The moment of truth – Putting category ... - ECR Community

The moment of truth –
Putting category management into action –
At store level
1

Crash Course - Objectives
• To have a clear understanding of the values of working with category
management on store level
• Understand what it takes to move from project to process
• Get a clear understand of how to measure and manage sales and profit
effectiveness
• See the true value of working proactively whit P.O.S data
2

Subject
Understand Category
management issues
and opportunities
Category
management from
project to process
From data to relevant
business knowledge
Next step
Content Expected output
The business to business to consumer market
Category management models and steps
From continiuosly improvements to Joint
Category management – Focused at
partnership
A way of working in the FMCG industri – A
shift in pradigme
Group discussions at the table
Effective POS- data analyzes and tools
Build on cases:
Market potential - Issues and opportunities
Reasons – Objectives Actionplan -
Implementation – Cockpit and review procces
Combined with 2 small workshops at the table
Focusing at understanding potential and
impostnat tools
How to go from project to process
Group discussions at the tablefilling in a small
questionare
Give the participants a broad overwiev of the issues
and opportunities in relation to category
management in FMCG
See the value of implementing category
management the right way
Understand the category management could and
should become a way of working and not a project
retated to individual parameters
Understand that managing kompleks data sources
could become simple asking the right questions
using suffient tools
What will be step 1 in your company
3

Category management issues and opportunities
1

The business to business to consumer market
CONSUMER MARKETING MANAGEMENT
Manufacture Chain POP Consumer
Moment of
truth
TRADE MARKETING MANAGEMENT
2

The Business to Business to Consumer market
• We are actually selling 2 types of products!
• The consumer product – covering consumer needs
• The business product – covering business needs
3

The Consumer Product
The value is basically build on taste, feelings and perceptions
• Consumer evaluation
• Ability to create consumer loyalty
• Ability to create consumer trial
• Ability to create consumer knowledge
4

The Business Product
The value is basically build on facts
• Business evaluation
• Ability to create chain and store turnover
• Ability to create chain and store profit
• Ability to create chain and store profile and image
5

ECR & Category Management
E fficient
C onsumer
R esponse
Though cooperation to fulfill
the needs of our common
consumers – better, faster
and at a lower cost
6

Category development
How can we grow the cake together – optimizing the moment of truth
Win for consumers
Win for chains and stores
Future potential
Today's
Solutions =
Sales &
Profit
Win for manufactures
7

Category Management
Category Management
Right assortment
Right prices
Right promotions
Right place & space
Right NPI’s
Category development
8

Cooperation at several levels creates the best results
KAM/BUM
Sales Rep
/ Merch.
Consumer
Chain
Store/POP
9

Cooperation around the moment of truth
Internal
dialog
KAM/BUM
External dialog
Consumer
Category manager
Sales rep / Merch Store / POP
External dialog
Chain
Sales management
District management
Internal
dialog
Dialog
Store/POP
10

Knowledge and understanding becomes key to success
Manufactures knows a
lot but not enough
Knowledge sharing
creates synergy
Retailers knows a
lot but not enough
Efforts Results
Data / knowledge sharing is a must to create best practice solutions
11

Category management / category development – Put to work !
Category profit - One chain - Remarkable results in one category
+ 4,5 mio
12

Category Management process – ECR Best practice
Category Review
Category Definition
Category Role
Category Assessment
Category Objectives
Category Marketing
Strategies
Category Tactics
(initiatives)
Implementation Plan
13

The “joint” Category Management model
Category review
Joint basic plan
Category definition and structure
Assortment
Retailer strategy definition
Space
Tactics assessment
Tactics optimization
Store Lay out
Communication
Promotion
Price
Category management
&
implementation plan
Store Development
program
• Alignment – Go/No go
• Joint objectives
• Priorities
• Cooperation
• Specific objectives
• Strategy
• Action
14

