
How do I identify offers for each customer that drive response & incremental sales?
Thank You
Incremental Sales (Cross Sell/Up Sell)
Improve Category Penetration
Support Brand Objectives
Total Spend and Frequency
Total Store Offer Bank
How do I incorporate customer-driven offers into the personalization process?
Offer Optimization Engine
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Business Performance Management
What and where is driving business performance?
Promotions
Which promotions work and which ones should not be repeated?
Assortment
Which products should be kept and which should be delisted?
Pricing
Which products are the most/least price elastic with shoppers?
Shopper Insights
Who and what is driving store and department sales?
Advanced Shopper Analytics
How did a new product introduction perform (Trial & Repeat)?
Customer Strategy and Segments
Who are the shoppers and where are the growth opportunities?
Total Store Supplier Collaboration
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How does a Retailer Become Shopper-Centric?
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Total Store OptimizationPrecima believes a total store
approach is essential
Shopper-Centric RetailingIntroduced by Winston Weber & Associates in December,
2015, supported by Deloitte Consulting … endorsed by The Food Marketing Institute
and a growing number of retailers
Shopper Solutions
Shopping Experience Enhancement
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20
2017
Shopper Insights
Internal/ExternalAssessment
MarketplaceAssessment
Solution Goalsand Strategy
ShoppingExperience
Solution PlanImplementation
Strategic PositioningOrganizationRestructuring
Descriptive JobFunctional Titles
Core MerchandisingProcesses
Actionable Shopper Insights
Repositoryof Knowledge
Infrastructure People
Culture/Behavior
BusinessPractices
Cross FunctionalCollaboration
RequiredSkills
Performance Appraisal
Shopper Solutions Planning
Shopper-Centric RetailingVision--Strategy--Commitment
Focus
Shopper and Shopping Experience
Shopper-Centric Retailing, with its core Shopper Solutions Planning process, focuses on shopper solutions and the shopping experience
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Category Definition
Category Role
Category Segmentation
Category Assessment
Category Scorecard
Category Strategy
Implement
Category Review
Category Management 2.08 Step Process
Category Management8 Step Process
Category Definition
Category Role
Category Assessment
Scorecard
Category Strategies
Category Tactics
Plan Implementation
Shopper Insights
Internal/ExternalAssessment
MarketplaceAssessment
Solution Goalsand Strategy
ShoppingExperience
Solution PlanImplementation
Strategic Positioning
Shopper Solutions Planning
Evolution
Category Review
Specifically designed to translate insights into shopping solution enhancements at the category, aisle, department, and total store
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Shopper Solutions Planning
Shopper Insights
Internal/ExternalAssessment
MarketplaceAssessment
Solution Goalsand Strategy
ShoppingExperience
Solution PlanImplementation
Strategic Positioning
• Aligns with what we know about todays shopper.
• A continuous process allowing for adaptability to and staying in front of changing market dynamics.
• It begins with and is driven by an in-depth understanding of the “why” behind the “what”.
• Focus on shopper insights that identify actionable shopping experience issues and opportunities.
• Changes how the retailer’s Category Managers/ Shopper Solutions Managers must think and conduct business.
• Builds upon category management; overcomes its many limitations.
Shifts the focus from products and categories to those solutions the shopper is seeking and enhancements to the shopping experience
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Shopper Solutions Planning
Shopper Insights
Internal/ExternalAssessment
MarketplaceAssessment
Solution Goalsand Strategy
ShoppingExperience
Solution PlanImplementation
Strategic Positioning
Internal/External assessment step leads to the development of solution groupings and shopper solution strategies
• In-depth collaborative process requiring transparency in the sharing of consumer and shopper insights between the retailer and CPG manufacturer.
• This leads to the development of solutions groupings, which capitalize on the growth power of complimentary categories and products that comprise the solution.
• Solution groupings, combined with shopper insights, leads to the development of shopper solution strategies.
• Strategy statements must align with the corporate strategic initiatives and be consistent with the role of the category.
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Shopper Solutions Planning
The tactical components of the 4Ps of merchandising help create an emotional connection between the shopper and the store
Shopper Insights
Internal/ExternalAssessment
MarketplaceAssessment
Solution Goalsand Strategy
ShoppingExperience
Solution PlanImplementation
Strategic Positioning
• Product Assortment provides the opportunity to truly “touch” and connect with the shopper
• Placement presentation aligns the shelf with the consumer purchase decision hierarchy in a way that stimulates interest and entices the shopper to buy
• Price enables a retailer to communicate value… finding value is part of the shopper’s emotional connection with a store
• Promotions provide the opportunity to enhance the in-store shopping experience through solutions based execution
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Much Better Better Same Worse
Total Process 43% 57% 0% 0%
Information Sharing 75% 25% 0% 0%
Strategic Focus 75% 25% 0% 0%
CM Involvement 75% 25% 0% 0%
Shopper Focus 75% 25% 0% 0%
Understanding Retailer Goals 43% 43% 14% 0%
Plan Developed 75% 25% 0% 0%
Presentation of Plan 88% 13% 0% 0%
Execution of Plan 38% 63% 0% 0%
Suppliers were asked to rate each of the following relative to category planning experiences they have had with other retail clients.
