Reams. That’s likely how you’d quantify the amount of data your company has about any given category. POS data, shopper insights, line-item reviews … enough Excel sheets and PowerPoint charts to make your eyesight get a little worse each year, right?
It’s great that you’re collecting all of this data, but what are you doing with it? And what are you missing?
“Most people don’t know what they don’t know, because it’s inconvenient to think that way,” says Gordon Wade, managing partner and director of best practices for the Category Management Association (CMA), Wimberley, Texas. He summarizes this phenomenon and identifies such weak spots with the acronym IWIK: I wish I knew.
We’re here to eradicate the IWIKs.
The Convenience Store Products Category Management Playbook organizes category-management tools into 10 key areas to standardize processes and identify gaps in information. It stems from the CMA’s ROI Improvement Plan, which the association uses to evaluate a retailer’s or manufacturer’s category-management functions and suggest changes.
Every retailer or manufacturer should go through the CMA’s ROI Improvement Plan. In the meantime, we’ll provide you with the 10 steps of the plan so you can begin formalizing your category-management toolkit and put all that data to measurable use.
Many larger retailers may already have a semblance of this playbook in place, while indie operators or brands in transition may be more focused on making sure their night-shift employee shows up tonight. Given that, you can go through this chronologically, or pick one step at a time based on your needs today.
The Voice of the Shopper
Historically, category management has focused on the products on your shelf, and the shelves in your stores. Today, cat-man practitioners are increasingly expanding their gaze to the shoppers themselves, integrating consumer insights in order to understand how to get the shopper into the store in the first place and keep them coming back.
This first step in the CMA’s ROI Improvement Plan includes identifying the behaviors and attitudes of each category’s core shopper. The foundation of this Voice of the Shopper document involves a standard taxonomy for each category:
- Who is the shopper?
- What are they buying?
- Why are they buying it?
- When are they buying it?
- How are you influencing their purchase decisions (such as with ads, marketing, social media, in-store signage)?
The goal of this document is to ensure everyone on the team understands who the category shopper is and knows where to find that information quickly. More often than not, though, it also serves to reveal gaps in data and areas where the retailer needs further insights. It also helps retailers understand just what to do with that data. “Most retailers and manufacturers have a lot of data, but it is pitifully organized,” says Wade. This exercise will standardize the capturing and sharing of that data across the board.
Voice of the Shopper data should come from a combination of supplier data, POS data and household surveys from third-party firms such as Chicago-based IRI, and the retailer’s own data from a loyalty program, intercept surveys and shopper focus groups, among other places.
When building your Voice of the Shopper, consider the following types of data:
- Category structure/consumer need states: how shoppers segment the category;
- Path-to-purchase/ethnographic research: behavior in home and in store;
- Demographic/psychographic segmentation: answering who the shopper is;
- Market share trends: answering what they are buying;
- Usage and attitude data: why they are buying it;
- Channel trends; where they are buying it;
- Seasonal, occasion and purchase-trigger data: when shoppers buy;
- Assortment, price, placement and promotions from vendor success models and internal POS analysis: how we are influencing shoppers.
Step 2: Category Shopper Insight Platform
The second tool in the CMA’s ROI Improvement Plan takes the Voice of the Shopper and applies those insights to come up with the strategies, policies and goals for the category. It includes:
- A definition of the category;
- The structure of the category;
- The role that the category plays within the total store;
- The top 10 assessment trends going on in the category and their implications;
- Tactics such as identifying traffic drivers and transaction drivers;
- Pricing strategies for optimization, such as between premium, popular-price and private-label brands.
“It’s the document that you use as a manufacturer to express and deploy your strategies based on your vision of the category. For the retailer it’s the flip-flop: Here’s what I think the category is; here’s how I want to manage that category; here is the role that it plays within the total portfolio of the store; here are the eight or 10 most important learnings; here are the strategies and tactics,” says Wade.
An important element of this step is identifying how the consumer segments the category and makes decisions accordingly. Shown above is a consumer decision tree for water purchases, indicating that shoppers now consider brand more than ever, with more practical considerations such as package size and pack count close behind. Create similar decision trees for every major category and subcategory, and lean on suppliers for such insights.
Step 3: Category Business Analysis
This step is meant to create a standardized approach to understanding a given category’s performance. It is actually a document the manufacturer should provide to the retailer that identifies what’s going well and not so well within the category. It should include at a minimum a review of:
- Category and sub-category trends in dollars and units—what’s growing and declining by sub-category;
- Retailer share trends by sub-category—where is the retailer strong or weak;
- Comparisons to key competitors on assortment, pricing, merchandising and promotion patterns in areas where the retailer is underperforming;
- Conclusions about causes of weak/strong performance.
Step 4: Insights Summary
Once you have developed a robust, standardized Voice of the Shopper document, you’ll want to provide your team with updates throughout the year. This is your Insights Summary—it should be written in a consistent way and distributed companywide.
Having an Insights Summary ensures that the team member who owns this step is collecting fresh data on a regular basis. As with the Voice of the Shopper, resources should include supplier data, third-party firms and the retailer’s own proprietary insights. Summaries should be prepared for each major category.
