Retail Operations and Store Management-II UNIT 9 CATEGORY MANAGEMENT

Structure 9.0 Objectives 9.1 Introduction 9.2 What are Categories 9.3 The Concept of Category Management 9.4 Relationship of Different Goals with the Category Management Process 9.4.1 Example of Different Goals for a Retail Business 9.4.2 Category Management as an Independent Function 9.5 Influence of Category Management on Other Functions 9.5.1 The Category Management 8-step Process 9.6 Need and Benefits of Category Management 9.6.1 Who Benefits from Category Management? 9.6.2 How is Category Management Used? 9.7 Let Us Sum Up 9.8 Keywords 9.9 Answers to Check Your Progress 9.10 Terminal Questions 9.11 Further Readings

9.0 OBJECTIVES

After going through this unit, you should be able to:

● discuss the concept of Category Management; ● discuss the category and Their Definitions; ● analyse the relationship of Different Goals with Category Management; ● discuss the influence of Category Management on Other Functions of Retail; and ● describe the Need and Benefits of Category Management.

9.1 INTRODUCTION

Category management has become an important concept in the current scenario. You must be witnessing that a small retailer has to deal with many different products with different characteristics making the task further difficult for the retailer. Retailers have to handle retail categories at many different levels like product class, product categories, sub-product categories, styles, brands, SKUs. Further at the level of strategic management, group level, country and regional level, and finally at individual store level. Moreover, at each of these levels, the categories need to be analysed on several parameters to reach a meaningful decision on the fate of the concerned category in the store. Though it may seem at first glance that retail category management is similar to product management in manufacturing and marketing companies. It is not so, when one looks at the environment 210 and conditions in which these categories are to be managed. In the year 2007 the Indian Category Management retail market size was estimated at Rs 1330000 crores with an annual growth rate of 10.8%; of this the share of organized retail sector was estimated to be about 5.9% at Rs 78300 crores. For the year 2010 organised retail sector is estimated to be Rs 230000 crores, constituting 13 per cent of the total retail market. With such growth prospects for the retail sector, category management and related strategic issues assume tremendous importance for every stakeholder, practitioner and player at all levels in the retail sector. In this unit, you will learn the concept of category management, its definitions, its relationship with different goals, its influence on other retailing functions, and above all its benefits.

9.3 WHAT ARE CATEGORIES

Let us try and understand how category is defined. The Partnering Group has defined category as “a distinct manageable group of products or services that consumers perceive to be inter-related and /or substitutable in meeting a consumer need”. For example in a broad product class Women’s Clothing the different product categories could be Dresses, Jeans, Trousers, Skirts, etc. In this example Dresses, Jeans, Skirts are referred as categories because each of them refers to a distinct grouping of items which has similar characteristics and appeal to a distinct kind of target consumers who have more or less similar likings. But as Levy & Weitz have explained that each retailer and their suppliers may define the categories with respect to the consumers’ preferences and situation pertinent to a given store. For example Shampoos and conditioners may be allocated under different categories like Hair Washing and Hair Conditioning respectively, or may be combined under a single category called Hair Care; similarly paper towels may be assigned to ‘Paper Products’ category or ‘Napkins’ category based on the purchasing behaviors of consumers and importance of a given category to consumers. Generally it is being observed that higher the importance of a given product in terms of either sales volume or sales value or in terms of profitability in rupee value the chances are that such a product may be identified as a separate product category or may be combined with another product of similar type and characteristics. For e.g., Parallel Jeans and Narrow Jeans may be combined under the ‘Jeans’ category. A product may be combined with another product or with group of products if it is found that such products individually do not contribute much to the profitability or to sales volume but needs to be there to satisfy a certain class of consumers then such a product may be classified under a broad product category; for e.g. Jeans and Trousers may be classified under a broad classification ‘Bottoms’ category. Some retailers may define categories in terms of brands. For e.g. Louis Phillipe may be a separate category and ‘Park Avenue’ may be another. This may be necessary as the taste of consumers of Louis Phillipe are different than those of Park Avenue; and hence, needs to be displayed in a particular way so as to reflect the given brand personality. Where brands represent separate categories all the products of a given brand are grouped in the brand-wise category and all such brands will be further grouped in a broad product class for the purpose of analysis.

