The more brand marketers practice category management, the more they realize that they should never do it the same way twice.
Although the process and philosophy applies to every category and every customer, brand marketers are learning that the execution must be designed to fit the unique circumstances of each retail account and, by extension, each store.
"We are trying to tailor programs for our customers down to the store level," says Mike Internicola, vice president of customer
marketing at Tropicana Products Sales, Bradenton, Fla.
His sentiments are echoed by executives interviewed by Brand Marketing. Several report early successes in store-specific category management. Others are targeting this capability as a goal for the coming year.
Most say key tools in this quest for the custom fit are consumer demographic analysis tools such as those from Spectra, Market Metrics and Efficient Market Services, as well as fuller disclosure of customer data supplied by more trusting retail partners.
The result is a more strategic use of customer and consumer data to manage the category, rather than a tactical focus on techniques such as space management.
"We don't just set that department, we present programs and promotions for the retailer that will allow them to promote to that individual consumer based on that demographic information," says Bill Parsons, vice president of corporate trade development at American Greetings, Cleveland.
The local focus has come particularly quickly for manufacturers in direct-store-delivery categories such as greeting cards and soft drinks, at least at a tactical level. "We already have virtually store-by-store management," in large part due to the company's experience at store-door delivery, says Rob Baskin, director of public relations for Coca-Cola USA, Atlanta.
If some DSD companies enjoy a jump on the tactical side, most brand marketers are still in the early stages of implementing the strategic aspects of category management, which requires high-level communication about the in-store role of the department in question.
"We build a plan from the retailer's perspective," says Tim Sullivan, senior account executive for supermarkets at Coors Brewing Co., Golden, Colo. "Nine times out of 10 the accounts don't have all the answers. That's OK, because if we do this process correctly, it will come out during the analytics."
Christopher Fink, director of ECR and category management for Nabisco Foods Group, Winston-Salem, N.C., agrees that retailers are at different stages of readiness. "We don't make a value judgment about the readiness of our customers to work with us on category management. We look at it more in terms of their commitment and resources," he says.
As brand marketers zero in on more chain-, cluster- and store-specific strategies for their categories, the criteria they use to measure success must also become more sophisticated, says Franklin Krum, president and CEO of Golden Cat Corp., South Bend, Ind.
"We are seeing a recognition in the grocery trade that category management really succeeds when you provide the tools for your category manager to look at income statements," he says.
Also intriguing, and underlying many of the remarks here, is the notion that mastery of the intracategory process is enabling brand marketers and their retail partners to begin considering a broader role for category management that layers on a total store perspective.
Here is more of what they had to say:
director, ECR, category management Nabisco Foods Group Winston-Salem, N.C.
We have made good progress in applying category management as an operating philosophy in all of the businesses that we have. That is not just in the last 12 to 18 months since ECR began. It has been that way for the last four or five years. What is new is that we began matching it to consumer information in last two years -- 1993 to present.
Our process in the last couple of years has clearly been benefited by information services and support systems, improved syndicated data, improved availability to do store testing. It's a coming together of several tools.
You need to be very flexible and deliver a range of category management products to fit the size and sophistication of the category itself and the retailer. We don't make a value judgment about the readiness of our customers to work with us on category management. We look at it more in terms of their commitment and resources.
Nabisco Foods sells products in nine categories. We are dominant in some; not in others. Yet we are committed to applying category management to all of our businesses by the close of 1994. We don't believe we must have dominant shares.
We also can leverage the value of our category management expertise across all our businesses. It is not something that you can decide to do for a few of your businesses and not do for others. It is necessary that it be applied to all our businesses.
Retailers' commitment and interest and resources for category management varies in a practical way, based on their needs. Not on an intellectual but a practical basis. So we must have a portfolio of category management offerings for retailers and design individual programs for each.
We are today beginning with definition of categories, which is a consumer-based process based on consumer usage and product interaction. We are doing this work today, starting with tests at a couple of retailers, and looking at total store layouts. That is, total store planning.
VP, customer marketing Tropicana Products Sales Bradenton, Fla.
We have been informally doing some of it for a couple of years. About three months ago we formalized a group of seven or eight people to develop category management. We are trying to form teams with our trade partners -- alliances to help maximize profit and growth by looking at what is best for the category.
We will work with our customers to understand what their mission is, what they want, their expectations for the category. To help achieve that, we are putting together a lot of technologies: Spectra, Infoscan, Panel data, shelf management tools. We are also using a lot of postanalysis -- promotion evaluation and sales tracking.
We are really trying to tailor programs for our customers down to the store level. We tend to look at chilled and shelf-stable separately. But we also look at how our customer defines the category. Cold could be defined as the entire dairy case. Shelf-stable could include all beverages.
We are working with our customers on how they want to proceed. For each segment they may have a separate strategy. One may be a loss leader/traffic builder, another may be a profit center.
Our customers are pretty clear about their objectives. I think they know what they want and how they want the category to perform for them. Each customer knows what they want it to do.
We have formalized it. In the past it has been ad hoc work. We are putting together a support staff, the category management group, under our customer marketing umbrella. Also we are developing a training program we expect to bring out in September using an outside supplier to train everyone in field sales.
As all of us try to become business managers, I think that one of the key ingredients will be to understand category management. We are trying to build a corporate template for the information that can be used consistently by our field sales force and by our brokers. Using panel data, we can show how various brands interact and show how to best merchandise our products.
president and CEO Golden Cat Corp. South Bend, Ind.
Most of our focus has been on developing tools for our customers and trying to promote a concept with them that we believe will help make the grocery industry more competitive.
We did some landmark work on category management, a 15-month project with cooperation of the chairman, the chief financial officer and the vice president of merchandising of a major supermarket chain. We spent three months inside the chain, with access to all their computer data.
