Product group management

The term category management or category management referred to in marketing the structuring of a business center in the stationary retail on the principle of product categories . These are created with the help of market research analyzes by manufacturers and retailers.

Definition

Historical development

The concept of category management emerged in the USA in the early 1990s. The development of this concept is linked to the previous development of the scanner cash register . In 1995, according to the "ECR Tracking Survey 1995" study by the management consultancy Kurt Salomon Associates (now Accenture ), around 37% of companies in the USA and around 19% of companies in Europe were already practicing category management.

definition

The term category management summarizes approaches of cooperation between industry and trade in theory and practice , the main characteristic of which is the control of product groups as strategic business units (SBU) . Some authors also see this as "a set of retail tools for strategic and operational planning and control of product range and merchandise management (...), which equips the category manager with extensive responsibility for all purchasing and sales-related activities for a category and an intensive, (strategic and operationally oriented) product group-related cooperation between manufacturer and trade implies. "

What is really new about this approach is the assignment of products to product groups to groups of products that belong together from the consumer's point of view. This leads to a restructuring of the company, away from the division of purchasing and sales and towards managing the company according to product groups as strategic business units.

A nine-stage planning process is used to implement category management in the company. The company has four main strategies to implement it (product range design, sales promotion campaigns, new product development and pricing).

The category management approach pursues the goal of differentiating a company's products from the range offered by other retailers through the selection of the range made by the consumer and thus promoting its own sales and profits.

The approach is most frequently used in the consumer goods industry in combination with the ECR concept.

elements

Category manager

Ideally, a category manager should be responsible for the product group. Most sources leave it unclear in which company (manufacturer or retailer) the category manager should be located. Since a retail company will not outsource the assortment policy that shapes the company, the category manager can only be located on the retail side. The cooperation with the individual manufacturers should take place in multifunctional category teams or customer business development groups, some of which are members of the retail company. Although some sources point out the merging of purchasing and sales tasks as areas of the category manager, other authors do not see the task of inventory management and purchasing as typical areas of the category manager.

The tasks of the category manager can be summarized as follows:

Product group optimization to increase the "product group profit" including purchasing and pricing policy;
Shelf optimization (English space management ) / direct product profitability ;
Inventory management;
Promotions: special action planning , implementation and control;
Shopping cart analyzes .

Category management process

The category management process can be divided into five phases:

Analysis of the product group : Strengths / weaknesses analysis with regard to product range, price level, advertising, placement in the individual shops as well as measurement of the "market shares" on the basis of a retail panel. The product group sales shares of individual articles are compared with the average sales shares in the respective product group.
Analysis of customer potential : The focus is on the following questions: "Which customers buy often, which less often, which not at all? What is the proportion of the total expenditure for the category that the trading partner achieves? What do customers and non-customers of the category spend with competitors? What do you buy from competitors and at what price? How often do customers buy from trading partners, how often do they buy from competitors? ”The competition-related data can be determined by household panels from market research institutes.
Planning the strategy : There are primarily two instruments available to the category manager for questions about product range expansion, price and placement changes:

What-if analyzes simulate the success of changes in placement, price and range. - Apart from the necessary (past-related) database / empirical values, the effectiveness of simulation models that do not take into account changes in competition in addition to permanent changes in product range and demand is questionable.
Price promotion models are primarily used to determine individual promotions for the success of the article and product group (for example, price reductions, changes in placement, newspaper supplements and radio spots).

Use of the strategy in test and control operations; Incidentally, this is a well-known trading strategy.

Evaluation of the results : comparison of the simulation results with the practical results . Here, the market share of the individual articles of a category changes are recorded as positive or negative deviation of the mean calculation on the basis of trading panel data measured. - It remains open, however, how the relative size of a category, understood as alternative purchase options, is weighted, because the change in sales of an article depends on the number of alternative articles in addition to article-specific promotions and network effects . - For illustration: whether ketchup A achieves 20% "market share" or sales share of the ketchup types in shopping location B , and whether this is above or below the industry average, i.e. the average sales share of this type in the respective product group of other shopping locations not least varieties of ketchup on the number of the shopping venue B dependent. For example, if it has five types of ketchup, while the industry average offers seven alternatives, then the “ market share ” must be weighted. - There are no references to this in the CM literature.