211 Retail Operations and Store Management-II 9.3 THE CONCEPT OF CATEGORY MANAGEMENT Category management has, for the longest time, remained hidden in the realm of product management, considering that the latter concept has been used more commonly, especially in the context of manufacturing and marketing, by FMCG companies, where this responsibility rests with a product executive or manager. Product manager is usually responsible for coordinating with other functions such as sales, marketing, production and administration so as to ensure the right placement of the product in the market – at the right price and at the right time, with necessary support on the marketing and promotion fronts. With the advent of large format store retailing in the past decade, the concept of category management began taking roots with its own theory and practice. There are various definitions of ‘category management’, some of which need a closer look in order to understand the concept clearly. It is a process by which a particular product group/sub-group is managed against various or selected dimensions (various product or category features like price range, product content or material used, product usage, etc.) so as to achieve right stock levels vis-à-vis actual sales and, thereby, achieve the desired profitability goal. Category management is essentially a retailing concept in which the total range of products sold by a retailer is broken down into discrete groups of similar or related products known as product categories. Examples of grocery categories may be: grains, soaps and detergents, oil and ghee, toothpastes, etc. For an apparel seller the major categories would be men’s apparel, women’s apparel and kids’ apparel. These categories can be further broken into sub-categories as per the consumer buying trend or grouping of products under certain features or dimensions. The idea is to run each category like a “mini business” in its own right, with its own set of turnover and/or profitability targets and strategies. An important facet of Category Management is the shift in relationship between retailer and supplier: instead of the traditional adversarial relationship, the relationship moves to one of collaboration, exchange of information and data and joint business building. The focus of all planning and discussions is centered on achieving higher turnover of the total category and not just the sales of the individual products therein. Suppliers are expected to suggest only the product ideas or promotions which will ultimately benefit the concerned category and the shoppers of the said category. “Quite simply category management involves organizing and managing promotions, merchandising and distribution activity around the way consumers view and buy a product”. Another definition of Category Management is “the distributors’/suppliers’ process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value”. Category management has emerged as a strategy to aid retailers in successfully competing in each retail category to enhance shoppers’ loyalty and profitability. As a cornerstone of efficient consumer response (ECR) initiatives, category management is designed to help retailers with the right mix of products, at the right price, with the right promotions, at the right time, and at the right place.

212 As it is understood from the above definitions, one needs to be clear about the dimensions Category Management on which a category needs to be analyzed so as to understand the sales trend of a category against a particular dimension and thereby help the category manager in managing the category as per the desired profitability target or category management goals. Talking about dimensions on which to analyze the sales trends brings us to the concept of better understanding of consumer needs. This becomes of foremost importance in order to reach at the objective of profitable management of categories. No one can deny that for any business to succeed in to-day’s fierce competitive environment correct understanding of consumer choices and buying trends is of utmost importance see Figure9.1.

Figure 9.1: Relationship of Consumer Needs and Buying Trends with Category Management

9.4 RELATIONSHIP OF DIFFERENT GOALS WITH THE CATEGORY MANAGEMENT PROCESS

As explained in Figure9-2 the process of Category Management or its goals are influenced by Business Goals, Financial Goals, and Consumer Needs in that order which in turn have influence on Profitability Goals and Consumer Satisfaction. The regular review of Profitability Goals and Consumer Satisfaction Goals leads to review of Category Management process and its goals in turn. We shall briefly explain each of these goals as follows: a) Business Goals: These goals determine the direction the category would take in order to fulfill the business purpose. b) Financial Goals: Based on the business goals company determines the financial goals it would like to have for itself in order to satisfy the stakeholders’ interest, like that of shareholders/investors, employees, vendors, etc. c) Consumer Needs: Based on the Business and Financial goals company may decide what needs of the consumer it may try and satisfy. Sometime it could be other way round too; whereby the company may first decide what type of consumer need it should satisfy based on its market survey, and then decide which business goals would suit its long term interest both financially and business-wise. 213 Retail Operations and d) Profitability Goals and Consumer Satisfaction levels: These are the Store Management-II consequences achieved based on the category management process followed by the company. Hence these act more as measurement criteria for the performance of the company against the above mentioned goals.

