next generation of category management
TRANSCRIPT
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.1
Shopper & Category Development
The Next Generation of Best Practices Category Management
The Partnering GroupDr. Brian Harris John Clutts
Hallmark Cards Inc.,Wayne Strickland
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.2
Scanning
Space Management
Category Management
ECR Category Management Best Practices
Next GenerationStore Designs
ShopperMarketing
Retail Marketing - The Big Waves
1975
1989
Today
1985
20001995
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.3
Category Management
Concept introduced in the late 1980’s
Category Management has had global acceptance since it’s introduction
The 1995 US ECR Report documented the Best Practices definition and business process
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.4
Adoption of Best Practices Spread Quickly
Ado
ptio
n
1993 Today
The Best Practice Model provided a Platform for Global Adoption.
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.5
It Spawned Related Best Practice Reports
1997 - Category Management – Building Organizational Capability
1999 – Micromarketing – A Tool for Category Management
1998 – Category Management in a Direct Store Delivery Environment
1998 – Advanced Category Management – A Pizza Category Case Study
Many other US and International reports followed.
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.6
Category Management Filled A Need
Products were not viewed as consumer-centric categories
Lack of a formalized business planning process
Underutilization of consumer research, data, and tools
Data mining was in its infancy
No formalized & balanced view of business performance
Non-collaborative supplier relationships
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.7
It Remains A Top Priority
98% of retailers and 89% of manufacturers consider Category Management critically important.
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.8
Key Reasons why CM Has Worked
Provided foundation for strategic retail marketingCategories as SBU’sAligning Company to Company strategiesBalanced portfolio of Category RolesLinking Category Strategies and Tactics
Brought consumer focus to Retail Marketing and Merchandising
New Category Definitions and StructuresConsumer-driven Strategies and Tactics
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.9
Key Reasons why CM Has Worked
Provided a new and more effective model for collaboration through better information sharing
Expanded organizational capabilitiesNew skills and talentRoles and accountabilityScorecard-based performance
Delivered superior resultsRetailers and ManufacturersSales, Profits, and ROI
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.10
Industry Results
Retailer RevenueGrowth
11% 10%
Source: ECR Industry Report 2000
Retailer ProfitGrowth
Grew SalesImproved ProfitabilityIncreased Market ShareImproved Operational EfficiencyOptimized Store AssortmentsCreated a basis to evaluate new items
Category Definition
Category Role
Category Assessment
Category Scorecard
Category Strategies
Category Tactics
Plan Implementation
Cat
egor
y R
evie
w
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.11
Category Management Results
Source: Business 2.0, Feb 2003 & 2002 Cannondale Studies
Sales growth attributed to Category Management + 14% Retailers & Wholesalers
+ 8% Suppliers
Category Management is now standard practice at nearly every U.S. supermarket, convenience store, mass merchant, and drug chain.
And its use is growing because it works – at least from a dollars-and-cents standpoint.
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.12
Why CM Hasn’t Achieved It’s Full PotentialInconsistent top management support
Used more as a tactical tool than an competitive strategic advantage
Scorecards have not changed enough to motivate and reward new behavior
Too project oriented – not a “continuous” process
Work cycles too long and time intensive
Process to data focused and template driven – not enough emphasis on insights
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.13
Why CM Hasn’t Achieved It’s Full PotentialToo much reliance on manufacturers – lack of retail ownership
Too headquarters focused – not enough store / shopper focus
Inconsistent implementation at store level
Pipeline of new people not well maintained
Lack of software supporting tools, especially in promotion and pricing tactics
New trends and competitive challenges have emerged
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.14
Trends Shaping The Next Generation of Category Management
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.15
Scanning
Space Management
Category Management
ECR Category Management Best Practices
Next GenerationStore Designs
ShopperMarketing
Retail Marketing - The Wave Continues
1975
1989
Today
1985
20001995
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.16
Best Practices Have Evolved
Category Management is more important than ever, and it has evolved to reflect the
changing times.
A “Next Generation” approach of Category Management has emerged to address the new needs and opportunities.
IndustryTrends
Category Management Experience
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.17
Shopper and Category Development
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.18
The Philosophy & Objective Remain The Same
“A Distributor-Supplier Process of managing categories as Strategic Business Units,
producing Enhanced Business Results by focusing on delivering Consumer/Shopper
Value.”
