C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014 25C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014 25

Thats likely how youd

quantify the amount of

data your company has about any given category. POS

data, shopper insights, line-item reviews enough Excel

sheets and PowerPoint charts to make your eyesight get

a little worse each year, right?

Its great that youre collecting all of this data, but

what are you doing with it? And what are you missing?

Most people dont know what they dont know,

because its inconvenient to think that way, says Gordon

Wade, managing partner and director of best practices for

the Category Management Association (CMA), Wimberley,

Texas. He summarizes this phenomenon and identifies

such weak spots with the acronym IWIK: I wish I knew.

Were here to eradicate the IWIKs.

The Convenience Store Products Category Man-agement Playbook organizes category-management

tools into 10 key areas to standardize processes and

identify gaps in information. It stems from the CMAs ROI

Improvement Plan, which the association uses to evalu-

ate a retailers or manufacturers category-management

functions and suggest changes.

Every retailer or manufacturer should go through

the CMAs ROI Improvement Plan. (Contact Wade

at gwade@cpgcatnet.org for more information.) In

the meantime, well provide you with the 10 steps of

the plan so you can begin formalizing your category-

management toolkit and put all that data to measur-

able use.

Many larger retailers may already have a sem-

blance of this playbook in place, while indie operators

or brands in transition may be more focused on making

sure their night-shift employee shows up tonight.

Given that, you can go through this chronologically,

or pick one step at a time based on your needs today.

Well also share stories from retailers and sup-

pliers on some of their big cat-man wins. Take

inspiration from their best practices for your own

category-management success.

C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014 25

Created with insights from the Category Management Association

(www.cpgcatnet.org)

By Steve Dwy

er and Abbie W

estra

Still

Premium

Flavored

Brand

Single vs.multipack

Unfl avored

Size

Non-premium

Brand

Packcount and size

Consumer decision trees, such as this one for bottled water shared by Nestle Waters, are crucial for step two, the Category Shopper Insight Platform. Work with suppliers for consumer decision trees for all categories.

Still

Premium

Flavored

Brand

Single vs.multipack

Unfl avored

Size

Non-premium

Brand

Packcount and size

Consumer decision trees, such as this one for bottled water shared by Nestle Waters, are crucial for step two, the Category Shopper Insight Platform. Work with suppliers for consumer decision trees for all categories.

26 C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014

The Voice of the ShopperHistorically, category management has focused on the products on your shelf, and

the shelves in your stores. Today, cat-man practitioners are increasingly expanding

their gaze to the shoppers themselves, integrating consumer insights in order to

understand how to get the shopper into the store in the fi rst place and keep them

coming back.

This fi rst step in the CMAs ROI Improvement Plan includes identifying the

behaviors and attitudes of each categorys core shopper. The foundation of this

Voice of the Shopper document involves a standard taxonomy for each category:

Who is the shopper? What are they buying? Why are they buying it? When are they buying it? How are you infl uencing their purchase decisions (such as with ads, market- ing, social media, in-store signage)?

The goal of this document is to ensure everyone on the team understands

who the category shopper is and knows where to fi nd that information quickly.

More often than not, though, it also serves to reveal gaps in data and areas where

the retailer needs further insights. It also helps retailers understand just what to

do with that data. Most retailers and manufacturers have a lot of data, but it is

pitifully organized, says Wade. This exercise will standardize the capturing and

sharing of that data across the board.

Voice of the Shopper data should come from a combination of supplier data,

POS data and household surveys from third-party fi rms such as Chicago-based

IRI, and the retailers own data from a loyalty program, intercept surveys and

shopper focus groups, among other places.

When building your Voice of the Shopper, consider the following types of data:

Category structure/consumer need states: how shoppers segment the category; Path-to-purchase/ethnographic research: behavior in home and in store; Demographic/psychographic segmentation: answering who the shopper is; Market share trends: answering what they are buying; Usage and attitude data: why they are buying it; Channel trends; where they are buying it; Seasonal, occasion and purchase-trigger data: when shoppers buy; Assortment, price, placement and promotions from vendor success models and internal POS analysis: how we are infl uencing shoppers.

Category Shopper Insight PlatformThe second tool in the CMAs ROI Improvement Plan takes the Voice of the Shopper and

applies those insights to come up with the strategies, policies and goals for the category.

It includes:

A defi nition of the category; The structure of the category; The role that the category plays within the total store; The top 10 assessment trends going on in the category and their implications; Tactics such as identifying traffi c drivers and transaction drivers; Pricing strategies for optimization, such as between premium, popular-price and private-label brands.

Its the document that you use as a manufacturer to express and deploy your strate-

gies based on your vision of the category. For the retailer its the fl ip-fl op: Heres what I

think the category is; heres how I want to manage that category; here is the role that it

plays within the total portfolio of the store; here are the eight or 10 most important learn-

ings; here are the strategies and tactics, says Wade.