Figure 9.2: Relationship of Different Goal with the Category Management Process

9.4.1 Example of Different Goals for a Retail business For retail business of beauty products the Business Goal can be defined as “to get walk- ins increased by 20% as compared to that of last year”. The Financial Goal for this business could be “to achieve a sales turnover of Rs 50 lacs during the current financial year and a net profit target of 5 percent of the overall sales of a particular category”. Consumer needs for beauty products could be defined in terms of certain features as demanded by the consumers, so for beauty products “the consumer need could be for certain hair care product which are suitable for dry hair in the price range of Rs 50 to 60”.

9.4.2 Category Management as an Independent Function Another strong concept that emerges from the above definition of the Partnering Group is that of viewing Category Management as a strategic business unit, which entails that Category Management should not be viewed as a part or sub-unit of other Retail Management activities or functions but should be treated on par with other independent functions like Marketing, Accounting & Finance, Planning & Strategic Operations, HRD & Training, Warehousing Operation, Vendor Management & Purchase, and Information Technology; or as a major component that needs to be understood and managed with respect to other interfaces of the retail operation, see Fig 9-3. It is the category management process which determines the efficiency and effectiveness of the retail organization and thereby profitability of its operation, and thus a deserving recognition as an independent function in its own right.

214 Category Management

Figure9.3: Category Management as an independent function Generally it is observed in many books on Retail Management, category management is shown as sub-part of Merchandising and Buying Operation, but the proposition made here is that, ‘merchandising and buying should be treated as part of the overall category management function, as it is only when the assortment planning is done under the category management process then only one can go ahead with the buying process based on the budgets and financial goals decided for a given category or group of product categories’.

Check Your Progress-A 1. Briefly comment on the following statements. a) Category management has emerged as a strategy to aid retailers...... b) Consumer buying categories can be further broken into sub- categories...... c) Focus of all planning and discussions is centered on achieving higher turnover...... 215 Retail Operations and Store Management-II d) Suppliers are expected to suggest only the product ideas...... 2. Fill in the blanks with the appropriate word given in the brackets a) Consumer choices and ______trends is of utmost importance. (Buying / Selling) b) Shampoos and conditioners may be allocated under______categories. (Different / One) c) ______management is a process by which a particular product group/sub-group is managed. (Category / Marketing) 3. State whether the following statements are True or False a) Category management is essentially a retailing concept. b) Category Management is not the process of managing categories as strategic business units. c) Idea to run each category like a “mini business” in its own right

9.5 INFLUENCE OF CATEGORY MANAGEMENT ON OTHER FUNCTIONS

In fact, when you analyze the category management more deeply it will be realized that it is Category Management which influences the other major functions in some way or the other as shown in Figure 9.4. We have briefly given description of the influences exerted by category management process on each of the functions as given in Figure 9.4.

Figure 9.4: Influence of Category Management on other functions

● Category Management influences IT by deciding the dimensions on which the data needs to be captured and analyzed, thus influencing the way the logic for the said software to be developed. The merchandising and allocation processes defined in the IT algorithms are determined by the category managers based on the sales 216 trends and patterns observed for the categories. ● Category Management influences Purchase and Vendor Management the most by Category Management deciding on which brands to be purchased in what packages and quantities and varieties. Category Management specifies the frequency and quantities to be delivered to the retail stores. Thus, it indirectly specifies the terms on which the vendors are to be selected and managed for better results. ● Category Management influences warehousing operation from the point of quantities need to be bought against various products and brands and packages, and hence necessitating the need to maintain inventory management process to avoid over-stocking as well as under-stocking in any of the products/brands as per their importance in the category management goals. Further the items stocked will need to be grouped as per the categories defined and stocked according to the frequency with which they are to be delivered to retail stores and to be replenished by vendors. ● Category Management influences the HRD function from the point of deciding the competencies required at various levels amongst the personnel of the category management function, thus deciding on the recruitment and the training needs of the personnel. Each category need certain expertise and experience in handling the category and hence, right selection of the category management team becomes utmost important. ● Category Management influences Marketing by specifying the requirement of promotions for different products and brands based on the performance of various product categories or brands within the categories on financial and consumer satisfaction parameters. Similarly, advertisement plans need to be closely determined in consonance with the category management team to determine the time and frequency with which advertisement of the items needs to be done to achieve better sales result. ● Category Management influences the financial and accounting goals by deciding on the purchase budgets for various product categories based on the profitability goals for the given product categories or for the given space in the retail store. Sometimes based on the profit margin goals, company may have to compromise on the credit policy and other payment policy features like discounts etc. Also the determination of mark-ups and markdowns are done based on the sales patterns observed for a category. ● Category Management process influences Strategic Planning and Operation Function too when the management has to review the performance of Category Management process on various financial and consumer satisfaction goals, and decides on new goals based on the past performance. While deciding on strategic issues and operational parameters the management do have to take into consideration the characteristics of the category in terms of its attributes, sales trends, consumer behavior vis-à-vis category, and so on.

