Publication:  Retail News
Author:  Fergal Smyth
Date:  December - January, 2001

In the November edition of Retail News, ACNielsen in the first of their series of articles on Category Management described the Category Management Best Practices Process, the agreed Category Management approach between Retailers and Manufacturers in Ireland, as endorsed by ECR Ireland. This month, ACNielsen will look at the first stage of the Category Management Process - Readiness for Category Management. They will provide the first published information (in Ireland), that details how to ensure your business is in a position to apply the Best Practices Category Management Process and gain the significant benefits this process can deliver.

Before describing the key components of the Readiness stage, lets first define Category Management. ECR Europe created a common definition of Category Management as part of the creation of the Category Management Best Practices Process. This outlines the Category Management is:

• A joint Retailer/Supplier process for evaluating and managing categories
• as separate business units
• on an item by item basis by ...
• focusing on delivering Consumer Value, and
• developing and monitoring targeted strategies for profitable growth

It is driven by the Retailers requirement to develop their categories and satisfy customers profitably. This makes it essential for Manufacturers to be category rather than brand focused and retailer rather than internally focused. They must aim to grow Retailers categories revenue and profits through their brands by focusing on the consumer.

In order to succeed in Category Management you should have a strategy for the implementation of the process. You must also understand and ensure you are in a position to implement the Category Management Process by having the Category Management enablers in place in your business to support the implementation of Category Management.

A Category Management strategy is essential to provide direction to your application of Category Management. It is the steering wheel behind the process. It is necessary for a Manufacturer or Retailer to have top management commitment to a two to three year process for Category Management development in their company. The business should be organised in category specific business units to guide decision making from corporate to category level. Defining Retailer strategy is an activity that should be conducted by every Retailer. It involves completing cross category analysis to allow a Retailer to strategically manage their categories. This provides the necessary category objectives that guide the direction of the Category Management Process between the Retailer and Manufacturer.

As outlined in our first article, Category Management should be based on the Category Management Best Practices Process as outlined in the Category Management Best Practices Report for Ireland. This process is the engine within which the Category Management work is completed and provides the sequence of activities required to achieve the Retailers objectives for any given category.

"Of the tasks required to implement Category Management, only 20% relate to the business process and 80% to the enabling components" as outlined in the ECR Europe Best Practices Category Management Report. It is essential that you have the Category Management Enablers in place in your business if you are going to get anywhere with the Category Management process - they are the wheels required to drive Category Management forwards.

1. Information and Technology - The data necessary to fuel the Category Management Process includes Retailer Scanning Data, In-Store Audits Data, Market Data, Consumer and Shopper Research. It is also necessary to have the technology to analyse this data and turn in into actionable information e.g. SPACEMAN the common language in space and range management between retailers and manufacturers in Ireland.
2. Collaborative Trading Partnerships - Retailers and Manufacturers should work together to maximise their unique resource and perspectives. The focus must be on the category and the consumer. Retailers need a better understanding of their consumers and the market in which they operate and Manufacturers can provide, interpret and apply this information.
3. Company Structure - This involves developing the Retailers and Manufacturers competence to perform Best Practices Category Management through the appropriate organisational structure, job roles / responsibilities, skill / knowledge development, job performance measurement and reward systems.
4. The Category Management Scorecard - This has been adapted to the needs of Irish companies by ACNielsen in Ireland and benchmarks the availability of the above enablers within a company, which are required to successfully implement Best Practices Category Management. Over 50 companies in Ireland have contributed to this Scorecard, which highlights the availability of each enabler within the company and how strong or weak they are in relation to their sector and other sectors of the market. ACNielsen complete this Scorecard with participating companies on a two-day training course, which is suitable for companies who wish to launch or enhance the development of Category Management in their company.

ACNielsen are best placed to ensure your business is in a position to implement Best Practices Category Management. They have trained representatives from over 100 companies in Ireland on the principles and application of this process. The training has proved to be a huge success over the last number of years. ACNielsen are in a position to ensure that course attendees can apply all of the elements of the process outlined during the training, and can provide the critical enablers required to make the process a success.

ACNielsen work directly with companies (who wish as a follow on from this Training) to develop a Category Management Action Plan which provides the Strategy for the application of the Best Practices Category Management Process in their business. They also create, as the final stage of Readiness for Category Management, a Category Management Project Specification between the Manufacturer and the Retailer for the initiation of the Category Management process on any given category.

Of course READINESS is just the first step in Category Management. In the next article ACNielsen will explain the next step of the Category Management Process - creating the Category Definition and Segmentation. They will outline how this consumer based information influences all subsequent decisions within the Category Management Process.