2017 Category Management & Shopper Insights Conference

Crossing The ChasmBRINGING CATEGORY MANAGEMENT TO THE ONLINE WORLD

P E T E R N A U M A N N

H E A D O F S A L E S S T R A T E G Y

P H I L I P S N O R T H A M E R I C A

A Story: Once Upon A Time

What happened? The birth of Cat Mgmt

Changing shopperbehavior

Capturing change via digitization of data

Collaboration driving excellence cross functionally

Philips Subclass Total Sales

Total Sales

LY

Pct

Chg

LY Total Sales

Total Sales

LY

Pct

Chg

LY Total Sales

Total Sales

LY

Pct

Chg

LY

Total

Sales

Total

Sales LY

Pct

Chg

LY

TOTAL TARGET $170,718,776 $165,201,794 3.3% $62,794,499 $64,712,689 -3.0% $17,101,453 $18,200,396 -6.0% $4,525,980 $4,598,918 -1.6%

AVM $41,922,137 $42,501,849 -1.4% $14,389,179 $17,993,777 -20.0% $3,791,990 $5,392,194 -29.7% $1,332,583 $1,461,817 -8.8%

P&A $48,584,691 $45,774,957 6.1% $19,008,749 $17,501,078 8.6% $4,807,107 $4,379,969 9.8% $1,121,114 $1,099,501 2.0%

Electronic Accessories $6,921,166 $1,622,087 326.7% $2,741,213 $653,489 319.5% $777,049 $281,901 175.6% $184,014 $96,047 91.6%

DLO $2,476,928 $6,548,624 -62.2% $601,164 $1,053,814 -43.0% $128,495 $220,539 -41.7% $21,667 $57,614 -62.4%

Hardw are $11,044,143 $11,450,411 -3.5% $5,694,606 $5,943,578 -4.2% $1,130,034 $1,224,535 -7.7% $265,970 $296,139 -10.2%

Headphones $28,142,454 $26,153,835 7.6% $9,971,766 $9,850,197 1.2% $2,771,529 $2,652,994 4.5% $649,463 $649,701 0.0%

Norelco $31,721,637 $29,151,752 8.8% $11,752,679 $11,003,395 6.8% $3,297,830 $3,052,132 8.1% $784,784 $717,317 9.4%

Razor $19,478,777 $18,391,442 5.9% $6,549,736 $7,042,178 -7.0% $1,849,123 $1,939,602 -4.7% $424,067 $447,424 -5.2%

Trimmers $8,987,806 $7,303,283 23.1% $3,701,426 $2,626,279 40.9% $1,043,486 $743,994 40.3% $258,208 $184,562 39.9%

Shaver Accessory $3,255,054 $3,457,027 -5.8% $1,501,517 $1,334,938 12.5% $405,221 $368,536 10.0% $102,509 $85,331 20.1%

Sonicare $28,080,463 $24,311,619 15.5% $10,423,673 $9,166,932 13.7% $2,962,082 $2,624,119 12.9% $753,941 $662,563 13.8%

BrushHead $14,747,293 $12,329,931 19.6% $5,468,743 $4,763,990 14.8% $1,642,672 $1,392,477 18.0% $423,557 $356,540 18.8%

Handle $13,333,170 $11,981,688 11.3% $4,954,930 $4,402,942 12.5% $1,319,410 $1,231,642 7.1% $330,384 $306,023 8.0%

AVENT $19,277,442 $21,704,738 -11.2% $6,792,151 $8,385,485 -19.0% $2,115,686 $2,524,785 -16.2% $506,761 $612,762 -17.3%

Reusable Infant Feeding $10,264,870 $11,189,889 -8.3% $3,773,201 $4,344,017 -13.1% $1,230,489 $1,312,191 -6.2% $285,700 $308,248 -7.3%

Pacifiers $2,921,905 $2,732,582 6.9% $1,053,099 $1,109,025 -5.0% $319,801 $342,287 -6.6% $80,067 $86,337 -7.3%

Breast Feeding $2,070,955 $2,885,180 -28.2% $669,336 $1,017,029 -34.2% $197,782 $311,740 -36.6% $48,142 $76,318 -36.9%

Toddler $1,550,473 $1,607,809 -3.6% $545,942 $585,743 -6.8% $157,251 $161,526 -2.6% $39,635 $45,374 -12.6%

Sets $1,115,081 $1,230,854 -9.4% $357,753 $486,014 -26.4% $109,154 $147,998 -26.2% $25,403 $36,295 -30.0%

Express Line $943,194 $1,237,758 -23.8% $248,685 $484,097 -48.6% $59,008 $141,142 -58.2% $18,155 $34,812 -47.8%

Disposable Infant Feeding $410,964 $820,666 -49.9% $144,135 $359,560 -59.9% $42,201 $107,901 -60.9% $9,659 $25,378 -61.9%

Senseo $1,132,406 $1,756,879 -35.5% $428,068 $662,022 -35.3% $126,758 $227,197 -44.2% $26,797 $44,958 -40.4%

Target YTD Last 13 Weeks Last 4 Weeks Last Week

What have we done?

