Ok – I admit it – I’m a category management skeptic. I wasn’t always that way, back in the early nineties I was a massive supporter – working with major retailers using a clear process which supported collaboration made loads of sense. At a time when traditional advertising was becoming less effective and marketing at the point of purchase was just beginning, I honestly thought ‘catman’ was the perfect solution.
Making category management work is challenging
Then in the early part of the last decade, I spent 18 months working with Tesco facilitating their “Category Excellence” program and my enthusiasm waned. Out of a total of 25 different projects with 23 different vendors, only two were a success. What went wrong? Everything! We found vendors’ expectations and Tesco’s were mismatched and both parties had nasty surprises along the way: often neither party had enough insight, let alone strategic clarity to support the project; the process was long and often difficult to sustain; tactics were agreed but could not be implemented in-store; and many manufacturers found that having invested in the program itself they were then asked to pay for execution.
Does any of this sound familiar to you? If so, we’ve shared a common experience. And yet, making category management work (or at least category captaincy) remains a common goal for many manufacturers when they work with major retailers. Why? Because when it works it can be magic! The picture above shows how Danone, working with Carrefour in Italy, has given the yoghurt category a major makeover. I’m told this has led to great results: higher traffic, increased basket size and better market shares for the vendor – an all-round success!
5 critical success factors that make category management work
So what makes category management work? (And for clarity what I mean by this is what makes working through a joint working category management process with a specific retailer successful?) Here are the five critical success factors which I think ensure you get the best outcome:
- Start with strategy – for many, becoming ‘category captain’ at Tesco or ‘doing category management’ with Carrefour is an objective. It shouldn’t be – category management should be a tactic which is used to implement a wider retail strategy. As a tactic it is an expensive and risky one, but it can pay off. This is particularly true when a company decides that a specific mix of marketing activities in a focused group of stores is essential to drive a brand or group of brands’ growth. Using category management under these circumstances gives the effort and investment wider purpose, it’s more likely to pay off faster and it’s often more effective because the team knows what it has to achieve in the project and why.
- Select, don’t be selected – It’s great to be invited by a retailer to join a program – it makes the vendor feel wanted and valued. However, an extended period of joint working and data sharing is expensive and so the head has to rule the heart. Ultimately category management pays back for vendors when more people buy their brands as a result of a retailer executing a mutually agreed strategy. So be selective; only work with retailers who have a great track record of execution and ensure that the partner you choose attracts the shoppers that could buy more of your brands more often.
- Look before you leap – don’t be coaxed into assuming that working on a category management program with a retailer is the only way to execute your strategies. Good, old fashioned selling works really well, so does a carefully structured and mutually agreed joint business plan. Carefully positioned mini-projects also secure quick wins, all of which can add up to the same result as a category management program in the medium term.
- Do your homework – A full-blown joint working project is a process of discovery between manufacturer and retailer. Too many companies use this process as a vehicle to learn – this is a bad idea! No-one wants to expose major issues in brand equity or supply-chain problems whilst they are in a workshop with a major customer. Manufacturers need to do the work before they bring it to the retailer so they are guiding the process, not being guided by it.
- Keep it simple – remember the goal of working with a retailer is to secure better execution and drive sales. I hope it goes without saying that retail is an extremely complex and fast moving environment and it doesn’t manage additional complexity well. So look for outcomes that are synchronous with the way stores work, even if they are not the most exciting ones. I believe it is better to drive change across the entire base of stores than it is to have a few test stores running concepts that never get rolled out. So I advise vendors work on tactics that every store can implement.
As the idea of working collaboratively with retailers enters its fourth decade, new and interesting ways of working with retailers are evolving, but the concepts that lie at the heart of the category management movement remain the foundation for many of these new initiatives. So adopting the principles I’ve suggested above should not only help now, but also in the future.
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