Category captain

For Category captain is usually the manufacturer with the or one of the largest market shares of a class of a trading company is appointed. He is responsible for advising on product group control. The category captain also has to take competitor products into account when planning the range. Against the background of the performance requirements of a sales or trademark marketing manager, this is extremely questionable, as these are remunerated for the success of those represented, but not for the success of competing products. In other words, a lack of independence and subjective decisions in favor of one's own products could have a negative effect on the strategic recommendations.

Retail companies specifically designate a company as a category captain in order to have a permanent advisor who supports them in making product range decisions for the relevant category. Since this category captain has extensive information and market analyzes about his category (after all, this is his core competence while the category only represents a small part of the business of the trading company), he can advise the trading company well when making decisions. Without a category captain, the trading company would have to e.g. B. Create or buy market and competition analyzes within the category yourself, which would not be economical due to the effort and the prices of the studies. The conflict of objectives (naturally the category captain tries to position his own products as well as possible) is largely offset by the specialist competence of the category manager, which over time also accumulates in the retail company.

Support from ECR

Category management is seen as an organizational prerequisite for a new form of cooperation between manufacturers and retailers, which aims to improve value creation across all economic levels through efficient customer orientation ( Efficient Consumer Response ; ECR). A further development of category management is currently being discussed - based on authors at Harvard Business School (Kracklauer / Mills / Seifert) - under the heading of "Collaborative CRM". Collaborative CRM opens up new ways for industry and trade to jointly pursue customer acquisition, customer loyalty and customer development along the value chain. This is also based on the knowledge that traders v. a. Have data about the “shopper”, while the industry has better data about the customer as the user of the products.

Individual evidence

↑ Andreas von der Heydt: Efficient Consumer Response (ECR) , 3rd edition, compare p. 104 f.
↑ Christa Feld: Category Management in Retail , working papers of the seminar for general business administration, retail and distribution at the University of Cologne, ed. v. Lothar Müller-Hagedorn, Working Paper No. 8, Cologne 1996
↑ Fred Bruin: Category Management at Albert Heijn , in: DIH, 38th year 1994, No. 6, pp. 2–6, p. 3.

literature

Bremen, Achim von: Shelf optimization as a permanent process , in: DIH, 1994, No. 6, pp. 18–24.
Grünblatt, Martin: Product group analysis with POS scanning data, EUL Verlag, Lohmar-Köln, 2004.
Heydt, Andreas von der: Efficient Consumer Response - Concepts, Experiences, Challenges , Vahlen Verlag, Munich 2000.
Kracklauer, A .; Mills, DQ; Seifert, D .; Leyk, M .; Rübke, S .: What helps retail out of the crisis , in: Harvard Business Manager, Issue No. 4, 2002, pp. 98-106.
Milde, Heidrun: Category Management - the silent revolution , in: Markenartikel, 56th year 1994, No. 7, pp. 343–346.
Pugell, Bernd; Prinzler, Detlef: Strategic partnerships between retailers and suppliers , in: Controller Magazin, No. 2, 1996, pp. 71–76.
Schröder, Hendrik (Ed.): Category Management: From Practice for Practice, Deutscher Fachverlag, 2003
Seifert, Dirk: ECR and Category Management (CM) as new strategic approaches, 4th expanded edition, Rainer Hammp Verlag, Munich 2006, ISBN 3-86618-052-7
Speer, Franz: Competence as a strategy for success - product group management: Cooperation between trade and industry essential , in: DIH, 38th year 1994, No. 6, pp. 12-16.
Tietz, Bruno: Efficient customer policy as a problem of information policy , in: Trommsdorff, Volker; FfH, Berlin eV (ed.): Trade Research 1995/96: information management in trade, Wiesbaden: Gabler 1995, pp 175-186.
Zoller, Klaus: Counting peas with profit , in: asw, 38th year 1993, No. 6, p. 50.

Web links

[1] Andreas von der Heydt: Efficient Consumer Response (ECR) , 3rd edition, compare p. 104 f.

[2] Christa Feld: Category Management in Retail , working papers of the seminar for general business administration, retail and distribution at the University of Cologne, ed. v. Lothar Müller-Hagedorn, Working Paper No. 8, Cologne 1996

[3] Fred Bruin: Category Management at Albert Heijn , in: DIH, 38th year 1994, No. 6, pp. 2–6, p. 3.