Retail change never stops, and our industry did not stop evolving either…

but should we think this linear for online category management?

ScanningData

ECRM Cat Mgmt

Shopper Mkting

Omni Channel

Syndicated/POSdata focus

Embedded national panel data

Deeper customized shopper research

Collaboration with Shopper Marketing

Data Focus Shopper/Insight Focus

Focus on the shopper…..not just data

Store Shopper

Online ShopperOnline Shopper

What do we know as we

approach the situation?

• There are not different shoppers:

Today’s shopper goes online and offline in a

non linear journey

• Need to provide the entire CDJ: To

create stickiness and insulate the shopper,

customer should be a place to bothresearch and buy

Source: GfK Omnichannel Shopper Study 2015

<10% purchases are just within channel search and buy

Source: Metrix Grooming CDJ Study 2017

Philips Examples

CEO

Marketing

Digital Content

SalesSales

Strategy

Cat Man

Philips philosophy approached 2 areas

Leverage organizational design

Leverage shopper first (CDJ) perspective vs. searching for “perfect POS”

1 2

Key Collaboration

Point

This forms the foundation

z zzzTrigger

Initial Consideration

Active Evaluation

Purchase

9

Translate Category Management principles: Must have for both store and site

• Direct mail• Advertising• Need

• Navigation to aisle

• Assortment• Merchandising• Shelf education• In store personnel

• Price • Promotion

• Search optimization

• Search/assortment• Navigation• Product Content• Ratings & Reviews

• Price • Promotion

AwarenessEase of Finding

ShoppabilityInformation to

Select/Deselect

Attractive and

Easy to Buy

Levers

Levers

Framework to attract the shopper

10

Our history: We guide maximum conversion at shelf

AssortmentOptimization

Content and fixture

design for shelf education and touch & learn

Category education guides for In

store personnel

PDH guides flow; best items

at eye level

Screen capture 9.26.16

Which attributes are important to shoppers

Filters should mirror the decision tree i.e. brand, budget, ratings

In store we brand block or segment

block by brand. How should this page come back?

What search terms do shoppers use

In store shoppers see the whole shelf and we place best items at eye level

• PDH• Search terms• Product titles and recipes

Where do we play?

Shoppers believe best items are at top

Are there enoughUser generated?

Peer feedback drives consideration

• Online POG• Power SKUs for ratings & reviews

Our future: Working on the virtual shelf

Screen capture 9.26.16

Above the fold copy should hit the important consumer decision points (PDH)

Product specifications and comparison tables should provide information relevant to shoppers and trace the proper decision tree

Where do we play?

Navigation at shelf: The right content

• Content guidelines for vendors• Fit/buying guides• FAQs

Protect space in

store

Consider space

reallocation to

emerging categories

Space reallocation

in store; feature online

Differentiate in

store from online (aisle reinvention)

Maximize

omnichannel

Localization

Cat

ego

ry Im

po

rtan

ce

Share Migrating to Online

Ultimately determine the role: How to manage store in changing environment

Example: Understand the CDJ online research combined with a visit to a store

Visiting a physical store to view options is important to many They use these visits to assess things they cannot determine online, like the quality of the product's materials and construction, weight, size and feel in their hand

However, some find a physical store visit unnecessary For these consumers, electric shavers and grooming products are commodities, and present a low enough risk that shoppers feel comfortable basing their purchase decision entirely on the information they find online

The picture

is one thing, but

actually being able

to see the product,

hold the product,

especially the

higher-end ones.

A lot of times they

have them on

display out of the

box, so being able

to actually hold it

in your hand, see

how it feels, get an

actual size and

feel for it is a lot

different than

seeing it on [the

computer].

Example: Most prefer to use a computer to research shaving/grooming products

Occasionally a tablet would be used instead of computer out of convenience

Few would research or purchase on their smartphone

• Most feel the small screen makes it too difficult to compare different models or switch between pages and sites

Some shoppers will use their Smartphone to check a price in-store to confirm if it was a good deal

• However, most obtain pricing information before making a brick and mortar store visit so feel they have sufficient knowledge to evaluate store price

Key Messages

Its Happened Before: Today’s change in the industry and shopper online revolution is no different than the forces that gave birth to category management in the past

– Tech driving change…..must adapt

– This gave rise to new skills, new approaches and new points of collaboration

The Journey Prepares Us: Our function has continued to evolve and grow over time from POS to advanced shopper

– BUT, we must not think this linear process needs to happen step by step in the online/omni-channel world

– Focusing on the shopper first, not data (POS) first creates the right mindset and framework

– Invest in customized shopper research to uncover, review and evaluate what stress within each touchpoint

Look at your levers of the CDJ and evaluate the offline and online levers simultaneously

– Be specific so you and your organization can see the connective tissue between it all. What is important to your category? Put it on paper.

Collaboration is our DNA: At the heart of Category Management excellence

– You can and should be thought leaders bringing together different centers of excellence internally and externally

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Peter NaumannHead of Sales Strategy

Philips North America