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You are here: About & MembershipInsights & AnalyticsWhat is Category Management?

What is Category Management?


An expanded definition of Category Management: Trading partners collaborating to determine the point of optimization in pricing, promotion, shelving, and assortment to maximize profitability and shopper satisfaction. Successful Category Management draws on the latest industry trends, leverages available data, and utilizes best-in-class technology from the leading solution providers.


The formal definition of Category Management: “A Retailer-Supplier Process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.”  -- ECR Category Management Report, 1997 



INDUSTRY-WIDE STANDARDS

Historically, the discipline known as category management, had many different definitions of roles and expectations of responsibilities. The Association was founded, in part, to address these gaps and create formalized standards. Now, with accepted industry-wide training standards, there is a foundation for the future of category management.

Certification through CMA approved standards will ensure that Category Management professionals have a clear understanding of the competencies expected at various levels of responsibility. It provides formal recognition for professional experience and training, which will help in recruiting and retaining talent. Plus, certified professionals will be able to better serve their trading partners, and retailers will be able to easily recognize those professionals who are truly best in class.



                                                                Clarifying Definitions

The purpose of this brief memorandum is to provide some clarifying definitions which can help CPG practitioners discriminate among various activities and thereby communicate with one another and trading partners.

Category Management
is a collaborative continuous process between manufacturers and retailers to manage a shopper need state which we refer to as a ‘category’. The purpose of this process is to optimize shopper satisfaction and fulfill the role chosen by the retailer for that category within the overall portfolio of categories in the retail format. The end state of the category management process is that combination of assortment, price, shelf presentation and promotion which optimizes the category role over time.

Category management is data intensive and analytical in character. Category management is about understanding data. By contrast, shopper marketing is more about understanding emotions or motivations.

Most importantly the category serves as the platform from which shopper marketing  initiatives can be collaboratively launched because the retailer and the manufacturers ideally are aligned around a common solution to a need state of the shopper. Large complex consumer need states such as a ‘family dining‘ solution or a ‘birthday party‘ solution often involve a multi-category solution which necessitates the collaboration of multiple manufacturers and the retailer.

Marketing
is an effort to change attitudes and thereby change behaviors. Marketing has many requirements. It must create awareness, stimulate desire and ultimately differentiate the product by giving consumers a reason to purchase in preference to competition. Marketing is a continuous and all-encompassing activity. It is not a single campaign or initiative such as event marketing, a social media program or an in store shopper marketing event. These are components of the larger multi-faceted activity known as marketing.

Marketers have many tools to attain their objectives. These include research protocols and various promotional and communication options ranging from print to TV to all the newer social and digital media.  Marketing begins by understanding consumer attitudes towards a particular need and then proceeds to product design and strategy development. Great marketing is built upon an insight, a profound understanding of some critical aspect of the consumer need. Marketing consummates at two moments of truth, the first at the shelf when the product is purchased and the second when the product is consumed.

The ultimate end of marketing is creating equity in the consumer’s mind such that consumers identify that product as uniquely theirs, a trusted contributor to a more satisfying life, one that meets a perceived need in a superior manner.

Shopper Marketing
For the CPG manufacturer, shopper marketing is an occasion based component of the larger marketing armamentarium.  It is preceded by the shopper’s perception of a need state and possibly by previous experience with other products in the category which satisfy the need. Shopper marketing is  preceded by and influenced by all the advertising and information collected from months perhaps years of advertising exposure and in many cases actual usage experience.  The objective of shopper marketing is the enhancement of the brand’s equity at the point of sale. Such that a purchase occurs.