9.5.1 The Category Management 8 Step Process The industry standard model for Category Management is the 8-step process, or 8-step cycle developed by the Partnering Group. The eight steps are shown in Figure 9-5 below; they are: 1. Define the Category: This is defined in terms of what products are included/ excluded so as to be either inter-related or substitutable in meeting consumer need. The definition should ensure that product falling within the category have a common feature on which they can be grouped or aligned together. 217 Retail Operations and 2. Define the role of the category within the retail store: The role could be Store Management-II defined as niche or staples, or fill-ins. There could be other roles of a category like being a destination, or preferred, or convenience, or occasional or seasonal buy. 3. Assess the current performance: Here you need to understand the existing performance of the category on certain factors like sales, billing value per customer, number of units purchased per bill, footfalls, conversion ratio, and category profitability, and so on. 4. Set objectives and targets for the category: Once you have information on the current performance the next step is to determine the targets for the coming season or period against different parameters as mentioned in point no. 3. 5. Develop an overall Strategy: It is not enough just to decide on targets, but now you have to identify what strategies or actions we shall plan in order to achieve various targets on different parameters of performance. 6. Develop specific tactics: The strategies need to be implemented by adopting various tactics which are short term in nature. For e.g. to achieve high footfall would be a strategy for increasing sales, but to achieve this we may adopt a tactic of providing significant price reductions on certain days of the week on select items. 7. Implement: Unless you act upon our plans you would not be able to judge the performance, and hence you may have to draw upon the action calendar including milestones for achieving results on different parameters and taking suitable steps. 8. To undertake review of the above steps: This takes you back to step 1, as unless you review the performance of the category on regular basis, you shall not be able to reach an optimum level where you know the category has started giving the desired results.

218 Figure 9.5: Category management Eight Step cycle The current industry trend is for supplier or retail companies to use the standard process Category Management as a basis to develop their own more streamlined processes, tailored to their own particular products. Market Research company Nielsen has a similar process based on only 5 steps : 1. Reviewing the Category, 2. Targeting consumers, 3. Planning merchandising, 4. Implementing strategy, and 5. Evaluating results.

9.6 NEED AND BENEFITS OF CATEGORY MANAGEMENT Category Management is the central focus of any strategic plans for the retail store or organization. Many retail organizations after they have firmed up on their Business and Financial Objectives have to get into the nitty gritty of Merchandise Purchase Plan, that leads to Merchandise Assortment Planning or in other words Category Planning. Through Merchandise Assortment Plan the retailer or Merchandise Manager decides on how much to buy of what category, which is in essence a part of the merchandise management or more specifically the Category Management process. In some of the earlier books on retailing, category management used to be referred as merchandising management, which can be deciphered from its definition, “Merchandise Management is the process by which a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time while meeting the company’s financial goals”. One may think from the superficial level that the decision on what to buy and how much to buy is easy, but once we get into a deeper level of the buying process or decision making we realize the complexity of buying and the need for category management. Now visualize buying for women’s clothing retail store. Retail stores are normally constrained by the amount of money available for merchandise and the space in the store. “They must decide whether to carry a large variety of different kinds of clothing (i.e. categories) – for example dresses, blouses, and jeans – or carry fewer categories but a larger assortment of more styles and colors within each category. To complicate the situation they need to decide how much back up stocks to carry for each item. The more back-up stock, the less likely they are to run out of a particular item. On the other hand, if they decide to carry a lot of back-up stock, they will have less money available to invest in a deeper assortment or in more categories” Hence, we can sum up some of the important benefits as follows:

