What is Category Management?
To find out what category management is, we first have to define a category.
In most cases, a category is perceived as a group of products that are used by customers to satisfy similar needs. Within a category, products can differ in dimensions, price, brand, etc.
As far as the yoghurt category is concerned, the category in the strict sense of the term covers only traditional white yoghurts, ranging from cream yoghurts to low-fat yoghurts. Adding fruit ingredients broadens the concept of the category, as the majority of customers perceive fruit yogurts as a substitute for white yogurts. An additional extension of the category is created by adding yoghurt drinks, which is perceived as "yoghurt without a spoon". In the broadest sense of the term, the yoghurt category can also include soy and other herbal products that satisfy similar needs of customers, but which are not yoghurts by nature.
The next step in category management is to understand the mechanism of the customer's decision to buy a particular category. The decision-making process is usually analyzed by observing the customer directly in the store and by direct questioning. The result is recorded in the Customer Decision Tree (CDT).
This is an example of the decision tree for the yogurt category for a small business with conservative customers. You must be aware that even the same customers within the same category can make different decisions in different situations (weekend shopping vs. quick shopping for breakfast), in different life roles (shopping alone or with children) and that decision trees change over time. For this reason, there are no universal customer decision trees and it is necessary to address the problem on a case-by-case basis.
Once the category is defined, we can start managing it.
First we have to assess how important the category is from the dealer's point of view.
The most important for the store is the target category, as it refers to a category of products for which the customer is willing to come to the store. This category includes products that are purchased frequently and are important to the customer. Such products must have the best position on the shelf. The customer should have the opportunity to choose from alternative products always at the best price. This is the most important category, as it determines whether the customer chooses the store as the destination for his or her purchases or buys elsewhere.
The routine category refers to a category that the customer buys regularly, and therefore we should always offer a sufficient assortment clearly visible on the shelf at affordable prices. Shopping in this assortment has become routine, which is not a great burden for the customer who wants everything available immediately and at a reasonable price.
As far as the seasonal/occasional category is concerned, the customer here is motivated by his current need, which means that it is important to follow trends in order to be able to provide him with a pleasant surprise.
The convenience categories refer to impulse purchases that would normally prevent the customer from going to the store. They are characterized by a low level of buyer loyalty.
The importance of such a category must be taken into account in the store's floor layout, and they must be placed in an appropriate manner.
After arranging the above categories we can proceed to the creation of planograms. The necessary information includes the technical specification of the equipment available in the branch.
The equipment is often the factor that limits the final presentation. Therefore, it is necessary to document all types of equipment in which the respective category is to be presented before creating planograms. In this phase of category management, we cannot make progress without appropriate software that enables the processing of information from all stores. Advanced software applications such as Quant make it possible to enter such information directly on site, which greatly simplifies and accelerates the process.
Planograms are created after the products have been analyzed and selected. Regular analyses of high quality are possible with secured daily transmission of sales data. In such a case it is possible to work on day-to-day category management.
When creating planograms, the customer's decision tree must be included. The process begins with the creation of the most common (or even the largest or smallest) version of planograms. This version must be further adapted to all the different equipment for which the given category is intended. Software applications such as Quant offer considerable savings in time and effort, as they are able to automatically prepare the hierarchy of all required planogram versions and create planograms based on the template and the selected rules for different shelf widths.
For example, the rules can specify a number of days for which the stock should be available on the shelf. In the case of yogurt, for example, the above rules should be derived from the frequency of delivery (the minimum number of days for which the stock is available) and the warranty period (the maximum number of days for which the stock is available). Based on sales data provided by the individual stores, the sophisticated systems prepare the number of items for products in individual planograms that reflect the sales in each store. Based on a single template, planograms are created for shelves with widths of 25 cm, 40 cm and 80 cm.
A key moment is the publication of the planograms for the stores and their implementation. If this step in the process is not handled appropriately, the result of the entire demanding task cannot be achieved. An advantage is the possibility to easily compare changes in the previous and new planograms. The time saved in the range of minutes per store has a clearly positive effect on the entire chain.
If it is possible to implement planograms easily thanks to mobile devices, time is saved that would otherwise be spent in the office printing planograms.
For major changes in the presentation of important categories, photographic feedback that quickly identifies potential areas for improvement is invaluable. When implemented with mobile devices, photographic feedback is available in seconds.
The main advantage of the planogram is that it provides staff with information about the position of each product. If the staff has the information that the product in the category yoghurt on the first shelf should be displayed in the second position on the right side of the first shelf and should have 4 positions, the process of displaying the product is accelerated enormously. In addition, many other processes, such as the introduction of SELs (shelf labels) in stores, can be linked to planograms. Information about the positions of the products can then be placed directly on the shelf labels, which considerably speeds up the personnel work involved in arranging the shelf labels. Shelf labels can be prepared before the actual rearrangement, which makes the work with the products on the shelves more efficient due to the information on the shelf labels.
The key to success is correct communication with the branches. Major changes should be explained to staff to give them time to adapt to new developments.
Mobile devices can reduce the time spent in the office. The entire implementation process can easily be performed directly from a tablet and/or mobile device.
The main benefits of category management include
• Increase in sales and other indicators on which category management focuses (profits, etc.).
• Easier stock management.
• Accelerate the process of opening and rebuilding new stores.
• Assortment that meets the local needs.