Not Stone Dead, Evolving

“My first real experience with category management was in 1990. My company had a strategic relationship with Sam’s Club,” notes Steve Grinstead, CEO of the Grinstead Group and former chief executive of PRO*ACT USA. “Sam’s Club was using category management like it had never been used before, setting sales-per-square-foot requirements for products by category. This determined which products stayed on the shelves and which were eliminated. It’s generally regarded that Walmart fully developed the concept of extending category management deep into the supplier community.”

The traditional category management cycle, developed by Brian Harris at the Partnering Group, includes eight steps: (1) define the category – determine which products make up the category and key segments within the category; (2) define the category role – assign category roles (how retailers want products to be viewed by consumers) based on cross-category analysis; (3) assess the category – use data to evaluate current category performance and identify future sales, profit, and return on asset opportunities; (4) establish category goals – develop scorecards to establish baseline objectives and targets for the category; (5) devise category strategy – build demand and supply chain strategies to improve customer engagement and merchandise flow; (6) devise category tactics – determine the assortment pricing, promotion, display, and supply chain actions to achieve the scorecard goals; (7) implementation – execute the plan at the store level; and (8) review the category – monitor category performance versus goal and adjust as needed.

Although the process looks straightforward, it can be cumbersome, particularly for smaller suppliers and retailers. “The eight-step process with the overhead, the meetings, and the documentation can fall apart under its own weight,” notes Tom White, a partner at Kurt Salmon and coauthor of Seven Facets of Modern Category Management. “That’s why people are trying to take the best of what was done, infuse some analytics, and use category management in their day-to-day operations.”

The Category Management Association also recognized that traditional category management principles and processes don’t effectively address the major changes in the retail industry. A more diverse shopper base, new retail formats, greater availability of data and analytical tools, and timely communication capabilities call for a new model—focusing on the development of a comprehensive category management plan based on facts, shopper insights, sound strategies, and proven tactical success models.

The outcome of these industry enhancements is a broader set of capabilities. White’s Seven Facets highlights the need to establish category roles and strategy, macro space allocation, financial budgeting, assortment planning, planogram development, price optimization, private brand development, promotion and event planning, and joint business planning with vendors. The sidebar (on the previous page) highlights the seven imperatives of today’s category management.