CHAPTER 3 CATEGORY MANAGEMENT Teaching Notes Category Management is an important concept in the study of retail product management. Led by the way consumers buy products, category management has implications for building a product assortment and managing the supply chain. Chapter three explores the business philosophy of category management and describes in detail the processes involved when adopting a category management approach. The chapter also looks at the implications of category management on the way buying and merchandising roles are organised and the contribution that suppliers make to the process. It is important for students to understand the background of the category management philosophy and how it fits into a broadly responsive approach to product management that encompasses not only buying activities, but everything that links production schedules to consumer purchasing patterns, and so the chapter introduces efficient consumer response (ECR) and quick response (QR) as related supply chain systems. The chapter includes a number of conceptual diagrams to help students to grasp the principles involved, while product examples help to put the theory into familiar context.
Box 3.1 ECR initiatives This provides some examples of high profile organisations that have been involved in the historical development of category management.
Box 3.2 Information Overload In an attempt to encourage a critical viewpoint from students, this box illustrates how information systems have to be creatively managed in order for retail product managers to achieve the best results from using them. It begins to introduce some of the limitations of category management, which are expanded later in the chapter.
CASE STUDY: Sagit Unilever This case study was included in the first edition of the book, and proved to be such a useful one that it has been kept in the new edition. The case illustrates how consumer buying informs the category management process; it takes the reader through the various stages involved from the consumer buying research stage, through the definition of the category in question, the formulation of an efficient product assortment, the link between product assortment and space management, and finally to the contribution that promotional activity can make. The case illustrates how category management implementation brought benefit to both the retailer and their supply partner. End of chapter Question 4 asks the student to use the case study to outline the category management process, providing a useful opportunity to apply the theory, shown in diagrammatic form in Table 3.1. This could become the basis of an assignment or a tutorial exercise.
More specific questions / exercises that could be set: • Explain how the consumer research that Sagit provided was used by retailer GS to organise the frozen food category and sub-categories. • What are the measures of category performance used in this case? Think about both quantitative and qualitative ways in which the category performance was evaluated. • What do you think were the short term and long term category objectives for retailer GS and their supply partner Sagit? To what extent were they achieved by the implementation of category management? • What was included in the marketing mix devised for the category? Students could be asked to use their own retail market to explore how the category of frozen foods is organised. • Is it organised in a similar way to the Italian retailer GS? • If not, can they explain why it is organised differently? • What roles are various product items playing within a category (SKU’s); which product items create excitement; which ones do you think are generating sales volume and/or high profit margins for the retailer? • Within the major product category frozen food, can you find sub-categories that make different contributions to the retailer’s overall product assortment. Use Table 3.2 to perform this analysis.