● Category Management helps the retailer not only in finalizing the financial and merchandising objectives of the retailer for a particular merchandising category but also in reaching the goals through intelligent monitoring and control of the category. ● By having a Category Manager to manage the category we are able to fix the ownership for a category thereby making one person responsible for the failure or success of a category. ● Another reason for using Category Management is to maximize profit. For e.g. in a breakfast cereal case there are different vendors like Nestle, Kellogs, J&J, local brands and so on. Now the Category Manager cannot purchase all the different varieties of cereal from every supplier nor can he keep all the different available packages in different sizes. If he does that he will have overstock in one category. Thus, the Category Manager will have to choose among different brands based on the choice of the customers and decide on which brand of cereal in what variety and packages to be maintained in the given limited space for the ‘Cereal/Baby Food Products’ category, so as to give maximum sale to the store and maximize profits while keeping maximum number of his customers satisfied. 219 Retail Operations and ● The introduction of Category Management imposes the condition that all actions Store Management-II undertaken, such as new promotions, new products, re-vamped planogram, introduction of point of sale advertising, etc. are beneficial to the retailer and the shopper in the store, and not to any specific brand or product within a given category. ● There is a realisation that only a finite amount of profit can be milked from price negotiations and that there is more profit to be made in increasing the total level of sales of a category. ● Category Management entailed that the retailer should collaborate with the supplier so that supplier’s expertise about the market could be drawn upon, and also that a considerable amount of workload in developing the category could be delegated to the supplier. In a manufacturing-cum-marketing operation the category management process is akin to brand or product management process. In such operations too generally one person is responsible for all aspects of a brand or product category and he is usually the brand or product manager. ‘Almost 90 percent of all consumer packaged goods companies say they are engaged in some level of category management’

9.6.1 Who Benefits from Category Management? The major beneficiary of the category management is naturally the Retail Organization, Retail Chains, and the individual shop-owners. As seen from the earlier analysis the retailer is able to decide the optimum level of assortments in a given category and the overall stocks, as these are vis-à-vis the sales trends; the profitability is better and the operational costs are lower. Besides the retailer, vendors and manufacturers also benefit from the category management process as they correctly understand what to produce and supply. The other person who benefits is the Category Manager or Floor Manager or Brand/ Product Manager. But the most important entity which benefits from the Category Management is the consumer. It is the consumer who finally benefits as he/she is able to get the merchandise of his/her choice at the right price at the right place and at the right time. You can also look at the major components that are mutually benefited due to the category management being a systematic study. Here one may look at the major components of the category management process, as propounded by Swapna Pradhan in her book Retailing Management – Text and Cases’ see Figure 9-6, which influences the process as well as are also influenced due to the category management process.

220 Figure 9.6: Major Components of Category management In the above figure ‘Strategy and Business Process’, which in turn is the result of Category Management company’s long-term strategies, are the core components of the category management process. These two components determine category management as a system and its major purpose. The other four components have influence on the way category management will be operationalised and institutionalized in the company as explained here-below. Category management sets important parameters of performance and directions for each of the components.

● The process of category management determines the requirement of organizational capabilities in terms of personnel strength and competencies. ● It also determines the requirement or parameters to be set for the Information technology. ● Category management goals determine the kind of trading partners required and the type of relationships to be maintained with them. ● It sets the performance measurement goals on which the category management process needs to be monitored. The review of performance parameters sets the directions for future Strategies and Business processes for the company. Hence, stronger the inter-linkages among the various components the stronger will be the category management process.

9.6.2 How is category management used? a) As discussed in earlier sections Category Management is used most in a situation where number of vendors are competing for the same shelf space and the category manager needs to determine how much quantity of each brand, each pack size, each variety, and each price type to be maintained in the store or more correctly in the given limited space. b) Beside it is also useful for deciding on the margin structure for different categories and price segments based on the profitability goals of the retailer. c) Category Management is also used for deciding on promotion schemes during different times of the year and also to determine the advertising and merchandising display strategy to be used for a category.