An important element of this step is identifying how the consumer segments the

category and makes decisions accordingly. Shown above is a consumer decision tree

for water purchases, indicating that shoppers now consider brand more than ever, with

more practical considerations such as package size and pack count close behind. Create

similar decision trees for every major category and subcategory, and lean on suppliers

for such insights.

27C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014

Pack count

Size

Brand

Pack count

Size

Brand

Category Business AnalysisThis step is meant to create a standardized approach to understanding a given

categorys performance. It is actually a document the manufacturer should provide

to the retailer that identifi es whats going well and not so well within the category.

It should include at a minimum a review of:

Category and sub-category trends in dollars and unitswhats growing and declining by sub-category;

Retailer share trends by sub-categorywhere is the retailer strong or weak; Comparisons to key competitors on assortment, pricing, merchandising and promotion patterns in areas where the retailer is underperforming;

Conclusions about causes of weak/strong performance.

Insights SummaryOnce you have developed a robust, standardized Voice of the Shopper document, youll want to

provide your team with updates throughout the year. This is your Insights Summaryit should

be written in a consistent way and distributed companywide.

Having an Insights Summary ensures that the team member who owns this step is collecting

fresh data on a regular basis. As with the Voice of the Shopper, resources should include supplier

data, third-party fi rms and the retailers own proprietary insights. Summaries should be prepared

for each major category.

Supplier EvaluationMost retailers are quick to evaluate a supplier when something goes wrong, says Wade, but

less frequently do they enact a regular evaluation program to ensure vendors are delivering on

their needs.

Supplier Evaluations should include metrics for:

Innovationhow the supplier is feeding the new-product pipeline; Consumer knowledge; Strength of offers; Brand and individual sales trends; The type and quality of information and tools the supplier is providing the retailer.

The Supplier Evaluation standardizes this practice and should certainly be shared with the

respective vendor so the company can better serve the retailer. Wade recommends undergoing

this step annually.

Retailer Win: Category CaptainsA key element of Anne Flints man-

agement of the tobacco category

at Cumberland Farms is the service

of its category captain, Swedish

Match. The manufacturer assists

with category organization for the

Framingham, Mass.-based chain

and provides the analysis we

need and its bipartisan input, says

Flint, senior category manager for

tobacco/OTP, adding that a prudent

category captain realizes that you

cant plug in a certain brand from

that supplier if its an ill-advised fi t

for that store.

We constantly review Nielsen

data in collaboration with Swedish

Match to determine what we are not

carrying, and adapt to those find-

ings, Flint says. They will suggest

items for us to carry, knowing our

background as a retailer.

Flint says that geographic con-

siderations are always in play with

her chains own cat-man playbook:

Massachusetts smokeless-tobacco

tax rate had recently risen, which

affected category-management

decisions at stores in that state.

This tax increase is a major factor

as we make decisions going forward

in expanding e-cigs, she says.

I used to go with my gut instinct

[many years ago] from information

gleaned from the Web and Nielsen

rankings, says Flint. Now, we have

a solid picture of what our e-cig sets

should consist of.

28 C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014

Vendor Line ReviewWhile the Supplier Evaluation (No. 5) is meant for the retailer to present to the

supplier, the Vendor Line Review is a document that the vendor must provide the

retailer to summarize category performance.

Often, says Wade, if a retailer isnt proactive in what he or she requires from the

Vendor Line Review, it becomes a tool for the supplier to pitch new items.

The line review tends to be a selling doc instead of an analytical doc, he

says. The retailer should have a standardized document that they send to the

vendor to say, This is what I expect you to bring to me when you bring a line

review.

Vendor Line Reviews should include the following metrics:

Which segments are growing and declining? Which vendors are growing and declining? Why those segments/vendors are growing and declining? What new items are seeing big gains? Whats going on in the rest of the country thats applicable to the retailer? What other retailers are doing things that are really unique and different?

Vendor New Item PresentationA great amount of energy and resources are put toward new-product rollouts. Unfortunately,

says Wade, not nearly enough is put toward following through to ensure the product doesnt

end up collecting dust in a retailers back roomor simply cannibalizing sales from other items.

The CMA recommends retailers create a standard list of questions to ask suppliers when

presented with a new product. Likewise, suppliers should be prepared to provide the following

information in detail:

What segment of the category is it in?How big is the segment? Is it growing? What was the share of the last item introduced into

this segment? What kind of market share does the item need to attain to reach the claimed

volume levels?

What is this items point of difference?What makes this product stand out from similar items?

To which shopper segment does this item appeal?Who will buy this item? When, and why?

How much incremental volume will it generate?Will it simply replace volume from another item, or does it appeal to a different shopper need?

Whats the effect on total category profi t?Does this item increase gross margin dollars? Does it source volume from lower gross-margin-

dollar items? What is the profi t model for the category with this new item?

What is the introductory marketing effort?What happened the last time you introduced an item into the category? What was the market-

ing support, and what results did it generate?

Retailer Win: King Is KingRandy Adams, center store category

manager for Martin & Bayley, par-

ent company of the 113-store Hucks

chain, based in Carmi, Ill., saw a new

sheriff in town: the king. King-size

confection, that is.