Assess and develop co-operation
Investment
by
Manufacture
(Human
Resources and
Financial)
Category
management
Advanced
Customer
management
Basic
Customer
management
Limited cooperation
(low priority)
Focused
at
Discounts
Focused
at
Improvement
Focused
at
Partnership
Limited cooperation
(low priority)
Traditional negotiations Key Supplier cooperation Category Management
Investment by Retailers
15

Continuously focusing at improvements
Assortment
Space
Tactics assessment
Tactics optimization
Store Lay out
Communication
Promotion
Price
Store Development
program
• Specific objectives
• Strategy
• Action
16

The Classic category development dilemma 1 -
Contribution formula
How
many?
Hvor mange forbrugere
kommer i butikken ?
X X
X
How
often?
How
much?
Which
profit?
• Are we going to increase traffic, attract the ideal shopper profile and perhaps
more loyal shoppers?
• Are we going to guarantee a more effective use of the shopper-flow by raising
the average basket (or profit)?
=
Store
profit
17

Clarify areas of alignment
1.
2.
3.
4.
Manufacture Chain / POP
1.
2.
3.
4.
18

Focused at partnership and cooperating around category development
Banner/Chain X
Situation today Situation year 1 Situation year 2 Situation year 3
Business as usual Preffered partner adding volume Preffered partner adding value Increased customer loyalty
% Turnover Profit % Turnover Profit % Turnover Profit % Turnover Profit
Total category turnover 100 10000 1800 100 11000 1980 100 11000 2145 100 11000 2178
Preffered partner share 30 3000 600 30 3300 660 30 3300 825 35 3850 963
Competitor 1 20 2000 400 20 2200 440 20 2200 440 18 1980 396
Competitor 2 10 1000 200 10 1100 220 10 1100 220 8 880 176
Private label 40 4000 600 40 4400 660 40 4400 660 39 4290 644
19

Category management = Category development
Yes we know that it is a valuable opportunity
The key challenges are clear
It only works when you can go from project to process, Category
management has to become the way you run your business.
Category management is not brand management
Category management involves many employees at several levels at your
Company, requires a sufficient management and knowledge sharing structure –
Billions of data is involved
You need true cooperation throughout the whole value chain
It is only working when it is working at store level
If it is not working for you, you are probably making it to academic
20

The moment of truth –
Putting category management into action –
At store level
21

Crash Course - Objectives
• To have a clear understanding of the values of working with category
management on store level
• Understand what it takes to move from project to process
• Get a clear understand of how to measure and manage sales and profit
effectiveness
• See the true value of working proactively whit P.O.S data
22

Subject
Understand Category
management issues
and opportunities
Category
management from
project to process
From data to relevant
business knowledge
Next step
Content Expected output
The business to business to consumer market
Category management models and steps
From continiuosly improvements to Joint
Category management – Focused at
partnership
A way of working in the FMCG industri – A
shift in pradigme
Group discussions at the table
Effective POS- data analyzes and tools
Build on cases:
Market potential - Issues and opportunities
Reasons – Objectives Actionplan -
Implementation – Cockpit and review procces
Combined with 2 small workshops at the table
Focusing at understanding potential and
impostnat tools
How to go from project to process
Group discussions at the tablefilling in a small
questionare
Give the participants a broad overwiev of the issues
and opportunities in relation to category
management in FMCG
See the value of implementing category
management the right way
Understand the category management could and
should become a way of working and not a project
retated to individual parameters
Understand that managing kompleks data sources
could become simple asking the right questions
using suffient tools
What will be step 1 in your company
23

Category management from project
to process
1

The business to business to consumer market
Copyright ® Gordios Retail Innovation A/S
Consumer marketing
Manufacture /
Purchase /
Supplier
Category
Chain Store / POP Consumer
management
Trade marketing
Moment of
truth
2

Overall category management objectives
• Category development – Grow volume, Grow value, Grow loyalty
• Transform the strategic frames of the business plan to a category plan
which could and should be implemented a round ”the moment of truth”
• Use fact based decision process using sufficient tool’s managing bill of
complex data
• Continuously focus on best practice in store solutions – recognizing
different shopper behavior
Copyright ® Gordios Retail Innovation A/S
3

