CATEGORY MANAGEMENT ANALYZED

GLEN A. BERES

CHICAGO -- Category management can help retailers increase sales, gain a better understanding of their customers, coordinate programs with suppliers and generate cost savings -- but an organization must be committed to it at all levels if it is to succeed, a panel of experts told attendees at the Food Marketing Institute's annual convention here.

According to Claire D'Amour, vice president of corporate affairs for Big Y Foods, Springfield, Mass., category management shifts the distributor's buying focus from vendors to consumers through managing categories, rather than specific items.

"Research shows that consumers make buying decisions by category," she said. "Category management helps retailers identify the role each category plays for the consumer and it helps them set goals each category must meet." Mark Stewart, sales development director for M&M/Mars, Hackettstown, N.J., said the strategy improves the relationship between distributors and suppliers, which has traditionally been adversarial, because it gives vendors better information about what type of promotions their retail customers need.

To develop a category management program, D'Amour said, a company must first assess itself from top-down and determine potential problem areas that could hinder the transition.

For instance, an analysis of Big Y's operations revealed that it would need to beef up its technology and information systems before it could implement the program, she said. The quality of Big Y's current data gathering needed to be upgraded as well. Also, D'Amour said, store-level operations were highly autonomous and needed to undergo a major cultural change.

Next, the retailer must establish the roles each category plays. Is it the reason why the consumer walks into your store? If so, then it is a destination category, the most important for any operator, D'Amour said. Categories can also be assigned routine roles (establishes the retailer as a preferred category provider), occasional/seasonal roles and convenience roles (which reinforce the consumer's image of the retailer for one-stop shopping).

Subcategory strategies, which work together to support the primary roles, must also be developed. Subcategories include roles such as traffic building, turf protecting, excitement creation, cash generating and profit generating, Robert C. Blattberg, a professor of retailing at Northwestern University here, said.

A further challenge is to change the old culture and operations from a buyer/merchandiser format into a category management one. In the new program, category managers have decision-making authority, and advertising is much more integrated with pricing and planning, D'Amour said.