Mastering Category Management

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Category management is the primary platform from which CPGbrand owners interact with retailers, and it provides the language, process framework and metrics for communicating all recommendations to the retailer.

Without the foundation of category management, shopper marketing is “a tale full of sound and fury signifying nothing.”That is why CPG brand and retail leadership must understand what is happening in the CPG ecosystem and why they must allocate more resources to this critical function. Category management is a fundamental discipline, like consumer research or brand strategy development. Mastering category management is what will separate leaders from followers.

Major Changes

Brand owners and retailers need to give the category management function more and different resources, because several accelerating trends within the CPG marketing ecosystem are increasing the importance of category-based thinking. These trends threaten to overwhelm the existing capabilities of category management and choke growth unless management addresses them quickly, intelligently and holistically:

Retailer control of the shopper’s moment of truth at the shelf. This means the power of the retailer in the CPG ecosystem is increasing as traditional brand building tools are losing their potency and as brand equity is in freefall. Does any brand enjoy the loyalty it had 20 years ago? If so, name it.

The growing importance of marketing to the shopper on the path to purchase and in the store. All of those formerly brand-loyal shoppers are searching the Internet for a better deal.

The growing importance of harnessing “big data,” especially the interaction of loyalty card data with other data captured on social media and shopping-related apps. Everyone knows shopper insights emerge from the interactions of these data streams. The problem for CPG marketers and retailers is that we do not yet have the digital tools to facilitate the sorting of these interactions to discover an insight.

Analyzing the Trends

How is it that this one function addresses these emerging trends with portentous implications for CPG management?

Trend 1: Growing Retailer Power: The retailer thinks and works at the category level. The retail buyers are called category managers because they are paid and incented to grow categories, not brands. When a supplier’s presentation begins with a story about growing a brand, the category manager tunes out. He or she wants to hear how the supplier grows the category or its margins. Without an insight or a brand that grows the category, the only weapon you have is your wallet. You must master the category with superior insights, people and tools. Category management is the foundation of category mastery.

Trend 2: The Growing Importance of Marketing to the Shopper: Just as the retail “buyer” thinks in terms of categories, the shopper thinks in terms of need satisfaction. He or she thinks in “need states.”That’s why shoppers often write “detergent,”“bleach” or “bread” on a shopping list instead of “Tide,” “Clorox” or “Wonder.”The category is the answer to the shopper’s need. Therefore, you must organize your thinking around categories and the particular evolving needs they satisfy.

Trend 3: Big Data and Insight Generation:Marketers are drowning in a tsunami of data. No one can yet contain this torrent into pools of relevant data so that researchers may plumb the pool for actionable insights. Our answer is to organize the data around that which one is trying to understand, namely the shopper need state we refer to as the “category.” Organizing big data around categories (need states) is basic for uncovering unmet needs, which are the basis for new product development; the emotional factors driving a need (insight); the benefits that marketers need to offer; and the location of key communication touch points.

We are confident that no participant in the CPG ecosystem is functioning at the “excelling” level of the category management maturity curve. Everyone would benefit from benchmarking its capabilities against the standards set by the Category Management Association. To understand these standards, benchmarking and the category management maturity curve, access the white paper “Category Management Mastery: The Key to Growth!”at www.cpgcatnet.org, or reach out [email protected] 

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