CATEGORY MANAGEMENT

COMPONENTS OF CATEGORY MANAGEMENT

There are six components, which are key to the functioning of category management. Two of these are considered essential, without which category management cannot be started and they are therefore, called the core components. The other four are needed to enable to process, without these, category management can be started but it cannot be institutionalized on an on-going basis. The two core components are: the Strategy and the Business processes. The enabling factors are performance measurement, information technology, organizational Capabilities and co-operative Trading partner relationships. This is illustrated in the following fig. Performance Strategy

Organizational Measurement

Capabilities

Trading Partner Business Information

Relationships Process

Technology

Fig. The components of category Management

The core component strategy is linked to the company’s overall mission and goals. The business process, which evolves, is a result of these strategies. The business process focuses on how work has to be done within the organization and with its trading partners, rather than focusing on what is to be done. Category management business process, as defined by the partnering group is illustrated in the following fig. Category Definition

Category role

Category Assessment

Category Review

Category Score card

Category Strategy

Category Tactics

Plan Implementation

Fig. The Category Management Business process The steps involved in this process are explained briefly, below:

1. Category Definition: Category Definition is the first step in the process. The definition of the category has a significant impact on the  subsequent steps. A category definition should be based on how thecustomer buys, and not on how the retailer buys. For example, for a grocery retailer, aerated drinks may be one category, ready to cook meals, another and health drinks, a third category. Category definition varies from retailer to retailer.

2.Defining the Category Role: The category role determines the priority and the importance of the various categories in the overall business.  These aids in resource allocation. Traditionally, four categories havebeen identified. They are:

Destination Category : This is the main product offering of the retail store. Examples include fresh groceries at a supermarket and apparel in a department store.

Routine category: These are products that a customer buys from the retailer as a matter of routine or habit. Examples include toothpaste, soaps, etc.,

Seasonal Category: This includes products, which are not purchased very often or are purchased when available and needed. Examples would include mangoes sold in summer, in a super market, and umbrellas and raincoats, in a department store.

Convenience Category: These are products that a consumer finds convenient to buy at a neighborhood retailer. Examples include products like bread, eggs and even routine stationery. Category roles must be developed with the customer in mind and must reflect the typical consumer shopping behavior. These roles provide logical framework for the allocation of the retailer’s resources, based on its mission, goals, and strategies.

3. Category Assessment: In this step, the current performance of the category is evaluated with respect to the turnover, profits and return on  asses in the category. It involves an assessment of the consumers, themarket, the retailer and the suppliers.

4. Category Performance Measures: The development of category performance measures involves the setting of measurable targets in terms of sales, margins and Gross Margin Returns on Investment (GMROI).

5. Category strategies: At this point in the process, the retailers and the supplier know the category’s role; they have assessed the current performance of the category and have set preliminary targets for the category’s performance. The purpose of this step is to help the retailer and supplier to develop strategies that capitalise on category opportunities through creative and efficient use of the resources that are available to the category. Category strategies can be aimed at building traffic or transactions, generating cash, generating profit, enhancing the image or creating excitement.

6. Category Tactics: At this stage, category tactics are developed in the areas of assortment pricing, promotions and the presentation of the merchandise in the store.

7. Category plan implementation: A Specific implementation schedule is developed and responsibilities are assigned. Accurate implementation is the key to the success of the Category Management.

8. Category Review: The final step in the business process is the review of the progress and of the actual achievements as against the targets set for the category. Review aids in the taking of decisions at the right point of time.

Category management is considered to be a “scientific” approach to relating in the mature markets, largely because it is date driven and fact based. The successful adaptation of category management at pantaloon shows us how the returns on the particular product/category can be maximized by keeping the focus on the customer and creating systems and processes within the organization to aid such a focus.

R.Yuvarani

M.Phil scholar , Department of Commerce

Periyar University, Salem-11