Why Category Management is core to business success
The SBC is delighted to offer a series of blogs written by Ross Crombie on the essentials that businesses of any size need to get right, but frequently don’t!
Essentials or just Business School Jargon?
Every business, be it a FTSE or Dow Jones multinational conglomerate, or a small independent business, needs to get certain things right: the essentials. In my experience, the bigger the Company, the bigger the guilt-complex – they know what they should be doing, but sadly may not always be doing it. I see direct correlations to business performance. For smaller businesses, very often started up by passionate entrepreneurs, it is sometimes blissful ignorance that some essentials are missed, or the knowledge that they are needed isn’t matched by the resources (£ and people) available in the business needed to access them. Massive generalisations I know, but my experience tells me that very few businesses get everything right. Hey, if they did, I probably wouldn’t have any work to do!
The ‘shorthand’ that I want to use to describe these essentials is Category Management.
Jargon alert! I’ll try not to get bogged (blogged?) down in definitions and academic distinctions, so bear with me. Even the phrase Category Management will mean different things to different people, to different businesses. I hope reading this upcoming series of blogs will help you to question yourself and your own business. Whether there are some things you could do better, or quicker, or easier, and realise more cash in to the business.
What is my definition of Category Management?
Category Management is quite simple – what’s the range of products or services that you want to sell, at what price should they be sold, how should they be promoted (if at all), how can they best be presented or displayed to your customers, and how to optimise distribution.
A caveat right before we start. What we will talk about is Category Management ‘Best Practice’. That’s the clue – ‘best’. That doesn’t mean ‘common’.
In other words, it’s how things should work, it certainly doesn’t mean all Retailers, Suppliers and Brands work this way.
What we will discuss over the next few blogs:
- The strong structural underpinnings any Retailer, Brand or Service provider needs to have. It’s called the 3 Cs:
- knowing your CONSUMERS/CUSTOMERS: knowing who uses your product or service (Consumer); who buys it (Customer – sometimes different, eg, baby food is consumed by a baby but bought by someone else).; The customer might be how you describe the retailer or merchant that is buying from you, before selling on e.g. Boots is P&G’s customer. This works in a B2B and a B2C context.
- knowing your COMPETITORS, and through that a great understanding of the market in which you’re operating. What’s happening, why, and what are the future trends? How are you positioned both today and for that future?
- knowing your COMMERCIALS, what drives your costs and profitability, and therefore prices at which you can afford to sell?
- Then we’ll talk about each of what we call the ‘levers’: Range, Price, Promotion, Display, and Distribution. We call them ‘levers’ because each one can be ‘pulled’ in different ways to achieve the retailers’ goals and brand owners can understand how best to influence these for mutual benefit.
But, it’s not all about the Underpinnings and Levers.
Before any company dives in to this level of detail, I’m making the biggest assumption of all – that the business knows where it’s heading. Is there a longer term vision, are there shorter term goals and objectives, and is there a plan as to how to get there? In other words, is there a strategy? The strategy should determine the degree to which each of the levers is pulled. Obviously, if the strategy is to win on Price, they may mean that one doesn’t have to pull the promotion lever too much, if at all.
Let’s make the assumption these are in place!
The next blog will be all about the most fundamental of the essentials: knowing your consumer and your customer.
Ross Crombie spent 33 years working in Retail Marketing, Manufacturing, Supply Chain Management and Strategy Development for a large corporate vertically integrated retailer. In the last 5 years he has developed his own Consultancy business, working with retailers and brands of varying sizes, in the arena of ‘Best Practice Category Management’. In addition, he jointly delivered the Marketing Module on Growth 100, a programme delivered by University of Nottingham Business School, jointly funded by Nottingham City Council and the ERDF, which provided free support to selected SMEs from the City to help them in their next stages of growth. Ross was also one of the Guest Mentors for two of the three cohorts on the 9-month programmes, and so worked closely with a variety of SMEs, many of which he has kept in contact with today. He also mentors and coaches both individuals and small businesses. He has recently become a mentor on the Entrepreneur In Residence Network.