PALM DESERT, Calif. — In many areas of the supermarket business, category management has developed into a well-practiced discipline. In others, notably among general merchandise categories, it is lagging. Eric Togneri, principal, CPG CatNet, San Antonio, spoke on the topic of category management at the Health Beauty Wellness Conference of the Global Market Development Center, Colorado Springs, held here last month, and SN interviewed him about the opportunities for category management in food and nonfood categories. CPG CatNet is an association for category development professionals. Togneri, who is based in the Atlanta area, formerly was the director of trade marketing for Wyeth Consumer Healthcare, Richmond, Va., where he managed trade strategy and investment.
SN: How does the practice of category management differ in food and nonfood categories?
ET: Category management is essentially the same wherever it is practiced. The differences lie in the level of sophistication and the emphasis placed upon the discipline in the sales and marketing process. As a general statement, food has provided the richest environment for the practice of category management. Grocery retailers have consistently demanded the highest level of performance in the discipline by their overwhelming expectations that category management play a significant role in their approach to customers and category decisions. For this primary reason, food retailers and suppliers tend to skew positively in category management competence. Far from a universal statement, though, one will find category management practiced at the highest levels in drug retailers like Rite Aid and CVS, and mass retailers like Target, and manufacturers as varied as Johnson & Johnson and General Electric.
SN: Within nonfood, is there a difference in category management between health and beauty care and general merchandise?
ET: GM has dealt with many challenges that have held back the level of commitment to category management principles in terms of sales and marketing. These challenges include data availability, fragmentation of players, and fluidity in offerings. All of these dynamics have led to GM lagging behind their counterparts in food and beverage and HBC as a general statement. There are notable outliers like GE that perform at a high level in GM, but these are more the exception than the rule.
SN: What are the benefits to retailers of improving their category management in food and nonfood areas?
ET: Category management is all about the consumer. It is understanding consumer behavior in areas like the reaction to pri-cing and promotion, and the level of category involvement for areas like category education. When retailers want to better know what triggers are motivating their customers, they will naturally embrace category management processes in their approach to marketing. Another key area for retailers is in the discipline of logistics. A key driver of logistics is consumer demand modeling and this squarely falls in the category management competence of an organization. Wal-Mart has long embraced this facet of category management and has gained competitive advantage as a result. Know your consumers' purchase patterns intimately, and you are well on your way to practicing category management.
SN: How is category management evolving for retailers and their suppliers?
ET: Category management is following a normal life cycle, where you have a broad spectrum from early adopters to laggards. What is interesting is the inevitability of the discipline and the varied perceptions of this reality. It is still common to hear retailers and suppliers comment, “I am too small to perform category management.” If you care about your customers, you will be all over category management. Category management is all about utilizing qualitative and quantitative data and insights to drive sales and marketing decisions. Ultimately, every consumer goods company will come to this realization and will choose to dedicate resources accordingly.
SN: In general, what do you see for the future of category management?
ET: Category management has a bright future. According to the Nielsen Co., category management increases head count by over 10% every year as both retailers and manufacturers alike embrace the need to utilize data to drive decisions. The future is really about sophistication. Technology offerings that lead to optimization in the areas like pricing and promotion are where the discipline is going. The purchase of companies like Demantra by Oracle and the initial public offering of DemandTec are clear indications that the money is betting on this trend. Fasten your seat belts, sophistication in data is going to drive category management well into the next decade.