Where and When is it used? As mentioned in earlier sections Category Management is mainly used in Retail and Manufacturing operations where the resources like space, money, man-power are limited and one needs to decide how these resources to be used optimally to give maximum profits. One can think about a mathematical representation of the above dilemma as follows: M1X1 + M2X2 + M3X3 >/= M X1 + X2 + X3 >/= X S1X1 + S2X2 + S3X3

Fact file 1: Category Management Association Category Management Association has been formed with the mission statement: ‘Advancing Professional Standards in Category Management’. Early in 2003 an informal newsletter began circulating as an anonymous discussion group exchanging ideas and advice. An interview with Progressive Grocer article prompted the formation of a formal organization in November 2004. Since that time, the association has blossomed by simple word-of-mouth into a member-driven resource for sharing information and advice. The Resource Directories continue to expand by category and channel. Each of these directories has a matching Discussion Group, some of which are very active and some of which sit empty until someone starts a thread. International Chapters have been added by request, along with university resources, professional coursework listings, new discussion group areas, and a new ‘Virtual Convention Center’ to allow members to hold small meetings as well as large webcasts. The association seeks to serve the needs of its members and guests, creating ‘buckets’ for information to be amassed, and creating a ‘place’ for interaction among peers.

9.7 LET US SUM UP

● Retailers have to handle retail categories at many different levels like product class, product categories, sub-product categories, styles, brands, SKUs, and then, further at the level of strategic management, group level, country and regional level, and finally at individual store level. ● Though it may seem at first glance that retail category management is similar to product management in manufacturing and marketing companies, it is not so, when one looks at the environment and conditions in which these categories are to be managed.

222 ● Category management has, for the longest time, remained hidden in the realm of Category Management product management, considering that the latter concept has been used more commonly, especially in the context of manufacturing and marketing, by FMCG companies, where this responsibility rests with a product executive or manager. ● With the advent of large format store retailing in the past decade, the concept of category management began taking roots with its own theory and practice. ● Category management is a process by which a particular product group/sub-group is managed against various or selected dimensions (various product or category features like price range, product content or material used, product usage, etc.) so as to achieve right stock levels vis-à-vis actual sales and, thereby, achieve the desired profitability goal. ● An important facet of Category Management is the shift in relationship between retailer and supplier: instead of the traditional adversarial relationship, the relationship moves to one of collaboration, exchange of information and data and joint business building ● As a cornerstone of efficient consumer response (ECR) initiatives, category management is designed to help retailers with the right mix of products, at the right price, with the right promotions, at the right time, and at the right place. ● The Partnering Group has defined category as “a distinct manageable group of products or services that consumers perceive to be inter-related and /or substitutable in meeting a consumer need. ● The process of Category Management or its goals are influenced by Business Goals, Financial Goals, and Consumer Needs in that order which in turn have influence on Profitability Goals and Consumer Satisfaction. ● When one analyzes the category management more deeply it will be realized that it is Category Management which influences the other major functions in some way or the other. ● The industry standard model for Category Management is the 8-step process, or 8-step cycle developed by the Partnering Group. ● Category Management is the central focus of any strategic plans for the retail store or organization. ● Many retail organizations after they have firmed up on their Business and Financial Objectives have to get into the nitty gritty of Merchandise Purchase Plan, that leads to Merchandise Assortment Planning or in other words Category Planning. ● The major beneficiary of the category management is naturally the Retail Organization, Retail Chains, and the individual shop-owners. The retailer is able to decide the optimum level of assortments in a given category and the overall stocks, as these are vis-à-vis the sales trends; the profitability is better and the operational costs are lower. ● The most important entity which benefits from the Category Management is the consumer. It is the consumer who finally benefits as he/she is able to get the merchandise of his/her choice at the right price at the right place and at the right time. ● Category Management is mainly used in Retail and Manufacturing operations where the resources like space, money, man-power are limited and one needs to decide how these resources to be used optimally to give maximum profits.

223 Retail Operations and Store Management-II Check Your Progress-B 1. Briefly comment on the following statements. a) Category Management influences IT by deciding the dimensions on which the data needs to be captured. b) Category Management influences warehousing operation from the point of quantities. c) Each category need certain expertise and experience in handling the category. 2. Fill in the blanks with the appropriate word given in the brackets a) Strategies need to be implemented by adopting various tactics which are ______term in nature. (Short / Long) b) In a manufacturing-cum-______operation the category management process is akin to brand. (Marketing / Finance) c) Most important entity which benefits from the Category Management is the______. (Consumer / Supplier) 3. State whether the following statements are True or False a) Management has to take into consideration the characteristics of the category in terms of its attributes. b) Unless we do not act upon our plans we would not be able to judge the performance. c) Role of Category Management is to minimize profit.