Category Review
From projects to process
Category Definition
Category Role
Category Assessment
Category Objectives
Category Marketing
Strategies
Category Tactics
(initiatives)
Implementation Plan
Copyright ® Gordios Retail Innovation A/S
On going analyses Dynamic planning Execution
Potential
Issues
Reasons
Objectives
Action plan
Cockpit
Headquarter
Store / POP
Review
4

Category Management proces
Joint ”plan” Analyses Planning Execution
Common
Platform
Chain strategi
Category role
Copyright ® Gordios Retail Innovation A/S
1 4
Potential
2
3
Issues &
opportunities
Reasons
5
6
”Seldom”
”Once”
Objectives
Action plan
Cockpit
Very often
Head quarter
POP
Review
5

Joint basic plan – Common understanding
• Retailer category strategies
• What, combined with objectives
• Category rolls
• Category definitions
• Structure and decision trees
• Best practice tactics – Tactograms etc.
• Assortment
• Place & Space
• Prices
• Promotions
• Communication
• NPI’s
• Overall implementation plan
• Process and responsibilities
Copyright ® Gordios Retail Innovation A/S
6

Step 1. potentiale
Category importance and chain potential
• Consumer perspective
• Category impact on primary target group
• Category trends and market options
• Category consumer positioning
• Business perspective
• How important is this category to turnover, profit and image enhancing
• Competitive overview with focus on complementary and substitute competition in
the category
Copyright ® Gordios Retail Innovation A/S
7

Step 2. Issues
• What are the issues and opportunities optimizing this category on a day
to day basis?
• Prioritize business issues
• Profile, Consumer flow, Average purchase, Profit pr purchase
• Where do we see those issues
• At segment or brand level
• At HQ level / Chain level or individual store level / regions etc.
Copyright ® Gordios Retail Innovation A/S
8

Step 3. Reasons
• What are the reasons to our “on going” issues and opportunities
• Focus on manageable variables
• Chain level ex:
• Assortment – Wide and depth, brands etc.
• Price levels – shelf and campaigns
• Promotions – Relevance, quantities, qualities
• In store space and place management
• Store level ex:
• Consumer flow
• In store placement of category and products
• Implementation quality
• Out of stock / shelf
• Local activities / local competition
• Regional demographical differences .
• In store attitude and merchandising
Copyright ® Gordios Retail Innovation A/S
9

Step 4. Objectives
• What are the overall objective of the category
• Focus on the “contribution formula”
• What specific objective are we working with in relation to the
P’s
• Products (Assortment) price, place etc. the “engine”
• What is our potential
• Focus at the “spread” in store effectiveness
Copyright ® Gordios Retail Innovation A/S
10

Step 5. Solutions and action plan
• Which issues should be solved in which sequence –
Prioritizing against issues and objectives
• Which objectives should we have solving specific issues
• Which specific actions do we need to take and who will be
the “on going” responsible
• Create a dynamic action plan giving an overview of – What,
how, where, who and when
• Agree on a review/adjust sequence of meetings
Copyright ® Gordios Retail Innovation A/S
11

Step 6. Cockpit, managing on going implementation and
review of the category development process
• Development and implement a joint cockpit
• Which KPI’s should we focus on developing the category – Sales and profit
effectiveness
• How often should we update our cockpit
• Who should have access to the cockpit
• Agree on review meetings
• Status on our action plan – Focus on exceptions and “red areas”
• Decide on needed adjustments to our plans
• Focus for the coming period
• Updating our best practice understanding if appropriate
Copyright ® Gordios Retail Innovation A/S
12

