Athena Retail has been on the market for over twenty years as a Category Management partner for worldwide Manufacturers and Distributors.
However, when customers are very different from each other in terms of language, corporate culture, or expertise in Category Management, it is very likely that each of them may attribute a different meaning to our words.
Clear communication is a cornerstone of effective Category Management. When everyone involved is on the same page, it fosters a climate of understanding that positively impacts collaboration among people. One feels at ease, one feels at home.
So, let’s start with the basics and… enjoy the reading!
What is Category Management?
Category Management is a common process among Manufacturer, Distributor, and Consumer in which categories are managed as strategic business units with the goal of increasing revenue and profit through greater consumer satisfaction.
What is a CDT?
CDT, which stands for Consumer Decision Tree, is a consumer’s decision-making tree, also known as the hierarchy of purchase decisions. It’s a tool used by companies to better understand consumer behavior and the motivations behind product purchases. The hierarchy is usually described as a genealogical tree that illustrates in detail the attributes of the product, both in terms of merchandise (e.g., taste, size, brand, price) and in terms of intended use, i.e., how the consumer uses that product (e.g., breakfast).
What is a category?
A category is a well-defined group of items that consumers may perceive as substitute for each other and/or interchangeable in meeting their needs.
What is a SKU?
It is the acronym for Stock Keeping Unit. It is a unique alphanumeric sequence that companies use to identify and track their products not only within the warehouse, but throughout the entire chain, from supplier purchases to consumer sales.
What is an assortment?
We consider assortment as the set of SKUs that best meets the expectations of the target consumers.
An assortment is defined according to the following characteristics:
- breadth: it is determined by the number of product families that can satisfy different consumer purchasing needs. It is therefore the range of needs satisfied by an assortment in a specific point of sale.
- Depth: it is determined by the number of alternatives that satisfy the same consumer purchasing need. The greater the number of proposed alternatives, the greater the assortment depth.
What does FMCG mean?
FMCG, acronym for fast-moving consumer goods, refers to packaged consumer products, so named because of their high shelf turnover. These are often goods with a short life cycle, which are purchased frequently and therefore used daily. FMCG products include items such as beverages, household care products, cosmetics, but also bulk products such as fruits, vegetables, bread, meat, etc.
Now that we have defined some of the key terms that describe part of our world, let’s focus on the actors in the process: CPG Producers and Distributors.
CPG Manufacturers:
Companies that produce consumer packaged goods. CPG stands for Consumer-Packaged Goods.
The professionals who belong to this world and play an active role in the Category Management process are:
Trade Marketing Managers:
Which are responsible for planning and controlling the distribution of company products through all distribution channels.
They are responsible for defining sell-in strategies designed to maximize product distribution and visibility within sales channels and to establish strong and mutually beneficial relationships with retailers.
Below are some examples of typical activities of a Trade Marketing Manager:
- provide in-depth product training to ensure that Retailers are well-informed and motivated to promote the products
- create attractive marketing materials, such as displays, signage, and promotional materials, to enhance product visibility and appeal in retail stores
- adapt the offering to the specific needs of different retailers, considering their size, location, and target audience.
In cases where the Trade Marketing Manager belongs to a company perceived as a “category captain” in its field, the role also aims to help the retailer define a strategy (assortment, display, pricing, and promotion) for the category, aimed at maximizing turnover and/or revenue and/or profits.
Merchandisers:
They are responsible for stocking products on shelves, checking inventory, managing promotional items in designated areas, and ensuring price accuracy.
Retailers:
Companies of various sizes that sells goods to the public and operate in these sectors:
- Grocery / Fresh / Frozen
- Pharmacy / Drugstore
- Convenience
- Hardline
- Consumer Electronics
- Health & Beauty
- Cosmetics
Retailers can be organized as follow:
- Owned Stores: owned outlets refer to stores that are directly owned by a company, as opposed to those operated under franchise or affiliation. These stores are managed and controlled entirely by the parent company, which holds legal and financial ownership of the stores.