We did a P&L for them on the entire cat box filler category, which we used as a stalking horse for what we felt was the discipline that would allow us and our customers to significantly increase operating profit and return on investment.
One key truth arose from all our experience: A number of retailers have embraced category management in one form or another, from total understanding and implementation to just printing up new business cards. But until the category manager is evaluating his category's performance using the same criteria as the CEO or chief operating officer, he is going to underachieve the promise of category management because making decisions using the wrong measures.
The CEO of a company looks at sales and profits. The benefits that ECR represents really develop below the gross line. Or else you miss a great majority of those efficiencies that mass merchants are already realizing.
Category management conceptually is whatever you want to make it. The work we have done has clearly demonstrated that you are liable to underachieve unless you measure success based on some kind of return instrument -- return on assets, return on assets employed or return on inventory investment.
We have some retail partners who are there already. Happily, we are seeing a recognition in the grocery trade that category management really succeeds when you provide the tools for your category manager to look at income statements.
Some retailers have different abilities to absorb change -- different cultures and different levels of systems sophistication. Category management doesn't come into full flower without major changes to systems and to culture.
Size is not necessarily a factor either. It comes back to vision and the courage of the guy running the business. Category management will not work from the bottom up.
VP, corporate trade development American Greetings Cleveland
I think the greeting card companies in general have been there for a long time because we usually are the exclusive supplier at a retailer and we are DSD. Because it is our space, the retailer expects us to be able to come up with the programs and the products to make that category really jump.
That differs from any other category you want to pick, where they may have four, five, six, seven different suppliers that the category captain has to work with. For them it's a lot harder.
Seven or eight years ago, before category management became the buzzword, we were doing demographic profiles for new departments, for new stores, within the supermarket business.
We have increased our reliability even more so now through an exclusive arrangement with Market Metrics. We take census data along with a lot of other variables and design a greeting card department to be not just chain-specific, but store-specific.
Then we don't just set that department, we present programs and promotions for the retailers that will allow them to promote to that individual consumer based on that demographic information.
Anyone that services the supermarket industry needs to know who our customers' consumer is. Once you get back in the store, what do you do to make sure that the retailer is reaching as many consumers who walk into that store as possible? That is where the specific promotional activity comes into play.
There is a lot of opportunity left there for us to come up with more programs that will help the retailer reach their customer. The closer we identify the retailer's consumer, the better we can help that retailers service the consumer.
We should eventually be able to tell the customer, "This is the trading area, you are not reaching this group and here's what we have to do to get there." That's next.
senior account executive, supermarkets Coors Brewing Co. Golden, Colo.
We have developed a target account list. I currently have 10 supermarket accounts targeted for this year and my counterpart has an additional 10. So we are trying to implement about 20 category plans and that is just with those targets. Each division can require a distinct approach. In the planning process, we have meetings at levels slightly higher than where we traditionally call on at the field. We want to talk to an owner of a strategic decision or an evaluator that is involved in that decision. We go to the account and have a totally different discussion with them from what we would normally have about tactics -- features, displays or whatever.
We ask them about their business: What is your mission statement? Who is your target consumer? What is your target market? What is your competitive advantage? Are you using fresh as your advantage, or are you using variety, limited assortment, service? What is your competitive advantage vs. other supermarkets? Where do you stand on variety? Do you want a limited assortment? A maximum assortment? Where are you in terms of profit and price?
Then we talk to them specifically about malt beverages: What is the role of the malt beverage category? Is it traffic generation? Is it a turf defender against alternative formats? Is it a margin generator? A cash generator? An image enhancer? For every one of those roles, there is going to be a different set of measurement criteria.
If a guy is into traffic generation, you are not going to go in to him with a margin plan. You are going to be going in talking about sales and share and find out how they are performing against that.
Nine times out of 10 the accounts don't have all the answers. That's OK, because if we do this process correctly, it will come out during the analytics. Once we get to the point where we start to share data, share information and start to build the category plan through those analytics, it can become fairly clear that, for example, you are generating margin with beer. We build a plan from the retailer's perspective. That is why we have that series of interview questions that we ask up front: so that we make sure we are tracking with them. We make sure who their target market is. Their target consumer.
We feel we have a real good handle on [category management] version 1.0. Version 2.0 as we are working on it will overlay more and more consumer information: who your shopper is and who is the shopper out there that you are not getting. Also, for us to try to get into more total store category management.
Maybe we'll move beyond the malt beverage aisle to talk about cold beverages, or maybe all beverages. The list of accounts can expand, but we also want a greater sophistication of the process.
director of public relations Coca-Cola USA, Atlanta
Category management means a lot of different things to a lot of different people. It can be misleading to use the term without defining it.
We do not practice category management at Coca-Cola Co. What we do here, though, is work with our customers to develop programs which are both merchandising initiatives as well as logistical initiatives to expand the size of the soft drink category and the value it can bring to our customers.
We already believe that we at Coca-Cola are logistically the most efficient producer. We have taken a lot of costs out of our systems. We already have virtually store-by-store management. In many cases stores are visited several times per week. We are trying to assist the retailer. We can't manage their store for them. They don't want us to. It is their store. However, we can show them how we think they can maximize their revenue and profit within the soft drink aisle.
We have expanded our product line into new lines like Fruitopia, OK Cola. Consumers are looking for more different choices. We have changed our systems to offer those choices. The consumer remains king in all of this.
So we have broadened our brand portfolio. Sergio Zyman, our chief marketing officer, said this in a presentation to analysts here two weeks ago: "The consumer wants durable brands. Within them there may be some nondurable products."
There are a host of things involved in assisting the retailer. With respect to expanding that category, our focus is on promotional support and an efficient distribution system.