Consumer/Shopper
RetailerSupplier
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.19
Shopper & Category Development
Key ElementsStreamlined, robust for all categories
Consumer & shopper insight driven
Shopper centric strategies
Loyalty Marketing integration
Breakthrough, differentiated initiatives
Global & local application
Emphasis on implementation
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.20
The Evolution of Best Practices Process
Category Definition
Category Role
Category Assessment
Category Scorecard
Category Strategies
Category Tactics
Plan Implementation
Cat
egor
y R
evie
w
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Category Definition
Category Role
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.21
Best Practices Enhancements
Category Definition
Category Role
CATEGORY SUB-CATEGORIES SEGMENTS SUB-SEGMENTS
Definition & Role remain an important elements of the
process.
Greater focus on strategic alignment and Destination
categories.
Performed as needed
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.22
Best Practices Enhancements
✔ Key opportunities versus “boiling the ocean”
✔ Heavy emphasis on shopper understanding
✔ Business question driven versus templates
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.23
Best Practices Enhancements
✔ One step Strategies/Tactics for optimal linkages
✔ Greater focus on the consumer and shopper
✔ Tactical Blueprints✔ Framework tactical guidance of
initiatives
✔ Mechanism for core and local planning
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.24
CoreCategory
Business Plan
Market“A”
Market“B”
Market“C”
Plan Localization
80%
20%
Core PlanningLocal Planning
Local Tailoring
Tactical Blueprint
Local Tailoring
Tactical Blueprint
Local Tailoring
Tactical Blueprint
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.25
Best Practices Enhancements
✔ Rigorous cost/benefit analysis & prioritization
✔ Formal identification of plan requirements✔ Secures commitment and
resources
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Importance of InitiativesBring innovation to lifeCreates a focus on implementation and success measurement
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.26
Best Practices Enhancements
✔ Detailed implementation planning tied to each initiative
✔ Formal approval & executive commitment process
✔ Improved scorecard target setting & measurement
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.27
Best Practices Enhancements
✔ Plan review focused on initiative results as well as total category
✔ Continual evaluation and adjustment
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.28
Moving Beyond Traditional Category Plans
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Category Definition
Category Role
Plan
Rev
iew
TraditionalCategory
Plans
PortfolioPlans
ShopperSegment
Plans
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.29
Wayne StricklandVice President Category Management
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.30
Category Management At Hallmark
Hallmark has been successfully practicing Category Management for years
Drove growth through collaboration with our customers
With the ever increasingly competitive market, we recognized the need to take it to the next level
Took steps to enhance our Customer Marketing capabilities and adopted this new process
Revitalized our focus on driving Shopper focused solutionsEstablished a rigor in the organization for converting consumer and shopper insights into action
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.31
Our Path
Assessed our current capabilities and challengesRefined many of our internal processesReorganized our Customer Marketing TeamApplied the new processTaken the new capability to our customers delivering innovative shopper focused solutions
Along the way, we had some key learnings.
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.32
Hallmark’s Top Ten Learnings
1. Top of the house support is critical2. Scorecard is a must to track and drive performance3. Courage and discipline to stay the course4. “Research” and “Insights” are not the same5. Everything starts with the Consumer & Shopper insights6. Cross-functional alignment the customer is essential7. A common / shared scorecard with the retailer keeps
everyone focused on success8. Customer Teams must become business partners with
the customer9. Develop the corporate capability and establish training
programs that continue to grow the organization10. Category Management is a “way of life”, not a project
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.33
Insights To ActionMany shoppers are short on time and patience
Many consumers did not know this customer carried Hallmark – very important to core consumersShoppers only taking a couple of minutes to find the right cardVery convenience driven shopping tripWhen they find the right card they stay in the store longer
Sections can be difficult to shopOften organized by lineA single occasion (eg. Birthday) can be found in numerous locationsDisplay units designed to maximize inventory more than to showcase product
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.34
Two Shopper Focused Strategies
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Plan
Rev
iew
Convert The Shoppers
Simplify the shopping experience making it easier to find the right
card.
Build The Shopper Transaction
Encourage the purchase of complimentary products both in the
section as well as the rest of the store.
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.35
Scanning
Space Management
Category Management
ECR Category Management Best Practices
Next GenerationStore Designs
ShopperMarketing
1975
1989
Today
1985
20001995
Retail Marketing - The Big Waves
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.36
In Summary Shopper & Category DevelopmentStreamlinedInsight driven strategies“Selective set” of tactics tied to each strategyEnables differentiating initiativesClosely ties implementation to initiativesFocused on driving sustainable resultsHeavy emphasis on plan executionShopper is at the heart
Insight Generation
Strategic & Tactical Planning
Initiative Development
Plan Launch
Category Definition
Category Role
Plan
Rev
iew
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.37
Upcoming FMI Report
Shopper and Category Development
The Next Generation of Best Practices Category Management
Publication: Fall 2008
Next Generation Category ManagementFMI 5-6-08 © 2008 The Partnering Group, Inc.38