It is unfortunate that many of the well-established category management approaches
fail to recognise the importance of understanding consumption and usage, and focus
almost totally on purchase and retail audit understanding. In other words they
concentrate on the means not the end.
The category management process usually involves steps that run something like
this:
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Category Definition
Category Role
Category Assessment (analysis of sub categories, brands etc.)
Strategy
Tactics
Implementation
I contend that consumption information should be at the heart of many of these
stages – particularly category definition and strategy.
Any definition of category management usually includes the words “strategic”,
“consumer needs” and “innovation or growth”. Let’s take
each of the words in turn.
Strategic (‘Overall Plan’). For an overall perspective we must understand
all elements of the product life cycle (from production to store to purchase
to consumption). This will necessarily include all consumers (not just the buyer),
all food and drink (not simply the pre-defined category). This will provide
a holistic approach – an inclusive approach rather than an exclusive approach
that starts with a (sometimes) rather artificially defined category and then
tries to manage it.
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By GlobalDataWhen is a category not a category? – when it fails to reflect the reality of
how products are used and purchased. For example. The biscuits industry has
recently agreed new sub sectors within the biscuits market. Out have gone semi-sweet,
sweet, half coated, fully coated, plain and savoury and chocolate biscuit countlines
(whatever they are) and in comes consumption based sub sectors that reflect
usage (kids, everyday, everyday treats, special treats, crackers, savoury nibbles,
etc.).
Usage information challenges the notion that category management starts with
a long established market or category definition – it helps (re) define the
boundaries of the category and its key sub segments or components.
Consumption information takes a ‘horizontal’ approach to category definition
rather than a ‘vertical’ one. Under the vertical scheme you find out all there
is to
know about your pre-defined market in isolation (drilling down within the category).
The horizontal approach analyses across all food, all consumer, all occasions,
to look at the boundaries of a category. Under the vertical method if crisps
are down and crisp buyers purchasing of pizza has increased then we (partially)
attribute the decline in crisps to the growth in pizza. The horizontal approach
understands that the crisps and pizza are very rarely eaten at the same sort
of occasions, and rarely fulfil the same need for the same consumer. The horizontal
approach defines the competitive boundaries.
This ‘holistic approach’ has given rise to the identification of a host of
new opportunities. Home Meal Replacement, for example, stems from an understanding
that around one quarter of expenditure on foods is made on meals out of home
– an area that the major grocery retailers have not had their correct pound
of flesh. Cooking sauces have evolved from the understanding that many meals
are made from scratch. Cake Bars have appeared through an understanding that
lunchboxes (‘the lunchbox category’) is growing like Topsy and cake was losing
out.
Consumer Needs. Consumers don’t simply buy food. They shop for meals, and for
individuals. They shop for solutions not problems. ‘I need something for the
kids Teas this week, a big family meal for Sunday lunch, something special for
the two of us for our anniversary, a healthy mid week meal, something quick
for dinner, something for the kids lunchboxes.… Categories, and category
management, need to reflect consumer needs by understanding consumption occasions
and what drives both the purchase and the consumption. They need to take into
account why the product was purchased, as purchase is not an end in itself,
consumption is the end.
It is clear that the ‘drivers’ of most markets are consumption or lifestyle
not purchase led. The yoghurt market has achieved strong growth over the past
decade because of the consumer need for a ‘dessert’ to carry out of home in
a lunchbox, the move towards more convenience (as a result of the gradual breakdown
in the family meal), the growth in interest in healthy eating etc. Consumption
and lifestyle are the strategic drivers. As such, any strategic management of
a category needs to reflect the importance of these drivers, which should give
rise to category growth.
Consumption is a key driver of purchase. The concept of the ‘meal occasion
shopping basket’ is well established – and its natural extension “merchandising
for meals”. Purchase may be a replenishment exercise and therefore it is
essential to understand consumption for true strategic insight. To really grow
the category you need to understand the drivers (usage) and direct new products
at them. To change a category you need to ‘go back to the start’ and understand
usage.
Innovation (or growing the category). Unless profitability or increased
sales result from category management then what’s the point? A prerequisite
to growing the category must be to look outside the category. Otherwise all
of the effort results in shuffling slices of the cake rather than growing it.
Walkers has a very large share of the crisps category, but a very small share
of the snacking market. Coke has a very large share of carbonated cola drinks,
but a very small share of drinking. The most effective (and easiest) way of
growing the category is to look outside it. The question should be “how
can we take share from water or juice”, not “how can we take the last
5% points from Brand X?”. Hence the horizontal approach.
I contend that much of the current category management is not strategic, but
tactical, and results in range changes that do not truly grow or manage the
category. Some category management is bogged down in detail, driven in part
by tactical SKU level analysis. Usage information gives you the bigger picture
and helps you understand why the category is growing or declining and what the
opportunities are – the consumer’s view of markets – and since categories are
here to meet consumer needs we need to focus on the consumer. Strategic category
management is solution led – it solves consumer problems and the structure of
the category needs to reflect these needs and consumer opportunities. Consumption
insight puts the consumer back into E.C.R.
