New Streamlined Process
Puts Focus on Shoppers

By John Karolefski

The next wave of best practices for category management will incorporate such timely concepts as shopper marketing, in-store execution and loyalty marketing. It will build on the traditional eight-step process developed two decades ago by The Partnering Group (TPG), the well-known consultancy.

That is the vision of Dr. Brian Harris, founder and co-chairman of TPG, and developer of the eight-step process. “Shopper marketing is the next great change in the industry,” he said. “It will fill the gaps in category management with insights,” he said.

The updated version of category management will be Shopper & Category Development (SCD). It will be outlined in a new report called “The Next Wave of Best Practices for Category Management,” scheduled to be issued early this year by the Food Marketing Institute (FMI).

Harris said the key features of the new process will include: 
  • Streamlined, yet robust for all categories
  • Consumer- and shopper-insight driven
  • Shopper-centric strategies
  • Loyalty marketing integration
  • Breakthrough, differentiated strategies
  • Global and local application
  • More emphasis on implementation.

The traditional process included the following eight steps: category definition, role, assessment, scorecard, strategy, tactics, implementation and review. These steps will be compressed into the following five steps: insight generation, strategic and tactical planning, initiative development, plan launch and plan review.

The philosophy and objective of the new process remain the same as the original one, according to Harris, speaking at the annual Category Management Conference, hosted by the Category Management Association (CPG Catnet) in Atlanta. It is a “retailer-supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer/shopper value.”

Harris said category management worked for the industry for many years because it provided a foundation for strategic retail marketing. It also delivered superior results for trading partners in terms of sales, profits and ROI. Finally, it provided a model for collaboration through better sharing of information.
 
“Collaboration is a competitive advantage today,” he said.

Nevertheless, he explained that the traditional process of category management hasn’t achieved its full potential for several reasons:
  • Inconsistent top management support
  • Too data-driven and template-driven, and not enough emphasis on insights
  • Too project focused and not a “continuous” process
  • Work cycles are too long and time intensive
  • Scorecards have not changed enough
  • Too headquarters focused and not enough focus on stores and shoppers.
  • Inconsistent implementation at store level
  • Too much reliance on manufacturers and not enough retailer ownership
  • Lack of software supporting tools, especially for pricing and promotion
  • New trends and competitive challenges have emerged.

“But category management is a step in a journey,” he stressed. The first steps in the late 1970s were scanning and space management, and the newest step is shopper marketing.

The Category Management Conference featured several other noted speakers on timely issues. Here is a summary of some of them:

Center Store Is Shrinking
The total retail space in the supermarket will expand over the next five years, according Paul Weitzel, managing partner with Willard Bishop Consulting. But the Center Store will shrink with space going to the perimeter.

“Retailers wan to win on the perimeter and be good enough in the Center Store,” he said. “Many are taking a broad sweeping approach to space contraction. This is a big mistake.”

Seventy percent of supermarket executives have told the consultancy they will shrink space for the Center Store in the next give years. Fifty percent plan to shrink space by less than 10%, while 10% plan to reduce it by more than 10%.

Ironically, the Center Store is where retailers make their money, said Weitzel. About 72% of sales and 88% of profits come from Center Store sales.

“We need a Center Store strategy,” he said. “We don’t have one today [because we’re focused on the perimeter].”

Weitzel listed several implications for suppliers:
  • New collaboration will emerge
  • Successful collaboration will require grocers to “raise their game”
  • Different business relationships for new formats will emerge.

Supermarkets Must Adapt
The recessionary economy is affecting supermarkets and retailers must react to remain viable, according to G. Robert James,
Vice President of Strategy & Insights for The Great Atlantic & Pacific Tea Co.  

Specifically, there are changes in consumption behavior such as shopping more at super centers, buying less expensive grocery brands, using more coupons, and reducing overall spending.

James said grocers need to emphasize value, focus on “best bets,” meaning what they think consumers will buy, and partner with suppliers to identify creative incremental opportunities. “Retailers are paying a lot of attention to private label,” he added.

But the most important change supermarkets must make, he said, is “getting out of the middle. Getting out of the middle is not being a standard supermarket.” In other words, develop multiple formats that target different types of shoppers. Also, focus on fresh foods and personalized service to customers. 

Spotty In-Store Implementation
Deteriorating in-store conditions in terms of planogram “drift,” out of stocks, and lack of display compliance call for new solutions, according to Mike Spindler, president of Panther Mountain Companies and a veteran executive in the retail/CPG industry.