CPG manufacturers have given Shopper Solutions Planning an overwhelming favorable response
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Director
CM CM CM
Center Store
Director
CM CM CM
GM/HBC
Director
CM CM CM
Fresh
Merchandising
Not positioned to capitalize on the growth power of the complementary categories that comprise the
solution from the shoppers perspective
The current siloed department alignment in most retailers does not lend itself to the concept of solutions thinking
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Group ManagerMerchandising Solutions
Shopper Solutions Manager
Shopper Solutions Manager
Shopper Solutions Manager
Merchandising
Promotion/SolutionsManager
Provides support in coordinating the development of meal and
other solutions across functions….
Manages categories within the Solutions Group or individual
Solution Groups
The team structure moves to a solutions based structure focused on shopper attributes
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Other
CategoryConsumer/
Shopper
Category and consumer/ shopper analytics consolidated into one
group
Category and consumer/ shopper analytics experts have dotted-line responsibility to Solutions Teams
Merchandising Support
Merchandising SolutionsSupport
SpaceManagement
PricingData Entry/
Integrity Analytics Replenishment
Support functions report to centralized team
Centralized Solutions Support team viewed as astrategic imperative and essential investment
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SVP Shopper Solutions
Shopper SolutionsManagers
VP’s Center Store/GM Fresh
Group Solution Managers
SVP Store Operations
Director/VPMerchandising
Solutions/Execution
DistrictManagers
Field MerchandisingSpecialists
StoreManagers
Stores
VP’sStore
Operations
Provides local merchandising input
Feedback loop from stores to merchandising
Merchandising Operations
Executes merchandising plans
Interface with Solutions team
Merchandising communications to stores
Create a new senior-level position within Store Operations that aligns merchandising responsibilities and shopper-centric priorities
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Responsibilities
• In-stock conditions
• Stock rotation
• Planogram compliance
• Promotion execution/compliance
• New item speed to shelf
• Reset execution
• Local merchandising
• Solution focus
• Input and Feedback
The one solution to the decades old store execution problem
Operations
Manager Merchandising Solutions and Execution(Reports to Store Manager)
A new management function, titled Manager of Merchandising Solutions & Execution, should be added to store-management teams
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With this significant change, evolving to a shopper-centric approach to retailing,
it is extremely important to reflect this commitment throughout the organization.
New Job Titles/Vocabulary
• Category Management to…
Shopper Solutions Planning
• Category Manager to…
Shopper or Customer Solutions Manager
• Store Operations to…
Customer Experience Team
This update reinforces the commitment to shopper-centricity and sends a powerful message internally to employees across functions down to the store and to suppliers.
.
Job titles and vocabulary should reflect the evolution to shopper-centric retailing
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• Information-sharing, by both parties, is a foundational component to establishing shopper-centric strategic alignment, and it needs to be improved
• By seeking ways to rise above brand-centric biases through a shopper-centric alignment of business strategies, both sides can share and benefit from the same common goal.
• Manufacturers who wish to develop strategic alliances and actively participate in the shopper-centric solutions planning process must upgrade and better align their capabilities with the retailer.
Strategic alignment and information sharing is a must
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• By change, we mean evolving beyond ingrained business policies and practices to a fully integrated top-down, cross-functional focus on the shopper and enhancements to the shopping experience.
• This is truly a cultural change necessitating a defined:‒Shopper-centric vision and strategy
‒Non-negotiable commitment and reinforcement of the process that permeates all aspects of the organization, across all functions, from the top down to store- level.
• The evolution to shopper-centric retailing must begin at the retailer CEO/COO and senior executive suite levels.
• Strong sponsorship for change is essential within each functional group.
Retailers Must Evolve to the Shopper-Centric Retailing business model to Remain Distinct and Relevant
Magnitude of change will vary from a few retailers requiring minimal to moderate change to a majority who will require significant change
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Key Takeaways
• Move Beyond Category Management to Shopper-Centric Retailing
• Shopper Solutions Planning is the one process focused on shopper solutions and enhancement of the shopping experience
• Leverage data and analytics to take a Total Store Optimization approach across the organization
• Re-think your organization structure and processes and provide your teams with the support to facilitate the transition
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Questions?
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www.precima.com/research-insights/blog/beyond-category-management-1
Precima Thought-Leadership
www.precima.com/content/aligning-merchandising-marketing-decisions-with-shopper-preferences
www.precima.com/content/the-grocery-store-is-an-asset
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NRF’s Big Show 2018
See us at NRF’s Big Show in NYC, January 14-16, 2018
• Precima Booth #1125
• Exhibitor Big Ideas Session: The Impact of Changing Shopper Expectations and Implications for Food Retailers
• When: Tuesday, January 16, 2018 at 9:15 am• Where: EXPO Hall – Room 1/Level 1
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Win WeberCEO, Co-FounderWinston Weber &
Al McClainCEO, Co-Founder
Graeme McVieVP & GM, Business
DevelopmentPrecima
TOTAL STORE OPTIMIZATION
Sponsored by:
How Category Management Must Evolve