People talk about king-size

candy bars growing recently, but

in Hucks stores, its been prevalent

for about two to three years, says

Adams. It started when the Her-

sheys team approached us about

the upside of king-size bars, so a

decision was made to remove one

12-foot section of gum and mint and

allocate it to king-size varieties.

Even with the downsizing of

gum and mints, our gum and mint

sales remained the same. I actu-

ally lost 30 gum/mint SKUs in that

swap-out but didnt lose sales,

Adams continues. When it came to

gum/mint people, the main thing we

found is that they were fl avor-loyal

more than brand- or segment-loyal.

Meanwhile, king-size sales at

Hucks stores enjoyed a healthy

percentage increase.

Adams says that Hucks does

aggressive suggestive selling on

candy, and the chain historically

feared that putting a hot price on

a brand would pull away from the

sales of a customers regular brand.

But what occurred was that the guy

who buys a Kit Kat will buy that and

buy a brand we have on special. This

proved my loyalty theory that its not

an either/or, but both, says Adams.

30 C o n ve n i e n c e S t o r e P r o d u c t s MARCH/APRIL 2014

Tactical Success ModelsThis tool in the retailers arsenal is meant to identify and map out strategies around assortment,

pricing, merchandising and promotion that have proven success.

There are only fi ve things you can do with a product, says Wade. You can put it in or take

it out, price it higher or lower, place it here or there in the plan-o-gram, promote it this way or the

other way, and you can vary the service level. So the question is: What works?

This is where one of the most common category-management mistakes can happen: the lack of

proper follow-through and analysis. Wade urges manufacturers to develop the metrics to measure

the effects of promotionsand retailers to demand such analytics from their vendor partners.

One of the great sins of modern marketing is that management will spend hundreds of

thousands of dollars on an initiative and nothing on measuring its appeal to the shopper, he says.

Agree in advance what will be measured and how. If you dont have the data, ask yourself whats

more expensive, the data you need or the continuing ignorance about what is working and not.

Supplier Win: Their Store, Their BrandThe power of CPG brands is unde-

niable: A consumer often enters a

c-store looking not for a candy bar,

but a Snickers. They want Doritos,

not a salty snack. Yet the retailer

cant let the store brand fall into the

shadows of those on the shelves.

What the retail brand stands for

is something manufacturers need

to understand, says Joe Vonder

Haar, industry veteran and manag-

ing partner of St. Louis-based iSee

Store Innovations.

Vonder Haar says a visionary

supplier is one who works to fit

its own products into the retailer

brandnot the retailer trying to

shoehorn the product into its own

mix in what could be an ill-advised

fi t. He points to upscale tea brand

Argo Tea and adventure-themed

retailer Maverik as an example.

This tea brand might not nec-

essarily be adventurous, as its

an upscale boutique offering, he

says. Lets say Argo Tea is eager

to garner shelf space in Maverik

stores. The brand team could work

to infuse some adventure into

their upscale tea offering, he says,

referencing the North Salt Lake,

Utah, chain whose core shopper is

the outdoor enthusiast. Maybe just

a subtle nuance helps garner that

positioning in Maverik stores. The

brand worked to fi t [itself] into the

retailers own brandnot the other

way around.

Category Profit ReportWhile the Vendor Line Review is intended for the supplier to present to the retailer, and

the Supplier Review is meant for the retailer to analyze the supplier, the Category Profi t

Report is an internal tool to help the retailer identify what items are generating profi ts

and, based on such performances, the role of that category within the total store.

The Category Profi t Report should:

Compare categories on a series of metrics based on corporate strategy and category-management objectives;

Inform and align management around performance metrics, revealing how the company is delivering against its strategic objectives;

Be assigned to an owner who will develop such cross-category reports regularly. This step reveals the more holistic, total-store view of category management.

While we manage on the basis of a category being a strategic business unit, it is man-

aged as a part of a portfolio, says Wade. That is the purpose of the role development

step in category management. That is where one looks at a category and says: This is

a really important category to me; therefore, I should give it more assets, more space,

more inventory and more of my time, because its really important.

Competitive ReviewMost retailers track their competitors, but how many are doing it in a standardized way? This fi nal

step in the CMAs ROI Improvement Plan has you create a formatted review of principal competitors.

It should include:

The companys strategies and tactics around assortment, pricing, merchandising and promotion; Overarching company initiatives; Recent changes to the company as a whole and the category specifi cally.

Assign one person per category to own this task on an ongoing schedule, sending updates to the entire

team on a monthly or bi-monthly basis, says Wade. Lean on suppliers and third-party fi rms for some real

data-driven insights for the reports, and look not just at the c-store channel, but also competitors across

the segment.

A shopper doesnt think of just c-stores when hes going to lunch, Wade says. He thinks about every-

thing from a Frischs here in Cincinnati to a McDonalds to an Applebees, as well as a Hess and a Wawa.