New Day Dawns for Category Management
The introduction of category management nearly three decades ago marked a turning point in how retailers and suppliers approached merchandising and assortment planning decisions. Today, category management is at an inflection point thanks to the emergence of new industry dynamics that require a broader view of the strategic decision-making framework. The Category Management Association is at the forefront of this issue, and CMA president Blaine Ross spoke recently with Retail Leader about the ongoing transformation and category management's role as a driver of growth.
Retail Leader: Category management can mean different things to different people. How are you defining it?
Blaine Ross: Category Management today is a process to create a comprehensive plan that meets shopper needs in a superior manner to produce excellent business results for retailers and manufacturers. It is a holistic approach toward developing a plan based on facts, insights, sound strategies and tactical success models. Category management has evolved to include a variety of disciplines and functional areas, including shopper marketing, consumer insights, assortment optimization, pricing, promotion, distribution, logistics, operations, finance, supply chain, sales, marketing, HR, training, retail execution, in-store marketing and e-commerce. Today, achieving category management excellence requires a disciplined structure and process designed to identify key metrics for success.
RL: How is CatMan 2.0 different from the category management processes of 15 or 20 years ago?
BR: CatMan 2.0 is a comprehensive redesign of CatMan 1.0, which revolutionized the planning process between trading partners. CatMan 2.0 embodies the success models developed over the past 20 years, the remarkable improvements in data and analytics as well as all the game-changing influence of the digital revolution.
RL: For example?
BR: Virtually every aspect of CatMan 2.0 has changed or has been enhanced versus CatMan 1.0 to reflect whole new process steps that were either ignored or were underdeveloped in CatMan 1.0. Beyond these important content differences is a major difference in presentation format. Unlike CatMan 1.0 which was presented in a static printed monograph of more than 80 pages, CatMan 2.0 is offered in a more contemporary digital format that has several advantages. For starters, it is easier to update as new success models, software and data are developed. It is organized around specific tasks, which accelerates acceptance and usability by allowing the users to focus upon specific issues of immediate concern. Practitioners familiar with the Catman 1.0 process will have no difficulty adjusting to the new concepts introduced in Catman 2.0.
RL: What are some of the major enhancements?
BR: The major enhancements were in the areas of internal alignment, shopper marketing, shelf merchandising, deployment of resources and return on investment. Catman 1.0 totally ignored the collaborative business issue of internal alignment and joint business planning between retailers and suppliers. We fixed that. Shopper marketing underwent important changes because today's shopper is more diverse demographically and attitudinally than ever before, and they are empowered with significantly more information about the choices they have to meet their needs.
"One of the challenges is that online shopping creates major costs on the supply side that also affects the shopper experience on the demand side."
Shelf merchandising needed an upgrade. CatMan 1.0 took a relatively simplistic view of the issue, limiting itself primarily to the positioning of items, brands and segments within the category planogram. In CatMan 2.0, we address multiple issues that affect the shopping experience beyond the conventional planogram, such as where the category is placed in the store, relevant adjacencies, space allocation and how items and brands should be arrayed when the objectives of the category and the total shopping experience are balanced.
Deployment of resources was enhanced to address how a category plan gets deployed in a complex retail infrastructure and how that factors into return on investment. The question we are asked most often is, "What is the ROI of category management?" It was imperative to answer this question in CatMan 2.0 because of the growth of zero-based budgeting, a management approach which questions each line item in the overall business model during every planning cycle.
RL: What were some of the key drivers that made it necessary to rethink the definition and refine the protocols that underpin category management?
BR: There were several primary drivers that helped shape the new processes based on the changes that have occurred over the past decades. For example, there has been an explosion of data emanating from household panels, loyalty programs and the digital footprints customers leave on the path to purchase. Analytics capabilities, retail diversity with channel blurring, new promotional methods and just the general empowerment of shoppers all contributed to the need for a major upgrade to category management.
RL: How did you engage with the industry to develop the new CatMan 2.0 framework?
BR: The CMA's Best Practices team under the leadership of Gordon Wade, John Drake and Kaye Young developed a steering committee comprised of industry leaders from retailers, manufacturers, solution providers, and sales and marketing agencies. This group identified the areas of CatMan 1.0 which needed to be updated, and began the process of inputting data in to each of the areas requiring improvement. The steering committee organized itself into seven different groups, each of which focused on a series of work streams comprising the issues requiring improvement in CatMan 2. We held numerous meetings to identify best practices to create a final draft that includes case studies.
RL: Why was it important to have a consortium of retailers, suppliers and service providers involved in the process?
BR: Credibility. This is a global initiative, so bringing together leading retailers, suppliers and solution providers helped to validate our research and conclusions. Having a diverse group of industries and trade classes represented, along with cross-functional teams, allowed us to develop the CatMan 2.0 approach that we expect to become the gold standard within the CPG industry.
RL: What's left to be done?
BR: E-commerce is an area that will need further attention simply because of the pace of change in the digital world. Ordering products online either for pickup at a brick-and-mortar location or for delivery directly to the home from a remote supplier or from a local retailer is the most rapidly growing shopper behavior in the CPG universe. There is a remarkable dearth of information on best practices in this area, but we are focused on better understanding the complexities. One of the challenges is that online shopping creates major costs on the supply side that also affects the shopper experience on the demand side. CatMan 2.0 will continue to shed light on this current behavior and measured activities once we capture more experience.
RL: It seems we've entered a phase where category management needs to be perpetually upgraded to keep pace with all the different ways retailers and suppliers are serving customers. What is CMA's thinking on this issue?
BR: The Category Management Association's release of CatMan 2.0 is the most significant achievement within the category management discipline over the past 25 years. We are committed to continuing to deliver annual updates and enhancements to CatMan 2.0 processes in order to support the needs of retailers, suppliers, and solution providers within the ever-changing retail environment. One of the ways we've done that is with the development of a global certification program for both retailers and suppliers. To date, this certification has been achieved by more than 3,000 people who have demonstrated subject matter expertise, and who either meet or exceed industry professional standards.