KPI’s and Assessments
• Sales effectiveness
• Turnover / 1000 customer in the chain/store
• Profit effectiveness
• Turnover / 1000 customer in the chain/store
• Loyalty
• Loyalty to the chain / store – Number of potential customers who decide to buy in this chain / store
• Loyalty towards the supplier – Supplier category share of total category sales in the chain / store
• Category importance
• Category share of total chain / store turnover
• Category share of total chain / store profit
• Supplier importance
• Supplier share of total chain / store turnover
• Supplier share and total chain / store profit
Copyright ® Gordios Retail Innovation A/S
13

Cockpit
Copyright ® Gordios Retail Innovation A/S
14

KCRS case - chain scorecard
Copyright ® Gordios Retail Innovation A/S
15

Ex: Best practice tactogram – Developing the engine
Targets Strategies The supplier and the
4 P’s
Assortment Price Distribution
Merchandizing
Space and
positioning
Increased turnover Build customer
flow
Copyright ® Gordios Retail Innovation A/S
Multi sales and
complementary
sales
Focus on top 10 of the
category
Develop a wide and
deep assortment
covering all sorts of
demands of the
category
Increased earnings Profit maximization Focus on items with
high contribution per
unit.
Delist marginal issues
and articles with low
contribution per unit
Increased loyalty Image build-up Maximize assortment
focus on all what is in
the category
Events Focus on new
products from the
whole world
Maintain loyal
customers
Develop a wide and
deep assortment
covering all sorts of
demands of the
category
Shelf prices on market
level or lower
Shelf prices on market
level of top 20
products. Relatively
high prices of marginal
and niche products
Minimize space share
and use C positions
Optimize shelf position
– A positions for
marginal products.
Optimize sales prices Disproportional space
for high-marginal
products.
A-position on the floor
for high-marginal
products – No display
of products with low
Shelf prices on market
level of top 20
products. Relatively
high prices of marginal
and niche products
contribution
Optimize space based
on the market position
of the individual
products. Extra space
for new products on A
positions
Optimize sales prices Optimize space based
on the market position
of the individual
products. Extra space
for new products on A
Shelf prices of top 20
under the market price
positions
Optimize space focus
on the best positions
for top 20 products
Promotions
Sharp price
promotions
Currently advertised
Promotions on
marginal and niche
products – Theme
advertising
Focus on great
activities
No price promotions
only theme and idea
promotions on high
marginal products
Use a wide palette of
promotions
Advertise currently and
where possible
Develop activities and
events about new
launches
Pay day promotions
focusing on stock
loading
16

Promotion and communication
Category RTEC/K-
Snacks
Date: 30.06.07
Segment Objectives Type of
promotion
All Family
K-snacks
Drive
frequency of
purchase in
HH with kids
from avg 2,5
to 2,8 times
per year by
end of q1
2008
Build
penetration
to 10 % by
the end of Q4
2008
Copyright ® Gordios Retail Innovation A/S
FMIO (free
mailing in
offers)
communicated
in-store.
Cross
promotions
with fruit
manufacturer
In-store
promotion
focusing on
communication
Split of
investments
Suppliers pay
POSM
50/50 split of
price
reduction
Supplier pay
for POS
material
Promotion
material/
In-store
communication
FMIO
Cross category
benefits
Brand
communication.
Demos.
Placement
of
promotion
End gondola
End
gondola+fruit
department
Traffic spots
Close to
shelf
Pricing Amount of
promotions
Soft
price
reduction
4 per year
Normal 5 per year
Comments
17

Copyright ® Gordios Retail Innovation A/S
18

Execution
• The category management mind ship
• A way of working
• Common knowledge and understanding – a key treads whole
• Same view on “development” and management
• You need a cockpit solution “to take off”
• Agreed and formalized review process
• Focus on exceptions and prioritize
Copyright ® Gordios Retail Innovation A/S
19

Execution
• Focus on exceptions !!
• Reasons related to plan or execution
• Are we doing what we have agreed
• Do we understand the “engine” - Developing and implementing best practice
• Prioritizing focusing on utilizing the potential of what we have created
Copyright ® Gordios Retail Innovation A/S
20

