Are You Ready to Move to Consumer-Centric Categories?

Category management has evolved to become a key strategic and collaborative process between manufacturers and retailers to deliver on the shopper “need states” that drive satisfaction. In today’s digitally driven world, consumer behavior is changing constantly, and as behavior evolves, so must the ways in which retailers and brands engage with these always-on consumers. In this regard, the path to purchase is becoming increasingly complex while also providing retailers with new opportunities to engage with shoppers at precise moments to address their needs, purpose for shopping or simply answer questions.

The beverage industry offers an example of how quickly consumer behavior is changing. While soda sales have declined over the years when compared to bottled water, sales of sparkling water are growing faster than still water sales in America. This means the shift from soda to bottled water is not a direct correlation and illustrates how companies must have a greater understanding of the consumer needs driving shopping behavior.

In fact, what a shopper “needs” today should be how we define a category in the future. The best way to think about a category is to imagine all the products that could be used to meet a consumer’s need. For instance, recent health bulletins around Americans’ snacking habits are informing eating habits for the future. “Snacks” as a category are becoming very important, even as the products in that category change to focus on instant consumption and prioritizing healthy eating.

The challenge is that retailers often define categories as an operational convenience that allows them to lay out their stores, and the way the retailer defines a category is not always the same way a consumer thinks about a category. For example, most consumers perceive canned corn and frozen corn as being in the same category, but most retailers break canned and frozen products into two separate categories and manage them differently. That’s the key difference between consumer-centric and store-related categories. To complicate the situation even more is the fact that every individual store cannot cater to all their customers’ varied tastes or preferences.

As you can see, there are many levels of complexity at play that impact the category management process significantly. For retailers to succeed in this new environment, the category management process must go beyond the usual planogramming solutions, evolving into a consumer-centric process. This requires focusing on how the consumer shops and their need states, instead of just the product.

This new approach to the category management process starts at understanding the consumer behavior and buying patterns that drive assortment changes, as well as understanding the influence of price and promotion and the best way to present product at the shelf. Category management is evolving from being a tactical tool to one of strategic importance.

JDA’s Category Management solution starts by describing consumers precisely and defining consumer-centric store clusters for effective, localized assortments. JDA Assortment Optimization – Powered by dunnhumby will enable you to build consumer-centric assortments that target the need state for individual consumer segments.

JDA Category Management can help consumer packaged goods companies and retailers improve their category management practice by:

  • Creating consumer-centric store groupings to sensibly identify profitable attributes that drive business growth
  • Building localized assortments that precisely address consumer needs for a store/group of stores
  • Providing a best-in-class planogramming solution to help planners build optimized macro and micro space designs at greater speed

While the traditional category management process is typically project-based, with a regular review cadence, opportunities to capture market share will not wait until your next review. Your category management process should mature to be an agile and continuous process, enabling you to identify and optimize sub-optimal assortment or space situations on a regular basis (while keeping the cost factor in context). The category management process should also be looking externally to identify opportunities that arise from social, news, events and weather (SNEW) data to better respond to the ever-changing consumer. In fact, this need to better incorporate big data and analytics into the category management process was a key finding of the recent Voice of the Category Manager survey.

Not only does timely response to SNEW data have the potential to drive new growth opportunities, but it also helps limit the impacts of information that could have a negative result on your bottom line. Category management in the future will need to rely on science and strategy, as well as tactics. With the always-on digitally engaged consumer, ensuring that your product is in the right place at the right time will be more critical than ever. Welcome to category management of the 21st century!

To learn more about the Voice of the Category Manager survey results, download the executive summary or view the retail and manufacturing infographics.

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