- Retailers’ cooperative: retailers’ cooperatives are alliances of independent stores that combine their buying power to get better deals from suppliers and share marketing costs. This allows them to compete more effectively with larger chains, all while maintaining their individual ownership and control.
- Franchising: franchising is a business model where a successful company (the franchisor) licenses its brand, operations, and know-how to another party (the franchisee). This allows the franchisee to operate a similar business under the franchisor’s established name and system. Franchises share a common brand identity, standardized practices, and centralized support structures. This model extends beyond retail stores, encompassing restaurants and service businesses as well.
The professional figures that belong to this world and play an active role in the Category Management process are:
Category Managers:
They are responsible for managing one or more product categories for a specific geographic area. Category Managers aim to maximize sales of the categories they are responsible for, balancing the interests of the company, distribution, and end-consumer.
Floor Planners:
are responsible for creating functional and aesthetically pleasing interior layouts that maximize operational efficiency, improve the customer experience, and facilitate traffic flow within the supermarket.
Space Planners (or Planogrammers):
are responsible for digitally constructing planograms using dedicated software.
Now it’s time to focus on the store, what do we find inside?
The department:
The department is a delimited area of a store that houses one or more categories. An example of a department is the frozen foods department.
The aisle:
The aisle (or corridor) of a store is a delimited path on one or both sides, lined with shelves where products are placed.
Hot areas and cold areas:
What distinguishes a hot area from a cold area within a store is the flow of customers.
Hot zones are characterized by a high customer traffic index, while cold zones are less frequented.
A hot area, for example, is the checkout area, usually populated with impulse purchase products. Cold areas, on the other hand, are those furthest from the entrance.
If we refer to the aisle, we consider hot areas:
- their entry point, where customers enter and start shopping
- the proximity of the best-selling or promotional products
- stand-alone displays
- end aisle displays.
While cold areas can be:
- the end part of the aisles
- in proximity to the least sold products and service categories (salt, shoe polish, etc.).
The traffic flow:
By traffic flow, we mean the prevailing direction that customers follow in a specific aisle of a store.
Categories layout (or display layout / merchandising layout):
By categories layout, we mean the arrangement of products on the display structures of a store.
For example, within the same module we can find products aggregated by brand, displayed together to make “color spots” and stimulate brand recognition of the target brand.
The Floorplan:
The floorplan of a store is its mapping drawn to scale for the layout of merchandise, furniture and departments.
Last step (for the moment!): let’s place ourselves in front of the shelf.
What is a bay?
A bay is a distinct area within a planogram where components (shelves, bins, etc.) are added. A planogram can consist of one or more bays.
What is a case?
A case is packaging produced and shipped from the manufacturer to the distributor that contains a certain number of pieces of the same product or, in the case of so-called mixed crates, of products that have the same EAN code but differ from each other by, for instance, different fragrance (think of fabric softeners).
What is a facing?
Facing is the face of a particular product on the linear front of a shelf that is followed, in depth and sometimes in height, by other units of the same product.
What is the capacity?
Capacity refers to the total number of units in a SKU that a planogram accommodates. The calculation of capacity depends on the depth of the SKU, the depth of the shelf rack, and the number of facing units assigned to the SKU. For example: if the SKU has 1 facing, is 5 centimeters deep, and the shelf that houses it is 50 centimeters deep, the capacity will be 10 units. In the case where the SKU is shelved two facing, then the capacity will be equal to 20.
What is a planogram (or display)?
A planogram is a visual tool used in the retail industry to plan and organize the shelf layout and visual presentation of products within a store. Its main objective is to optimize the presentation of products to maximize sales, improve customer experience and facilitate shelf management by store staff.
If you feel we have missed anything, please contact us and we will be happy to supplement or edit this article. Thank you for your time, we hope you found this helpful 😊