“But there’s no quick solution to this difficult problem,” he said.

The problem is made worse by several factors such as no transparency into the store (“We don’t know what happens when a new product gets cut into a store”), no compliance measurement (“Is the POP up?”), and the wrong data used for evaluation. 

He outlined other key points:
  • 8% out of stocks
  • 2% lost sales due to shrink
  • 17% of new items gone from the shelf in less than            eight weeks
  • Less than 50% promotion/POP execution
  • More than 50% of in-store labor spent on non-critical issues.

“If we’re going to progress with shopper marketing and shopper retailing, we have to find out what’s happening in the store,” he said. “There are things coming down the pike to help us find out.”

He listed the following:
  • RFID for research/promotion management
  • PRISM (measurement of traffic by location)
  • CCTV (tracking people)
  • Digital collection and interpretation
  • Systemic digital collection
  • Ability to recognize item-level movement on, movement off and count.


DECEMBER 2008

Fisher-Price Leverages POS Data
As Single Source of Truth

By Al Heller

Toy maker Fisher-Price has found a way to leverage point-of-sale (POS) data as a single source of truth for retail activity. The Mattel Brands division has used this knowledge across the corporate organization to help generate better demand insights and sales forecasts, optimize orders for its customers, plan and manage promotions and categories, and execute in the field.

Since opting for a demand signal repository (DSR), Fisher-Price
has been able to overcome some inherent challenges in its
primary business:

  • Extreme seasonality. The lesser January to July season, and the prominent August to December season, which accounts for 80% of sales.
  • Long production lead times because so many goods are made overseas, which add to the need for precise sales forecasting.
  • A narrow window of just a few weeks to make actionable decisions for the coming year, based on fast, accurate reads of POS data.

So described Steve Czajkowski, senior manager of sales IT planning and e-business at Fisher-Price, in a recent webcast, “Creating a Single Source of Truth with POS Data Across the Organization.” He presented with Lora Cecere, vice president-consumer products at AMR Research, and David Kane, industry market development manager-U.S. consumer goods at Microsoft. The event was hosted and moderated by Jennifer Beckett, vice president-sales and marketing, Vendor Managed Technologies, maker of the Microsoft-based Velocity solution.

A demand signal repository, according to Cecere, is a robust centralized database that stores, harmonizes and normalizes large volumes of demand data. These include POS, wholesale distribution information, inventory movement, promotional demographics, market demographics, third-party market content, and customer loyalty data, all to support better decision making.

Based mostly on CPG pilots, she estimated a 14-month return on investment on DSR technologies, and a six-month ROI on predictive analytics that use the data.

“When data can be used to drive better response for seasonal products, a DSR can often drive a 2% to 4% sales increase,” Cecere said, while suggesting that the retailer-CPG trade has a way to go: “What should be easy is fundamentally difficult. The industry hasn’t built processes to use downstream data. Most organizations have rewarded sell-in, not sell-through, and have not aligned to the shelf.

“It’s extremely important for CPG to know how it is doing with an account in order to improve forecasts, and we’re seeing an evolution of software applied to this,” she added.

An AMR survey showed that among users of applications to forecast by SKU and retailer distribution center, 50% feel it is important and 35% are satisfied with performance; and among users of DSRs, 36% consider it important and 32% are pleased with results.

Count Fisher-Price’s Czajkowski in the corner of satisfied users. Since applying the Velocity solution to 20 of its largest retailer accounts, Fisher-Price has brought order to the array of data it gets from them, such as EDI (electronic data interchange), AS2, Retail Link and other proprietary chain platforms. It can take numerous views of this data, for example, to rank toys by sales, or tier stores by performance within a chain, or look at stores across chains. And the company shares this data with its in-store merchandising forces to bring about timely execution on the selling floors.

“We’ve repurposed ourselves from data assemblers into insight analyzers and promotion planners,” said Czajkowski. “We field large amounts of POS data quickly and add additional insights to that data. Reports are scheduled, triggered and delivered automatically.”

Other benefits he noted: better seasonal forecasting by extrapolating store-level data, greater ROI on promotions, faster store reads that help the company determine its end-game for the holiday season, and a labor savings of 10 full-time employees in sales and one in IT during year one alone.

