The market is getting more competitive every day, and that has led retailers and wholesalers to look for tools, methodologies, and strategic solutions to deal with changes in consumer behavior and optimize the supply chain. Among them, category management stands out as one of the most important.
Do you know what CM is, why it matters so much for both boosting sales and building customer loyalty, and how to apply it in your store? Then keep reading today’s article to learn more!
What is category management?
Put simply, category management is a methodology used to optimize how products are organized in retail according to consumers’ different needs.
An easy way to picture this is to think about how you organize the items in your kitchen at home. Is your silverware sorted by type? Do the glasses go in the food pantry? What about the plates? Chances are that, to make cooking and eating easier, you arrange these things in the best way possible, right?
How does it work?
Category management works in a similar way. Its goal is to find the categories in which products fit best at a point of sale (POS) so they sell more, while also improving inventory management and supplier relationships.
Among other factors, the method mainly takes into account:
- the consumer profile: social class, age group, gender, etc.:
- preferences at the moment of purchase;
- the purchase history of the listed categories.
For example, people who buy whole-grain cookies are generally between 36 and 50 years old and have higher purchasing power. This product falls under the “sweet grocery” category and is related to healthy, whole-grain, organic, lactose-free and/or gluten-free cookies.
So it makes sense to display these items side by side and invest in a cross-merchandising strategy with juices, coffee, teas, and ready-to-drink beverages.
In short, category management is an essential tool for retail, regardless of the market segment or the size of the business.
How to apply category management
Now that you know what category management is and why it’s essential for retail businesses, we’ll show you a few simple practices to apply it in your store.
Partner with your suppliers
Manufacturers know a great deal about the categories in a market, since they’re the ones who make the products, conduct research, and hold detailed information on how the sector behaves. That gives them a strategic command of the data and an unmatched understanding of the target audience.
You can tap into all that knowledge by forming partnerships and running merchandising techniques, such as sampling or a big promotion that can deliver great results, for example.
Think like a customer
First of all, do you really know how your business works? To put yourself in the shoes of a customer walking into your store, answer the following questions:
- what path would you take to get to a specific product you want?
- which products drive store visits?
- which department matters most to you?
- which products do you expect to find together in the same category?
Getting to know the particulars of your store in more depth is a very worthwhile practice. Even though a given product may seem insignificant in terms of revenue, it may be what brings more customers through the door.
Remember that presentation shouldn’t take a back seat, since it also plays a key role in the process as a whole. That’s why it pays to invest in custom packaging and a variety of other strategies to catch the consumer’s attention.
Consider your product mix
Another crucial factor for a retailer’s success is product assortment. In other words, the more diverse your product catalog, the better your chances of attracting consumers.
A good product mix can be a competitive advantage, viewed even more favorably than low prices from the customer’s perspective. Shoppers may prefer going to a single store that has everything they’re looking for, even if one item or another costs a little more, rather than going to a store with little variety.
Get to know the shopper
The shopper accounts for a significant share of the store’s revenue, unlike the consumer, who is the end user of the product. For example, diapers are made to be used by babies, but it’s the moms and dads who buy them.
Failing to understand how this person relates to segmentation can make it very hard to implement category management successfully.
So try to understand as fully as possible how your most frequent shoppers make their decisions, and map out their profiles as well. If your customers are upper and upper-middle class, for example, your assortment should include more sophisticated products to meet that group’s needs.
Monitor your data
Finally, you should constantly monitor data such as quantity, purchase volume, and frequency, since these are key metrics used to evaluate the strategies used at the POS.
With this information, you can analyze the metrics and see how your categories are performing in practice. After all, regularly tracking category management is necessary to show what results the methodology is delivering for your sales.
As you’ve seen in this article, category management brings together a set of practices that are essential to the success of a retail business, regardless of its size or market segment.
To make it work, it’s crucial to know your target audience’s profile and put yourself in their shoes when they walk into the store looking for products that meet their needs.
Do you still have any questions about how category management can give shoppers more power? Do you have experience with the topic that you’d like to share with us? Then leave a comment!
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