Group discussions
Are your company working with the category management mindset?
Do your company have “cockpit” solutions and are you working with the
same data base though out the value chain?
Do your company have and agreed process related to execution and review
process?
Discus what you see as the main barriers to develop common category
management results what it will take to create “excellence" in your opinion
Copyright ® Gordios Retail Innovation A/S
21

From data to knowledge –
Using a cockpit solution developing the
category on a day to day basis
1

Category Review
From projects to process
Category Definition
Category Role
Category Assessment
Category Objectives
Category Marketing
Strategies
Category Tactics
(initiatives)
Implementation Plan
On going analyses Dynamic planning Execution
Potential
Issues
Reasons
Objectives
Action plan
Cockpit
Headquarter
Store / POP
Review
2

Category Management proces
Joint ”plan” Analyses Planning Execution
Common
Platform
Chain strategi
Category role
Potential
Issues &
opportunities
Reasons
”Seldom”
”Once”
Objectives
Action plan
Cockpit
Very often
Head quarter
POP
Review
3

The full effect of Category Management isn’t proven until it works on
store level!
Category
development is
done store by store
4

Ranking analyses and the challenge of successful development
Relative effectiveness – Sales / profit
X+10%
X
1
N
Goal
The average of the chain in
the category
Stores
5

Tools and models in our cockpit
• Customer scorecard
• The contribution formula
• Ranking- and quadrant analyses
• Store descriptions
• Chain / Store action plans
• Using POS data, Nielsen and GFK as
main sources to common knowledge
6

Customer scorecard - catman@solution
7

What and where are the issues ?
• What is the issue ?
• What is the most important Issus ?
• Consumer flow, Shoppers, sales pr shopper, average purchase, profit etc. (%) ?
• Where is the issue ?
• At segment level/ brand level SKU level / Campaign level / Normal sales ?
• Head quarter / Chain / Region / Store level
• (indkøb/kæde) og/eller butiksniveau ?
8

Contribution formula
Number of
Visitors
Number of
Shoppers
Average Contribution
x
sales
x
ratio
=
• are we to create customer flow / attendances?
• Attract the wanted customer profile
• More customers in the store or perhaps more loyal customers
• Ensure that the visiting customers buy ”customer hit-rate”
• are we to ensure a more effective use of the customer flow?
• by increasing the average sale per attendance (sell more or sell out)
• by getting a better earning on the sold units
• by increasing the sale on the goods with the best earnings
Contribution
9

Focus on The Earnings of the Category / Store defining the issues and
opportunities
Number of
attendances
• Increase number of
attendances in the
store
• More custom-ers in
store / Increase ”customers
hit-rate”
• More loyal customers
/ more often
• The right customers
The turnover
Average
sales
Contribution
ratio
x x =
• Sell more to the
customers in the
store
• Have more
customers in store
buy in the
department
• Buyers buy more +
extra/ more
expensive
• More loyal to
category
• Sell better
• Sell goods of high
profit margin
Contribution
10

What is the issues ?
Number of
customers
in store
Turnover Contribution / purchase
Avarge Contribution
x
purchase
x
margin
=
Need more to
Buy category
Need to buy
More of category
Contribution
How do we utilize the shopper flow
to sell more and to increase our profit
Buy improving our coverage of consumer
needs
Increase profit
11

What is the issue ?
• If the goal is to increase profit in store – what to analyse?
• Should we use this category to increase number of shoppers and their by
increase turnover and profit?
• Should we chose to optimize utilization of present shopper flow
• Increase number of shoppers in category
• Increase sales pr shopper
• Increase profit pr purchase
• Prioritize one issues and one goal
12

Where is the issue?
• Generel consumer level / Chain level
• Specifick shoper level / Regional level / local level (Few shops)
13

Ranking analyses - Category management
segments
Affectivity of sale
in the store
6.00
5.00
4.00
3.00
2.50
2.00
1.80
X
Description 1
Description 2
X
Description 3
Description 4
X
Description 5

