Essential Role of Category Management in the Retail and CPG Industry?

In an extremely consumer-centric industry, companies need effective systems and a comprehensive understanding of their customers’ needs and preferences, and streamlined operations to propel growth. Category management helps retail and CPG industry players to bundle, evaluate, address, and manage a set of similar products or services, and implement detailed strategies to the entire category or business unit. As the retail industry transforms due to technological trends, changing consumer needs, various industry developments, and the increasing prevalence of digitization, retailers are advised to leverage category management, procurement market intelligence, and other systematic and data-driven approaches to efficiently manage their supply chain. Since the widespread impact of the COVID-19 pandemic, companies have found themselves struggling to keep pace with the dramatic shift to omnichannel sales and marketing and high online demand. Consumers’ buying behaviors and spending patterns have changed significantly, and category managers must closely assess these changes to improve their strategies, approaches, and supply chain management. As the world enters the post-COVID era, retailers are preparing for the “New Normal” and category managers must do the same.

How Should Category Management Evolve in the New Normal?

Supply Chain Resilience: With the increasing shift to digital platforms, online presence, and omnichannel services, retail and CPG companies need to reevaluate their supply chain strategies, and determine whether their current structure is sustainable. Various departments along the supply chain often focus on limited functions within the supply chain, but with the changing market, higher collaboration and coordination are necessary. Category managers must also aim to optimize delivery times and services, diversify suppliers, regularly assess their categories, and keep pace with consumer demand. Focusing on these crucial factors is imperative to ensure that the supply chain remains resilient and efficient in the new normal.

Growth Engine Model: Consumer attitudes and buying behaviors have transformed significantly through the pandemic, and retailers need to make a plethora of changes to keep pace with these novel demands. The way consumers interact with, compare, evaluate, choose, and buy products has changed due to the rise of online services and eCommerce platforms. Location, physical convenience, and easy-access are no longer the sole focus, and delivery services have made the market more competitive. Category managers needs to assess the factors that now impact consumers’ buying behaviors and modify their strategies and growth engine model accordingly. Category management is highly impacted by consumer patterns, and relevant alteration is necessary to maintain success.

Pricing and Portfolios: Companies and category managers often implement various strategies when assessing and deciding their preferred pricing approach, and the SKU based approach has been most common for decades. However, with the increase in price transparency, and the high impact of prices on consumer buying decisions, there is a rising need for change. Category management is reliant on distinguishing and categorizing products or groups based on role, value, and lifecycle. Managers should separate products according to categories such as, revenue generator, cash generator, new entries, or long-tail products. This method of pricing can help improve promotional, marketing, and distribution approaches, and help attract more consumers.

Automation: The supply chain is a highly complex and nuanced system that requires continuous strategizing, planning, and implementation of well-structured approaches. Category management is no different, and requires constant decision-making, systematic execution, and reviews to maintain efficiency. However, due to the vast, complicated, and highly crucial role of category management, employees and managers are often focused on manual and operational tasks, leaving no room or time to focus on crucial strategic tasks. Experts advise the adoption and implementation of automation, including machinery that handles manual tasks, and software that makes minor repetitive decisions, handles certain parts of processing, and minimizes workload for managers.

Technology: Digitization and technology have transformed every aspect of strategizing, planning, and execution, and companies need to capitalize on these changes to keep pace with the new normal. Every step and process within category management requires technology and digitization, and can be significantly improved with their implementation. Innovation has become a crucial tenet of business and management, and companies must continue to evolve and innovate to stay relevant and competitive in the market. Technology can improve decision-making through machine learning, artificial intelligence, and smart factories, and enable better communication and data collection across departments.

Success Story

After over a year of significant change in consumer behavior, market dynamics, and industry patterns through the COVID-19 pandemic, companies have come to realize the need for further transformations and significant reorganizations to succeed in the new normal. A leading consumer goods company based in Eastern Europe made a host of major changes to their decision-making, strategizing, execution, and tracking through the COVID-19 pandemic. However, the incoming new normal is different and the company felt unsure of the next step in their category management, procurement, and sourcing efforts. SpendEdge worked closely with the company to identify their shortcomings, and potential for improvement. With insights from our experts, the CPG company revisited their strategies, incorporated new technology trends, modified their pricing approach, reevaluated consumers’ changing behaviors, and leveraged automation along the supply chain. These changes helped the company prepare for the new normal, overcome the impact of the pandemic, and improve their category management processes significantly.