It’s November! With less than two months of the year to go, Tesco’s suppliers around the world will be preparing the ground for agreeing next year’s Joint Business Plan. This year the Thailand business unit, Tesco Lotus has launched a new twist to the process, encouraging and leading manufacturers to pool their ideas. Clearly Tesco’s Thai managers hope that by gathering a category’s leading lights, they will be able to access a level of insights they have failed to tap to date. Whilst this is great for Tesco’s commercial team, many Thai trade marketers are burning the midnight oil to meet expectations!

How the Category Action Planning process works

The whole journey starts with the health-check; data is gathered to determine Tesco’s relative performance as compared to other retailers in the space and to the category as a whole. Based on this data Tesco works with suppliers to develop a Category Action Plan. Each supplier then develops a business plan designed to support the category action plan as an input to the joint business planning process. Once the planning process is complete and both sides have signed-off the joint scorecard, terms are agreed for the coming year.

Viewed in this way, there is little new about the overarching process. Indeed some of the tools applied here have been around since the earliest days of Category Management and Efficient Consumer Response. However, this year, Tesco’s Thai team have added a couple of twists just to keep category managers on their toes!

Category Action Planning Twist One: Working With Competitors

I have to say that when I first heard about this, even I was a little surprised: The presentation of each company’s view on the Category Health Check and the development of Category Action Plans is to be done with all key vendors concurrently. Yup, that’s right, P&G, Unilever and L’Oreal each get to present their insights and ideas, whilst the others are in the same room!

Now whilst I’d love to be a fly on the wall in these meetings this twist presents a few challenges:

1. How do you persuade Tesco you are the guys to support whilst not sharing your key insights with competitors?
2. How do you avoid being shown up as not knowing enough by your competitors? And;
3. How do avoid sharing your key strategies with competitors and hence loose competitive advantage across, potentially, the whole modern trade?

Category Action Planning Twist Two: Using Dunnhumby data is a must

This is much less of a surprise: Clubcard data provides some rich veins of data to analyze and at least has the benefit of being equally available to its subscribers. But of course insisting this be the key source immediately excludes vendors who don’t subscribe. Even for subscribers there are challenges too:

1. How do you avoid offering anything other than the most generic analysis of Dunnhumby’s data without, again, exposing your own insights to competitors?
2. How do you approach the process if your team does not yet have a high-level of competence in managing this sort of data (our recent research with Nielsen  suggests nearly 80% of consumer goods businesses in Asia have inadequate processes to support the analysis of shopper data)?
3. How do you tie in other data sources to ensure that the analysis not only reflects what’s happening within Tesco, but also in the competitive world outside?

Managing the Challenges

Whilst the particular twists that Tesco have introduced this year are new, many suppliers have worked with Tesco successfully for years. We found that there are steps that these companies take, that with a small amount of modification will deliver in these circumstances:

1. Define where Tesco sits in the company’s strategy. It’s easy to assume that just because Tesco is a large customer that it’s an important customer. For many Tesco attracts a large volume of shoppers which drives high category volumes. But, as I wrote last week, many Tesco shoppers, particularly in large format stores operate on auto-pilot. This means that relatively little investment is needed in this part of the portfolio if this behavior works well for your brands. If, however, Tesco’s diverse store base helps you to un-tap shopping behavior that could drive your brands growth, the retailer may be more import.
2. Define clear objectives for Tesco. Be specific on the business changes you are seeking and define precisely in which groups of stores you expect these changes to be delivered. This will help you focus more clearly on the insights you need to develop to prove a future business case for supporting your agenda.
3. Offer insights, not just information. In this process everyone is party to the same information, be it Kantar, Nielsen or Dunnhumby. Offering another formulaic sets of charts that just describe the situation will neither distinguish you, nor defend against a more aggressive competitor. Convert your objectives into hypotheses and then use commonly available data to prove or disprove these. Avoid sharing research you have conducted, however, until you are one-on-one with Tesco.
4. Use retailer’s language. Tesco (as is clear from their high-handed approach) do not care about vendors – they care about their performance in the category. They don’t care if your sales are up, and they don’t measure your performance in invoice sales. BUT, they do care about their growth in both real and like-for-like retail sales; they care about their market share and their share of the category as they define it; they care about their stock-holding and your contribution to this and they care about the margins they make from the category. These are the measures you should focus on – not your own!
5. Offer practical solutions. Too many vendors propose exciting and creative retail solutions only to find that the ones that get implemented are the simpler more generic approaches of their competitors. This is because the best solutions for Tesco are ones they can rapidly and easily deploy across all there stores in a group of outlets.

I’m fortunate to have worked with Tesco, to have supported key account managers for many years and to be surrounded by veterans in the field, so it’s relatively it’s easy for me to identify how to manage the category action planning process. However it may not be so easy for you and your team.

Do please feel free to get in touch to learn more about how our team at engage can help you develop and negotiate joint business plans with Tesco or any other accounts around the world, or contact me if you feel you’d benefit from some one-on-one coaching.

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:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

If you’ve found this blog useful, please share it with others or feel free to add your thoughts and comments below.

I met a client in China last week who was telling me of their success in conducting category management programs with two major multi-national retailers. “The thing is, we’ve been doing this for two years and we ask ourselves, now what? Our partners are supportive but they keep challenging us to come up with something new”.  I started reflecting on their options and what guidance to give.

Thinking about the situation, the people I met where in a fortunate situation – first their experience was positive: the retail partners had delivered a reasonable level of implementation (c. 50% – which is great for China); both sales and market share had grown and the retailers remained engaged. Second, buoyed by a positive experience, the company had gone on to invest in deeper research into shopper behavior  in broader capability in managing large data sets. The management team I spoke to was convinced that the next step was to secure more category partnerships with key retailers. I’m not so sure, here’s why: [Read more…]