Store ranking – Identifying under
performing stores
15

Creating store segments using quadrant analyses
Salg pr 1000 exp.
1,6
1,4
1,2
1
0,8
0,6
0,4
0,2
0
Salgseffektivitet
05258 BILKA HOLSTEBRO
05262 BILKA KOLDING
05263 BILKA HORSENS
05264 BILKA ONE STOP, FIELDS
05255 BILKA ISHØJ
05261 BILKA VEJLE
05256 BILKA SLAGELSE
05265 BILKA VIBORG
05253 BILKA HUNDIGE
05257 BILKA NÆSTVED
05252 BILKA SKALBORG
05251 BILKA TILST
05259 BILKA ESBJERG
05254 BILKA ODENSE
0 500 1000 1500 2000 2500
Salg i stk
16

Optimizing the 3P’s focusing on Assortment
performance / Promotion performance / Space & Place
Salg pr 1000 exp.
1,6
1,4
1,2
1
0,8
0,6
0,4
0,2
0
Salgseffektivitet
05258 BILKA HOLSTEBRO
05262 BILKA KOLDING
05263 BILKA HORSENS
05264 BILKA ONE STOP, FIELDS
05255 BILKA ISHØJ
05261 BILKA VEJLE
05256 BILKA SLAGELSE
05265 BILKA VIBORG
05253 BILKA HUNDIGE
05257 BILKA NÆSTVED
05252 BILKA SKALBORG
05251 BILKA TILST
05259 BILKA ESBJERG
05254 BILKA ODENSE
0 500 1000 1500 2000 2500
Salg i stk
17

Understanding store segments
The Stores are visited and described
18

Creating golden rules understanding best practice
”Golden rules”…
19

Retailnet Tandpleje mod DVH og Føtex
Case
20

Targit – Litas varegrupper – bemærk kun
SuperBest excl. ISO og Dreisler. Forrige 52 uger
21

RetailNet, alle varegrupper mod DVH og Føtex
Se valg
Case
22

WEB based store Plan
Store plan
Chain: ___________________________
Kardex: ___________________________
Store: ___________________________
Period: ___________________________
Consultant: __________________________
Enclosure 1: Data from the store
Enclosure 2: Analysis charts with the placement of the store
Enclosure 3: Evaluation charts -/
platform
• Operational store plan
• Analysis platform
• Store data (POS)
• SWOT
• Store evaluation
• Main problem
• Part problems
• Goals and objectives
• Action plan
• National efforts
• Chain program
• Store efforts
23

Category Management proces
Joint ”plan” Analyses Planning Execution
Common
Platform
Chain strategi
Category role
Potential
Issues &
opportunities
Reasons
”Seldom”
”Once”
Objectives
Action plan
Cockpit
Very often
Head quarter
POP
Review
24

Workshop 1
Discuss and set up a list of variables which create different
“category potential” store by store understanding the ranking analyze
25

Workshop 2
Discus and come up with good ideas of how to use quadrant analyzes
working with category management.
26

Next Step –
How to go from project to process
1

• Please discuss your experience –
• What does it take to go from project to process
• Focus on how to get started
• Please fill the questioner and we will supply the result on our
homepage
2

GordioS focus areas
Gordios
Consulting People Training
CoCoCo IRS
Knowledge Cube
Retail solutions
4

Gordios
We support our customers sales and marketing efforts
with a clear focus on the
retail market
• Consulting / We develop simple, and effective solutions which
deliver measurable results
• People – We make sure that you have the right team in your sales
and marketing operation
• Training – We coach and develop your sales and marketing peoples
competencies
5

Reference List - Selective
6

The presentations could be found at
www.forum.ecrnet.org – after 6 june 2008
www.gordios.ecr.com – after 29 may 2008
If you want access to a demo version of CatMan@Solution please hand in
your company card to Claus Nykjær or Erik Svendsen and they will mail
you an individual access code
7