Step 5: Supplier Evaluation
Most retailers are quick to evaluate a supplier when something goes wrong, says Wade, but less frequently do they enact a regular evaluation program to ensure vendors are delivering on their needs.
Supplier Evaluations should include metrics for:
- Innovation—how the supplier is feeding the new-product pipeline;
- Consumer knowledge;
- Strength of offers;
- Brand and individual sales trends;
- The type and quality of information and tools the supplier is providing the retailer.
The Supplier Evaluation standardizes this practice and should certainly be shared with the respective vendor so the company can better serve the retailer. Wade recommends undergoing this step annually.
Step 6: Vendor Line Review
While the Supplier Evaluation (No. 5) is meant for the retailer to present to the supplier, the Vendor Line Review is a document that the vendor must provide the retailer to summarize category performance.
Often, says Wade, if a retailer isn’t proactive in what he or she requires from the Vendor Line Review, it becomes a tool for the supplier to pitch new items.
“The line review tends to be a selling doc instead of an analytical doc,” he says. “The retailer should have a standardized document that they send to the vendor to say, ‘This is what I expect you to bring to me when you bring a line review.’ ”
Vendor Line Reviews should include the following metrics:
- Which segments are growing and declining?
- Which vendors are growing and declining?
- Why those segments/vendors are growing and declining?
- What new items are seeing big gains?
- What’s going on in the rest of the country that’s applicable to the retailer?
- What other retailers are doing things that are really unique and different?
Step 7: Vendor New Item Presentation
A great amount of energy and resources are put toward new-product rollouts. Unfortunately, says Wade, not nearly enough is put toward following through to ensure the product doesn’t end up collecting dust in a retailer’s back room—or simply cannibalizing sales from other items.
The CMA recommends retailers create a standard list of questions to ask suppliers when presented with a new product. Likewise, suppliers should be prepared to provide the following information in detail:
- What segment of the category is it in? How big is the segment? Is it growing? What was the share of the last item introduced into this segment? What kind of market share does the item need to attain to reach the claimed volume levels?
- What is this item’s point of difference? What makes this product stand out from similar items?
- To which shopper segment does this item appeal? Who will buy this item? When, and why?
- How much incremental volume will it generate? Will it simply replace volume from another item, or does it appeal to a different shopper need?
- What’s the effect on total category profit? Does this item increase gross margin dollars? Does it source volume from lower gross-margin-dollar items? What is the profit model for the category with this new item?
- What is the introductory marketing effort? What happened the last time you introduced an item into the category? What was the marketing support, and what results did it generate?
Step 8: Tactical Success Models
This tool in the retailer’s arsenal is meant to identify and map out strategies around assortment, pricing, merchandising and promotion that have proven success.
“There are only five things you can do with a product,” says Wade. “You can put it in or take it out, price it higher or lower, place it here or there in the plan-o-gram, promote it this way or the other way, and you can vary the service level. So the question is: What works?”
This is where one of the most common category-management mistakes can happen: the lack of proper follow-through and analysis. Wade urges manufacturers to develop the metrics to measure the effects of promotions—and retailers to demand such analytics from their vendor partners.
“One of the great sins of modern marketing is that management will spend hundreds of thousands of dollars on an initiative and nothing on measuring its appeal to the shopper,” he says. “Agree in advance what will be measured and how. If you don’t have the data, ask yourself what’s more expensive, the data you need or the continuing ignorance about what is working and not.”
Step 9: Category Profit Report
While the Vendor Line Review is intended for the supplier to present to the retailer, and the Supplier Review is meant for the retailer to analyze the supplier, the Category Profit Report is an internal tool to help the retailer identify what items are generating profits and, based on such performances, the role of that category within the total store.
The Category Profit Report should:
- Compare categories on a series of metrics based on corporate strategy and category-management objectives;
- Inform and align management around performance metrics, revealing how the company is delivering against its strategic objectives;
- Be assigned to an owner who will develop such cross-category reports regularly.
This step reveals the more holistic, total-store view of category management. “While we manage on the basis of a category being a strategic business unit, it is managed as a part of a portfolio,” says Wade. “That is the purpose of the role development step in category management. That is where one looks at a category and says: ‘This is a really important category to me; therefore, I should give it more assets, more space, more inventory and more of my time, because it’s really important.’ ”
Step 10: Competitive Review
Most retailers track their competitors, but how many are doing it in a standardized way? This final step in the CMA’s ROI Improvement Plan has you create a formatted review of principal competitors. It should include:
- The company’s strategies and tactics around assortment, pricing, merchandising and promotion;
- Overarching company initiatives;
- Recent changes to the company as a whole and the category specifically.
Assign one person per category to own this task on an ongoing schedule, sending updates to the entire team on a monthly or bi-monthly basis, says Wade. Lean on suppliers and third-party firms for some real data-driven insights for the reports, and look not just at the c-store channel, but also competitors across the segment.
“A shopper doesn’t think of just c-stores when he’s going to lunch,” Wade says. “He thinks about everything from a Frisch’s here in Cincinnati to a McDonald’s to an Applebee’s, as well as a Hess and a Wawa.”
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