9.8 KEYWORDS

Business Goals : These goals determine the direction the category would take in order to fulfill the business purpose. Consumer Needs : Based on the Business and Financial goals company may decide what needs of the consumer it may try and satisfy. Category management : It is a process by which a particular product group/ sub-group is managed against various or selected dimensions (various product or category features like price range, product content or material used, product usage, etc.) so as to achieve right stock levels vis-à- vis actual sales and, thereby, achieve the desired profitability goal. Financial Goals : Based on the business goals company determines the financial goals it would like to have for itself in order to satisfy the stakeholders’ interest, like that of shareholders/investors, employees, vendors, etc. Profitability Goals : These are the consequences achieved based on the category management process followed by the company.

224 Category Management 9.9 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress-A FIB a) Buying b) Different c) Category T&F a) True b) False c) True

Check Your Progress-B FIB a) Short b) Marketing c) Consumer T&F a) True b) False c) False

9.10 TERMINAL QUESTIONS 1. Explain the concept of category management. 2. How one does defines categories? 3. Explain the relationship of different goals with category management process. 4. Why category management can be called as an independent function? 5. Explain the influence of category management on major functions. 6. Describe the eight step process in category management. 7. What are the major benefits of category management? 8. Who are the major beneficiaries of category management and why? 9. How category management process is used? Also put the major problem of category management in a mathematical form.

9.11 FURTHER READINGS Books

● Jonathan O’Brien “Category Management in Purchasing – A strategic approach to maximize business profitability” – Kogan Page, 2010 ● Cimler P & Zadra•ilová, D. “Retail management” - Praha Management Press 2007 978-80-7261-167-6 ● Brian Roberts & Natalie Berg “ Walmart – Key insights and Practical Lessons from the World’s largest retailer” Kogan Page, 2012 ● Keith Lincoln & Lars Thomassen “How to succeed at Retail – Winning case studies and strategies and strategies for Retailers and Brands”, Kogan Page, 2010 Journals

● Brown, Christina L.; Krishna, Aradhna (2004), “The Skeptical Shopper: A Metacognitive Account for the Effects of Default Options on Choice”, Journal of Consumer Research, 31 (3): 529-540. ● Childers, Terry L., Christopher L. Carr, Joann Peck, and Stephen Carson (2001), “Hedonic and Utilitarian Motivations for Online Retail Shopping Behavior,” Journal of Retailing, Volume 77, Number 4 (Winter), 511-535. 225 Retail Operations and ● Basuroy S, Mantrala MK, Walters GH. 2001. The Impact of Category Management Store Management-II on Retailer Prices and Performances: Theory and Evidence. Journal of Marketing 65: 16-32 ● Zenor, MJ. 1994. The Pro?ts Bene?ts of Category Management. Journal of Marketing Research 31: 202-213 ● Food Marketing Institute (1995), Category Management: The Category Plan. Washington, DC: Food Marketing Institute. Websites and Online Resources

● http://www.ftc.gov/speeches/leary/050328abainterview.pdf ● http://www.supplymanagement.com/resources/q-and-a/2003/category- management-explained/ ● http://download.cabinetoffice.gov.uk/efficiency/sirphilipgreenreview.pdf ● http://webuser.bus.umich.edu/feinf/research/Working_Papers/Wedel,_Zhang,_ Feinberg_(2004)_-_Optimal_Retail_Markups.pdf ● http://www.retailright.ca/ ● http://www.dmsretail.com/brandcatman.htm ● http://faculty-staff.ou.edu/B/Suman.Basuroy-1/files/11.pdf ● http://mansci.journal.informs.org/content/53/6/934.short

Activity

Visit any FMCG goods making company and find out the responsibility rests with a product executive. …………………………………………………………………………………...... …………………………………………………………………………………...... …………………………………………………………………………………...... …………………………………………………………………………………...... …………………………………………………………………………………...... …………………………………………………………………………………...... …………………………………………………………………………………...... …………………………………………………………………………………......

Note : These Terminal Questions/Check Your Progress/Activity will help you to understand the unit better. Try to write answers for them. But do not submit your answers to the University for Assessment. These are for your practice only.

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