 The initiative called ‘shopper marketing’ begins as the consumer perceives a need and starts down the path to purchase perhaps by taking the mundane first step of preparing the shopping list. Shopper marketing may include a range of information gathering and communication interactions including seeking and receiving promotional incentives or exploring websites for product recommendation or product availability. The key point is that shopper marketing is an episodic  time bound activity, occasion specific and immediately linked to a transaction consummated at retail at the end of the path to purchase.  The larger and more comprehensive ecosystem of marketing surrounds and influences the more immediate transactional activity known as shopper marketing.  What differentiates shopper marketing is its inextricable link to the retail point of purchase. Therefore truly effective shopper marketing requires some level of collaboration with the retailer who, after all, controls the point of sale. Let’s put it this way: the single most effective and efficient ‘shopper marketing’ tool is a display at retail. Can any manufacturer get display without the retailer’s collaboration? This basic fact requires the manufacturer to align with retailers who understandably have their own objectives regarding the shoppers and the need states involved in any given shopper marketing initiative.

For the retailer, shopper marketing is a more important component of the overall marketing activity because the   ‘product‘ the retailer is selling is the shopper experience. That experience has as its objective satisfying the need states which the drive the shopper to the store or digital shopping location. Many important aspects of that shopping experience are not time bound. For example, store appearance, in store service level, pricing and promotional policies etc. are permanent, continuous components of and contributors to the shopping experience and the overall marketing platform of the retailer.

But many important aspects of the retailer’s overall marketing platform are occasion specific or target shopper specific.  These overlap with and often align with the manufacturer’s ‘shopper marketing’ initiatives. These are initiatives aimed at a specific shopper need state that add excitement and urgency to the shopping experience. In these cases, shopper marketing for the retailer centers on categories which themselves are satisfiers of shopper’s needs. The brands within the category are competing to satisfy the basic shopper need. The retailer is agnostic to the brand except in so far as one brand somehow does a superior job in meeting the shopper need.  For the retailer, shopper marketing is about categories and needs not brands and their initiatives.

The retailer has the same weaponry as the manufacturer with which to influence the shopper but has two unique weapons unavailable to the manufacturer.  Through its proprietary loyalty card data, the retailer knows every aspect of the shopper’s buying behavior in the store. Even more importantly, the retailer controls one critical moment of truth, the  point of purchase itself, the shelf, the alter of  the shopper experience. Without the retailer’s collaboration, the manufacturer is virtually powerless at the shelf. Therefore the manufacturer’s capability to succeed at shopper marketing requires aligning with the need states or categories chosen by the retailer to attract and satisfy the shopper.

 




Re: Cat Mgt History - posted by moo

Dr Brian Harris & Bill Purcell were both very active in this space. They co-founded ABA Groups, which developed the Apollo Space Management system in 1983. http://www.cpgcatnet.org/page/119828/;jsessionid=itss132rqk3f

Safeway globally had for some time been using a magnetic board layout system, but not in conjunction with Category Management principles.

All retailers had grouped "Commodities" together. Category Management enabled expansion on the commodity, by identifying opportunities and removing "me too".

For what its worth -- Dr Harris has also been talking about occasion management for some time also -- so that "Bread" is laid out as "Breakfast", "Lunch" & "Dinner". The 3 imply more usage occasions than Category Management can, and would lead consumers to buy more bread than they do today....

  • Re: Cat Mgt History - posted by guest
    The memory trail continues.

    I was hired at Loblaws in April, 1983 by David Nichol to lead the category management effort. He had joined earlier from McKinsey and I was recruited from the same company. At Loblaws, Category management was used as a basis to review categories for Private Label product introductions (and other merchandising objectives).

    So, if this is an exercise in dating, then I suppose that April, 1983 precedes the Shnucks experience by a year or two.

    Prior to me, John Shipton had pioneered work in this area within National Grocers (Loblaws). So we did not "invent the concept", but merely applied the principles on a very large scale.

    I hired and led a team of 8 analysts through 1984 and we planned each category in its own plan. This was in conjunction with the buyer/category manager from the Merchandising department.

    Reviews were conducted by Dave Nichol in a War Room, which drew liberally on the Decision Support System which I had built (and was used continuously by Loblaws for the next 15 years). This system received several pages of attention in a best-selling business book about the Loblaws private label revolution.

