Category management: concept, basics, essence and process

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Increasing sales in a retail store is not difficult: it is enough to optimize the process of purchasing and marketing in order to meet the needs of a potential buyer. This is the area of influence of category management - a relatively new way of maintaining and accounting for the assortment. Let's take a closer look at how it works.

What is category management

Once upon a time, at the stage of the formation of modern civilization, people purchased various things and objects they needed on the market - a specially designated place for this in the open. In the market you could buy anything: from apples to boots or even a new cart. And no one thought about how to arrange the goods, who to offer in the first place - everything happened spontaneously.

In the modern world, there are too many goods to be combined in one place in the city. The market itself continues to exist, but in a completely different capacity. Now this is the name of the entire sphere of trade. And now there are a huge number of commodities in the field of retail trade.

Retailers tend to partner witha large number of brands and suppliers at the same time and are faced with the task of competent placement of goods on the shelves of their stores. Therefore, effective assortment and turnover management has become of great importance for the operation of any retail store.

So it became necessary to classify all available products. There was a division of goods into categories into groups. Now they are united among themselves according to their characteristic properties and functions. And, as a result, a new branch of trade appeared, which is called category management - the management of each category as a separate business unit with its own turnover, strategies and goals. The range of each retail store can be divided into types. And any product that lies on the store shelf can be attributed to one or another category of goods.

Main goals and principles

The essence of category management is to create an optimal system of interaction between the supplier, retailer and buyer, which will ultimately lead to increased sales.

The following principles follow logically from this:

1. The buyer or consumer is the main unit regulating the turnover, so it is worth focusing on effective formation, as well as maximum satisfaction of his needs.
2. The main business unit is a specific category of goods. The purchase and sale of products must be guided by the development plan proposed by the category manager at all stages: from selectionassortment before compiling the sales script.
3. The assortment is divided into categories based on the perception of the buyer and ignoring other possible classifications.

Benefits of implementing category management

In Russia, the commodity circulation system is often controlled by different departments, such as purchasing and sales. In classical merchandising, these two departments are managed by different people and work for themselves. The purchasing department is responsible for the quality of the product, its price, and the breadth of the assortment. And the sales department - for selling all purchased goods as quickly and efficiently as possible. This often results in conflicts of interest. But the logic of category management in retail is fundamentally different. The purchasing and sales department report directly to the manager. It is thanks to his plan to promote and acquire specific product categories that the interaction of these structures is simplified. They are no longer competitors, but partners.

Yes, and in general, category management shows itself as a more effective way to manage purchases and sales.

Which store will have more sales? Where did you buy some goods offered by the supplier, focusing on the benefits of the purchase, and placed them on the shelves, guided by your own convenience? For example, clothing grouped by brand.

Or still, goods that are purchased based on the requests of potential buyers and placed on the shelves so that they are easy to find will sell better. It makes no sense to prove - sales will be higher in the second store. This is the foundationcategory management.

Stages of assortment formation in the store

As part of category management, the assortment is formed in several stages:

1. Choose the specifics of the outlet. For example, a sportswear or nutritional supplement store, or a grocery store. At this moment, a general idea of a possible assortment is formed.
2. Developing a store strategy in such a way that it is possible to answer the questions: what do we sell, to whom, why, for whom our assortment is designed. At the stage of forming a strategy, it is important to take into account all the nuances.
3. Assortment structuring is the selection of the required assortment, getting in touch with suppliers, drawing up a procurement plan, entering commodity items depending on their category and brand. At this stage, decisions are made about which brand to promote. It should be understood that this is no longer a strategy, but a tactic that may vary depending on the constantly changing conditions of the real market.
4. Merchandising and pricing. At this stage, issues are being resolved about product layouts, pricing, ways to promote a particular brand.
5. Analysis and evaluation of the category. The effectiveness of pricing and assortment policy is analyzed. The analysis is carried out according to the following indicators:

• Turnover.
• Profit.
• Percentage of illiquid goods.

Moreover, these figures are calculated for each category separately. Based on the received readings, tactical moments are adjusted.

Formation of categories in assortment

A very important point that must be understood when managing the assortment is that the category is formed based on the needs of the buyer and nothing else. Consumers already think in categories. When a person thinks he needs a refrigerator, he usually looks at refrigerators of all brands and manufacturers. And the category of goods here can be called a refrigerator, and not its brand. So throughout the range of the store.

In order to form separate product categories, you need to follow the following algorithm:

• Select product class.
• Combine all products according to some broad criteria: what it is made of, for whom it is intended
• Identify target groups of buyers and study their basic needs.

It is permissible to divide goods in a standard way according to the similarity of manufacture and use. In this case, you can get such categories as: soap, shampoo, shower gel, bread, cottage cheese, coffee. You can also divide the categories according to the principle for which it is used. For example, goods for recreation, fishing, a certain type of creativity.

Almost every category can be divided into subcategories according to properties that are important to the buyer (for example, all shampoos can be sorted into products for dry, oily or normal hair) and arranged in accordance with this division. In this case, the buyer will be easier to navigate. Shower gels can be divided into scents. At the same time, the same washing powder, most likely, is better sorted not by aroma, but byby washing method.

Categories can be separated by using marketing research, by observing shoppers in the store, and by using sales assistants who are in frequent contact with customers and know their basic needs.

Category structure, shopping decision tree

The buyer goes to the store for a specific category. A classic shopping list, for example, to the grocery store looks like this:

• Bread.
• Sausage.
• Milk.
• Beer.
• Seeds.

And already in the store, the buyer faces a choice. What kind of bread does he need to buy? Rye, wheat, sliced, whole. What kind of milk: 6% fat or 3.5? What kind of sausage? Boiled, smoked?