“The greatest benefit was reaching the single source of truth, which had eluded us for so long,” he added. Having indisputable numbers broke a significant and recurring logjam in its multi-disciplinary meetings. “Each group [such as finance, sales, marketing, production planning] challenged each other’s numbers. Our meetings never got going. Hats off to the finance group for running that implementation of Velocity,” described Czajkowski.

Previously, Fisher-Price had homegrown systems that lacked high-level insights, and traditional desktop applications that couldn’t effectively manage the high volume of data. “To get a good read on our business was nearly impossible,” he said.

The company also turned to Velocity to support two to five
analysts who manage one key retailer account through the high-
level Category Advisorship program. “We now look consistent in
the way we approach” the chain, stated Czajkowski. With no increase in staffing, it provides reproducible store clustering and demographic analysis.

“We think CPG companies are ready to put business intelligence into their daily processes, such as how to weather events that affect consumption and put predictive analytics on them,” said Microsoft’s Kane. “Intelligent visualizations from chain-level down to store-level enable looks at the top and bottom stores within regions, for example, and help bring best practices from stores doing well to
the others.”

Al Heller is co-author, Consumer-Centric Category Management (Nielsen/Wiley, 2006) and president, Distinct Communications, LLC.


Market Watch
Web-Based Planograms Debut
Based on ‘Software as a Service’

By Lynne Cooke

WebPhoria Technologies has released ezPOG, the first web-based planogram solution, based on the delivery model known as Software as a Service (SaaS). It was conceived out of the belief that planogram software can be intuitive and easy to use.

The technology was developed by SMSB Consulting Group, a leading provider of product image solutions, planogram development services and category management consulting to the CPG industry for over 22 years.

“ezPOG enables subscribers to build accurately scaled planograms from scratch and/or modify or view existing planograms, along with those created by the leading space management solutions,” said Jason DeRienzo, company spokesman. 

The said that the solution offers all the core planogram functionality found in the leading PC-based planogram applications at fraction of the cost. Because the software works on the web, there is no need to invest in additional hardware or worry about annual maintenance. In addition, he said ezPOG eliminates the need to handle installation, complex set-up requirements and other upkeep and maintenance associated with typical PC based planogram solutions.

“ezPOG is intuitive and easy to use,” he said. “Users can begin building planograms within minutes after subscribing. Most users master the application within a day.”

The planograms may be saved as a jpeg images, allowing a subscriber to insert a planogram in any program without the need
for additional software. Subscribers can easily view and print planograms using product images and/or block shapes.
 
The solution comes with pre-defined planogram reports that can be further customized to address most planogram reporting needs. Reporting functions are integrated with Excel to facilitate view, modify and print reports.

ezPOG can import files from other leading space management applications. It accepts product images from all third-party image vendors. Single database management enables all subscribers from the same company to access the same image data file thus eliminating the need for remote subscribers to maintain individual, complex, resource intensive image data files. Workgroups allow users to share planograms, product data, and image databases.

An ezPOG demonstration is available www.ezpog.com.

Award for Relational Solutions
The B-eye Network Visionary Award has been given to Relational Solutions, a software and service company specializing in demand signal repositories, data integration and business analytics, and its customer, Comag Marketing Group (CMG) for business impact in the area of data integration.

CMG was able to achieve a greater return on investment, saving costs associated with outsourcing the management of data by implementing the POSmart solution. Its ability to integrate POS data from all classes of trade gave CMG the ability to compare POS data with internal information.

“POSmart’s demand signal repository also identifies anomalies and other exceptions that provide key information needed to manage sales growth. POSmart had the most flexible architecture and our key business users like the ease of use,” said Stephanie Justice, Sr. vice president of CMG

Eye on Product Categories
Retailers are looking closely at product categories that are most relevant to the economic shift in play today, according to G. Robert James, vice president of Strategy & Insights at The Great Atlantic & Pacific Tea Co. (A&P). These conditions can provide “creative incremental opportunities” for trading partners who work together.

Speaking in Atlanta at the annual conference of the Category Management Association, James said there will be a greater focus on localization and regionalization as market conditions intensify. He advised retailers to emphasize value and focus on “best bets,” which are products that consumers are likely to buy more of nowadays.
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JANUARY 2009

CATEGORY MANAGEMENT

New Streamlined Process Puts Focus on Shoppers

Fisher-Price Leverages POS Data as Single Source of Truth

Web-Based Planograms Debut Based on 'Software as a Service'

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