Category Depth and Variety

Focus on Demographic Determinants

What makes a “good” category for the semester?

• Competition among suppliers for shelf space (not just among brands).

• Retailer responsibility for brands, facings, depth, and pricing decisions. (No DSD)

• Competition among retailers and retail types (intertype competition, i.e., drug stores, grocery stores, discount stores,…)

• It’s “doable” for one person to do one store.

Demographics

• Age, income, occupation, education, number of children, marital status, and all combinations thereof.

• Census data and Internet web page make it available at no cost to retailers and wholesalers. www.census.gov

• How is it used in category management? • How can provide a competitive advantage,

to suppliers or retailers?

Suppliers have an initial advantage in product differentiation

• Manufacturers must introduce new products.• New brands and extensions are introduced to

address the “unseen” motivations of buyers and can segment markets.

• Retailers seldom have the scope of resources to introduce products for a particular segment.

• Retailers’ locations, and patrons, are their point of differentiation.

The Rising Retailer (?)Corstjens and Corstjens

“Retailers must adopt broad, bland positionings: in contrast to manufacturers, retailers cannot deselect important consumer segments.

“Shopper segments exist, but they must be targeted within the store.

“Retailers must learn to handle in-store data to recognise which of their shoppers of the greatest potential…”

Store-to-store differences within chains

• No two locations are identical– Size and orientation of parking lot – Adjacent retailers– Square feet of display area– Entrances

• What are the economies of the chain?

• Demographics (?)

Buying for the store:

• Differentiate from the competitor(s):– Minimize overlapping brands– Carry unique SKUs

• Match trade area and/or patrons with the assortment– Understanding of the patrons, and trade area– Knowledge of typical store demographics– Know brand demographics

A.C. Nielsen Homescan “Consumer Facts”

• Buyer Behavior and “Purchase Components”– Provides the leading brands, penetration,

sales, loyalty, dealing– Allows comparison of category to other

categories, relative size, penetration.

• Demographic Profile– Shows difference across brands in customer

demographic profile

A.C. Nielsen “Tips”

• Create a Excel “Workbook” that will compile data for examination independent of access to the Homescan software.

• Copy and paste “the Purchase Components” data into a single worksheet.

• Copy and paste the Demographic data for “% $ Volume” and “$ Volume Index” into separate worksheets.

• Sort on “% $ Volume” for category/brands

Top Household demographics (%)(All categories)

RACE/ORIGIN - WHITE 78.9

AGE/PRESENCE OF KIDS NO KIDS - UNDER 18 66.8

FEMALE HEAD EMPLOYMENT - EMPLOYED 46.9

ACN COUNTY - A 39.3

HH AFFLUENCY - LIVING COMFORTABLY 37.2

HH HEAD OCCUPATION - NOT IN WORK FORCE 35.9

FEMALE HEAD EMPLOYMENT - NOT EMPLOYED 34.3

FEMALE HEAD EMPLOYMENT - FULL TIME 33.4

AGE/PRESENCE OF KIDS - KIDS UNDER 18 33.2

HOUSEHOLD SIZE - 2 MEMBER 32.4

ACN COUNTY - B 30.7

HOUSEHOLD SIZE - 3-4 MEMBER 30.6

Light-duty liquid detergentsTop household demographics: % $ Volume

RACE/ORIGIN - WHITE 70.2

AGE/PRESENCE OF KIDS NO KIDS - UNDER 18 62.8

FEMALE HEAD EMPLOYMENT - EMPLOYED 47.4

FEMALE HEAD EMPLOYMENT - NOT EMPLOYED 40.2

ACN COUNTY - A 40.1

HH HEAD OCCUPATION - NOT IN WORK FORCE 38.1

HH AFFLUENCY - LIVING COMFORTABLY 37.2

AGE/PRESENCE OF KIDS - KIDS UNDER 18 36.8

Ivory light-duty liquidTop % $ Volume Demographics

AGE/PRESENCE OF KIDS NO KIDS - UNDER 18 82.2

RACE/ORIGIN - WHITE 78.1

FEMALE HEAD AGE - 55+ 56.0

HH HEAD OCCUPATION - NOT IN WORK FORCE 51.7

FEMALE HEAD EMPLOYMENT - NOT EMPLOYED 49.4

HOUSEHOLD SIZE - 2 MEMBER 45.0

HH LIFESTAGE - EMPTY NESTERS 44.3

Interpreting Index Scores

• Identifies “disproportionate” purchasing:

• Dividing a % $ volume by % of households (multiplying by 100) creates index.

• “Ivory Liquid, Female Head 55+” = 202

• (% $ volume ÷ %household) x 100 =202

• 56.0% ÷ 27.7% (x100) = 202

Ivory Liquid:Top $ Volume Index Demographics

FEMALE HEAD AGE - 65+ 230

FEMALE HEAD AGE - 55+ 202

HH LIFESTAGE - EMPTY NESTERS POOR 202

HH LIFESTAGE - EMPTY NESTERS 197

HH LIFESTAGE - EMPTY NESTERS LVNG 195

FEMALE HEAD AGE - 55-64 169

FEMALE HEAD EMPLOYMENT - NOT EMPLOYED 144

HH HEAD OCCUPATION - NOT IN WORK FORCE 144

Top $ Volume Indices for the Category

RACE/ORIGIN - AFRICAN AMERICAN 11.5 160

FEMALE HEAD EDUC - NOT HS GRAD 4.4 151

HH LIFESTAGE - EMPTY NESTERS POOR 6.5 144

RACE/ORIGIN - NON-WHITE 21.2 141

HOUSEHOLD SIZE - 5+ MEMBER 10.7 132

HH LIFESTAGE - MATR/FAM POOR-GETT 8.9 132

Assigning Selling Space• A category or line’s proportion of selling space

can be examined with respect to:– Sales, to overall store sales– Gross margin, to overall gross margins– Physical size of the product and consumer

preferences (paper goods)– Inventory needs, unit movement and replenishment

costs (soft drinks, DSD product categories)

• A line’s space will never be directly proportional to any single characteristic, but evolves to meet the needs of customers’ purchasing patterns and the retailer’s need for gross margins.

Consumer Loyalty

• Does the assortment need to carry a certain brand or brands?

• What situation is best for the retailer, high flexibility or low flexibility?

• Would customers be willing to switch to a higher gross margin, lower priced private label?

• What information must be provided to create switching, how could I initiate switching behavior.

Shopping Patterns

• Destination items

• Purchase frequency

• Price sensitivity

• Household penetration

• Sensitivity, “comfort of environment”

• Sales responsiveness to promotions, impulse items

Differentiation or Duplication

• Duplicating a competitor’s assortment:– Security in knowing you’re carrying a competitive

assortment (“we’re competitive”).– Tap into competitor’s customer base.– Less time required in developing a pricing or

assortment strategy

• Differentiation– Improved margins– Distinctiveness in the store– Build positive associations with the retailer

Where does the customer shop?

• Intertype competition: – Disposable diapers– Pet foods– Batteries– Chewing gum– Bloody Mary mixes

• Intratype competition– Distilled spirits (gin, whiskey, vodka)– Prescription drugs