All these selection criteria become subcategories of the product, which can be classified according to the following characteristics:

• Product user. For example, clothes can be women's, men's or children's. The latter, in turn, is divided into things for boys or girls.
• Shape and style. A dress can be straight or fitted, soap can be lumpy or liquid, and so on.
• Color.
• Size. For example, clothes. Or, for example, bed linen: single, half-sleeping or double.
• Material of production. Vinyl or paper wallpaper. Jacket leather, rag, suede.
• Taste or smell. Shower gel with strawberry or chocolate scent. Orange juice or multifruit.
• Price.
• Country of origin. In wine boutiques, you can often see that the wines are arranged according to this criterion.
• Also, depending on the specifics, categories can be divided into some other criteria.

The consumer makes a choice based on several of the above criteria. The final determination algorithm in a customer's purchase is called a purchasing decision tree.

Category Properties

In order to correctly divide the product into categories, it is important to know the purchasing properties:

• Rigidity - the willingness of a customer to refuse to buy a product of a certain category, if there is no kind that he prefers. Most often, the more expensive the product, the stronger the rigidity: in this case, the buyer can be tied to the type of product, to the brand, to certain properties. For example, if he came for an Iphone X of a certain color and with a certain amount of built-in memory, then he wants to leave with this particular product. Categories of a different price segment will be undesirable for a particular buyer. And not only by brand, but also by other characteristics. For example, if a customer likes green tea, then he will not buy black. Or if he loves red wine, he is unlikely to buy white even of the same brand or brand.
• Controllability of a category is the possibility of its expansion and contraction. The first option is required when there are too many commodity items inside it. In this case, it is divided into several subcategories. A narrowing is the opposite, the inclusion of onecategory to another, complementing it with related products.
• The life cycle of a category is the period of time during which a category is traded on the market. The life cycle has several stages: introduction of a product to the market, growth, maturity and decline.

Any category has such a cycle. A typical example would be audio cassette recorders, whose life cycle began around the 1980s, when compact cassettes of music began to be commercially distributed on a massive scale. The period of growth falls on the nineties, and the period of maturity in the two thousandths. The decline began with the massive advent of CDs and computer technology.

Balanced assortment at the point of sale

You should determine for yourself, again based on the preferences of the potential buyer, how to balance all the product variety on the shelves of your store.

• Assortment width - the total number of product categories in the store. It may differ depending on the purpose of the outlet, its area and location. For example, in a small food stall near the house, there may be about 15-30 categories. And in a large hypermarket, there are hundreds.
• Depth of range - the total number of items within each category. For example, regular bread, loaf, sliced loaf and rye bread. Or in an accessories store, the depth of the “bags” category will be measured by the number of models presented separately.

Balanced assortment - optimal ratio for the buyerdepth and breadth of the range. Depending on the purpose of the store and the role of each category, the balance can be different

Roles of categories and their classification

Depending on the type of product, each category can be assigned one of four roles.

• The privileged role is the main products of the store, which we focus on selling. This is the basis of the retailer's assortment, which forms the consumer and price perception of the outlet. These categories are the most competitive, so it is necessary to maintain appropriate prices for them: average for the market or, if possible, lower. Accordingly, these categories demonstrate a large turnover, but a relatively low profit.
• The convenience role is assigned to related products that complement the store's assortment. These categories increase turnover, as a rule, they have a high margin. At the same time, the buyer gets the impression that the outlet is universal for making any purchase.
• Seasonal role is assigned to categories that have a pronounced seasonality in sales. Sledges, swimwear, sunscreen, Christmas toys and more. These products also help shape the idea of the outlet as a one-stop shopping destination. At the same time, during the season they bring big profits, and during the off-season, sales are minimal or zero.

The role of destination can be assigned to some unusual, original goods that are not yet presented in other outlets. Such products may become"highlight" of the store, attracting a flow of customers. At the same time, categories in the role of destination do not last long, as competitors' stores quickly notice them and put them on their own shelves. In this case, the role of the product changes

Also, all categories can be divided into life cycle stages

• Sleepers are categories whose sales and distribution are declining, but at the same time there is potential for growth and development. Here it is important to highlight the key products in the category, remove products with low turnover and margin, leaving only marginal and circulating products.
• Promising - categories that are not very popular yet, but are growing and developing well. Here it is necessary to balance the composition of the category in accordance with market trends, if possible, reduce the price of key products. You can add related products. Maximize shelf space at the level of this category.
• Doubtful - these are categories in a difficult state, in need of some kind of renovation to increase interest in sales. Within a single store, this may not be possible. Therefore, you should limit yourself to key products and minimize the resources allocated to the categories of this role.
• Winners are categories that are developing well, their sales and distribution are growing. Here it is important to continue the current policy, promptly solve all emerging problems with procurement and logistics, and monitor the extensive representation of goods on the shelf.

Depending on the role, respectively, the manager allocates priority categories for a particularstore.

Categorizer checklist

Accordingly, taking into account all of the above, you can create a category manager checklist.

• Knowing all the characteristics and trends of the category for which he is responsible.
• Understanding the general principles of pricing and marketing.
• Education in the field of marketing, university, and additional education in the field of category management will be an advantage: advanced training courses.
• Availability of competencies necessary to make decisions on trade.
• Analytical thinking.

Of course, this is not a complete list, but you can add something of your own, based on the specifics of each particular store.

In general, applying the arithmetic of category management, you can significantly increase the turnover and profit of any single store.

It is also worth understanding that this is a continuous process, taking into account the constantly changing trends of the modern market. Product range management, analysis and adjustment of the existing situation should be carried out continuously, then it will be possible to talk about business development and expansion.