    My trail continued with Mike McPartland and Lanny Hernandez and Brian Harris after Loblaws (Old Prospectors Club). I consider that the "formalization" of the practices by FMI into a booklet is what defined the discipline for the industry. (It is said that the Roman Empire did not know that it had fallen until Gibbons wrote his book about it!)

    P.S. the third Apollo person was Bill Purcell. P.S. I contributed the "Future Section" for the FMI Category Management Best Practices publication as part of the parallel efforts of Bob Blattberg at NorthWestern.

    My name is Ray Goodman and I can be reached at ray.goodman@manthansystems.com I serve as President of an Indian-based company that specializes in Retail business intelligence software and services.
  • Re: Cat Mgt History - posted by guest
    The first memory I have of using the term Category Management occurred in a conversation between Scott Schnuck, Brian and myself at Schnuck's in the mid 80's. We were discussing alternate approaches to organize the merchandising functions at Schnuck's. Brian and I were explaining our recommendation of how responsibility should to be assigned to one person for the various merchandising functions for a set of products. Scott asked what title we should give that person. Either Brian or I came up with the term Category Manager. Subsequently we began using the term Category Management. After we both left IRI in 1990, Brian and Mike McPartland flushed out more of the concepts now embodied in the definition of Category Management.

    As I remember, the first exposition of the Category Management tenets was in a Coca Cola Research study presented by Brian and Mike at an CIES conference in Nice in October 1991 and subsequent FMI conferences.

    While none of the management concepts embodied in Category Management are particularly new, it was the packaging and timely delivery that caught everyones attention.

    -- Lanny Hernandez
  • Re: Cat Mgt History - posted by 1stcoast
    I just recently read the responses to this question concerning the history of category management. Whereas these all are excellent answers and very true for a modern era answer. I believe that the concept for category management started just a little bit earlier. If you understand that category management is the study of consumer purchase habits and how they relate to one another then category management was started in the early 1900's by a well known Floridian, P.T. Barnum. His desire to understand his customers and their wants and needs began on the midways of his circus. It was on the midway that he coined the phase "if the customer wants vanilla, give them vanilla". Thus starting the understanding of the consumer and their expectations while shopping.
  • Re: Cat Mgt History - posted by mrbentonville
    I recently read "Consumer-Centric Category Management : How to Increase Profits by Managing Categories based on Consumer Needs." It is a very good book on the subject.
  • Re: Cat Mgt History - posted by moderator
    A little More on Harris.

    Brian Harris, co-founder of the Partnering Group, is credited with coining the phrase category management. In 1994, he did the first industry-sponsored pilot at Giant. Harris used a "category captain"--a vendor chosen to help select the products that would get shelf space. The category captains used in the trial were Coca-Cola and Procter & Gamble. In those categories, Giant reclaimed market share that had been taken by Wal-Mart.
  • Re: Cat Mgt History - posted by guest
    Brian Harris was the "Father of Category Management" and it began in the
    late 1980"s. He was a professor at USC for their grocery program and also
    developed Apollo space management system with two others (Lanny Hernandez
    and someone else). AC Nielsen has a book about the beginning of CM.



  • WHAT THE INDUSTRY IS SAYING

    We are always talking to people in the industry and hear great declarations about the state of category management.
    Below are some quotes. (In accordance with the Association's privacy policy - some quotes are anonymous)

    "The future is integrating consumer and category trends, insights, and analytics - and putting them into action." - Top retailer

    "The certification effort is the most important industry initiative in the history of category management. Certification will change professional development and talent acquisition, communication to customers, selection of category captains, and, in large part, will determine what companies will be most successful in category management in the future. Additionally this effort will govern how universities approach category management and teach the subject in the future." - Dan Strunk, Chairman Certification Evaluation Board & Executive in Residence, Center for Sales Leadership, DePaul University

    Want to add your thoughts? Email your comment to:  dmilanese@cpgcatnet.org or post it on the Association bulletin board.



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