Debayan Ganguly (Dev Ayan) is an MBA with 2 years of experience in B2B sales. He likes to share his learnings through blogs and videos.
Brian F Harris, ex-Professor at the University of Southern California, coined the term Category Management in the year 1997. It began with retail, but now the term Category Management is used by any business or start-up having multiple segments.
So what exactly is Category Management?
A category is, in simple words, ‘Bundling’ or ‘Grouping’ of similar products. And Management is the process of procuring those products.
For example, if a company has to procure many things for the running of their business. Imagine a company ABC which is into construction. ABC has five centres across the country.
The products they procure could include cement, stones, wires, computers, printers, boilers, and stationaries to run their business. For each of their five offices, they would need to procure each of the things. Imagine if procurement was the responsibility of the Management running each factory. Each of them would have to go through the same process of procuring the same material. They would have to float tenders, call for quotations, evaluate each bid, and finalise a vendor. This step is to be repeated for each product in each of the offices around the country.
Isn’t that time and energy-consuming? Can it be reduced and done more efficiently?
Why, of course. That’s what Category Management is all about.
ABC will have one Category Management team responsible for doing all the sourcing and procurement for every office for each category of products. They will be responsible for all the products in the bundle. For example, an IT Category Manager will be responsible for procuring all the products like Computers, Routers, Servers, Printers, Optical Fibers, etc. They will do all the steps from floating tenders to call for submission to analysing each bid.
In this way, Category Managers ensure uniform pricing and maintain relationships with vendors. They check all the legal and regulatory compliances.
The definition of Category Management also extends to merchandising, sales, and other activities. For a company that has multiple products that they manufacture and sell, Category Management becomes essential.
Now imagine and FMCG company XYZ. They have products like Butter, Soap, Edible Oil, Cheese, Deodrants, Shampoos etc. Now for them, Category Management would be from the point of view of the consumers. They have to categories their products based on how their customers procure products. So Butter and Cheese will come under the same category of Dairy Products, and Soap and Shampoos will come under Bathroom Utilities. Similarly, XYZ will try to categorise their products.
How To Do Category Management?
The process of Category Management:
According to Professor Harris, there are 8 stages of Category Management. These stages are also valid for Manufacturers of multiple category products. Here, instead of procuring, their focus would be on selling.
- Defining the Category: Set rules for which products to be included in the bundle. Arrange products based on similarity in their origin, source of procurement etc. This step will ensure you have a clear idea about the Category and the products in it. You will know from where to purchase, from whom, and at what price. Also, you can create subcategories within the categories depending upon other features and parameters.
- Assess the Category Role: Analyze what this category means for the supplier. The profitability of the category, the margins for each player in the distribution cycle, the relation between each product has to be assessed to understand the tentative commercials of each category better.
- Track Performance: Review the category and subcategories periodically. This helps you in checking the sales report of each item, their performance, and profitability. You can have data for your inventories, get stock updates, and have better cross-departmental communications.
- Set Benchmarks and Objectives: After the assessment, set goals about Sales, Volume Sales, and Shares etc. These goals have to be measurable and achievable.
- Plan Strategies: After the goals have been set, you need to strategise on achieving those goals. You need to plan on whether you want to achieve volume sales, higher profits, good reputation, spread awareness.
- Designate Category Tactics: To achieve the strategies planes in the previous step, you need more minor short term tactics to achieve those strategies. These could be your focus on Marketing Mix, i.e. the 4 Ps, and setting the supply chain.
- Implementation: This is where you implement all the planning and work you have done in the previous stages. Prepare SOPs and communicate them to all the essential stakeholders.
- Review: Review the results vs targets. If the outcome of all the previous steps is desirable, then continue with the process; else, you need to redo your company’s Category Management Strategies. You need to see at which stage there is a problem and take necessary actions to rectify that.
So now that you have some idea of Category Management, I will expand on the idea and address other issues related to my future blogs.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2021 Debayan Ganguly