Data Management

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Efficient Consumer Response

• Efficient replenishment
• Systems, EDI
• Fewer stockouts
• Efficient promotion
• Promotions based on consumer demand
• Lean inventory to support promotions

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Efficient Consumer Response

• Efficient assortment
• Turnover
• Profit
• Enhances brand and retailer perceptions
• Efficient product introduction
• Pull strategy for new products
• Based on unmet needs

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Category Management

• Technique used by retailers
• Product is sub-divided into categories that
• Reflect purchasing behavior of target customers
• Are managed as separate business units
• Supermarkets and mass merchandisers

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Categories as SBUs

• Department is too broad and less strategic
• 150-300 categories vs. 15-20 departments
• Product/brand is too narrow to approach
  strategically
• 15-20,000 skus in a store and 16,000 new
  products/year

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Category Management

• Integration of Buying and Merchandising
  responsibilities
• Management of price, shelf space, merchandising
  assortment strategy, promo efforts, replenishment
• Affects manuf. sales and marketing
• Team approach between channel members

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Category Plans

• Jointly developed by retailers and suppliers
• Define strategies and financial objectives
• GM
• Sales/cu ft.

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Buying/Merchandising Decisions

• Responsibilities must be integrated
• Inventory allocation
• Space allocation/analysis
• Customer demand

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Category Management

• Goal - Retailer
• Optimize each part of the store
• Allocate space that maximizes Gross Margin/unit
  of space
• Goal Supplier
• To become the lead supplier or channel captain
  for that category

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Benefits

• Increased category sales (5-15)
• Increased category margins
• Assists in creating optimal assortments
• Reduction of SKUs in most cases
• For Mfct., move from trade allowances (push) to
  trade promotions (pull)

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Manco example

• Merchandising of tape products was difficult
• Different buyers bought tape
• Solution tape center
• Later mailing center
• Prevented other vendors access
• 19 SKUs to up to 32 feet in office superstores

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Direct Profit Profitability (DPP)

• Profit associated with each category
• Per unit Gross Margin minus all variable costs
• Procurement
• Distribution
• Sales

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Defining Categories

• Consider end uses (frozen, chilled, deli fresh)
• Consider substitutablity (fresh/frozen)
• Consider complimentary purchase decisions (pasta
  sauce)
• Base decision on how customer buys
• Same real estate

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Dairy category

• Displayed by brand name
• Customers shop by type (low fat, full fat, no
  fat, fruit)
• Then individual flavors

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Ready to eat meals category

• Type Chinese, Italian, meat/two vegetables
• Cooking method oven, micro, stove
• Low calorie or regular

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Defining Categories

• What products should be included?
• Beer Category- decisions
• Shelf beer and cold beer part of total
• Shelf beer 1 category and cooler 2nd
• Sub category of beer/wine/alcohol
• Beer as a solution (picnic, party, meal)

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Roles/Implied Strategies

• Destination

• Traffic building
• Turf protecting
• Transaction building
• Excitement creation
• Cash generating
• Image creator

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Pasta Category
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Roles/Implied Strategies

• Transaction building
• Profit generating
• Turf protection

• Routine/ preferred

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Roles/Implied Strategies

• Convenience

• Transaction building
• Profit generating
• Image enhancing

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Roles/Implied Strategies

• Occasional/ seasonal

• Traffic building
• Excitement creation
• Profit generating

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Tactics Traffic building

• Aggressive pricing on loyalty products/low
  margins
• Media on frequently purchased items
• Prominent space

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Case Study - Toothpaste
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Leading Manufacturers CM

• P G
• Kraft
• General Mills
• UnileverRalston PurinaPillsbury
• QuakerKelloggsCoke

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Leading Retailers CM

• HEB
• Safeway
• Wal-mart
• Ahold
• Kroger
• Wegmans