Welcome back! Recently, I’ve been thinking a lot about the subject of product ranges. When a business starts out, its product range (or menu or service offering) is one of the most important factors and one that companies invest a lot of time and energy in it. Rightly so! It will be one of the key ways that a customer decides whether or not you’re relevant to them. Equally important though, is how much attention to range a company gives once they’re up and running..
Consider a restaurant whose menu includes some items that are wildly popular and others that just don’t appeal. Or how about a bookstore that just adds the fiction bestsellers of any given month but actually has a customer base that are more interested in non-fiction and self-help. In apparel and home furnishings, seasonality and trends play a big part but not all customers want the most trendy dress or couch, classics are important too! In each of these cases, the ongoing focus, analysis and maintenance of the range is absolutely critical! Learning about our customers from what they tell us loud and clear each day (through their transactions) is one of our biggest assets and something we would be crazy to ignore!
Grocery (for me at least!) is the most interesting of all. It is estimated there are over 200,000 grocery SKUs available while the average supermarket carries about 35,000. A constant stream of innovation ranging from pack size & format changes to line extensions from existing brands as well as new brands, ingredients and categories make this selection process all the more difficult. How can you optimize your range to meet as many shoppers’ needs as possible; to keep new items coming in and to shift slow-movers out in a smooth, well-thought process? How can you make these decisions not just at a department level but at a category level?
This is where category management comes in, my personal passion!! A good category management structure and category planning process can be a real game-changer and can allow regular, thoughtful range curation, consistent across the business and based on a set of principles that reflect the company purpose and brand. A lack of such a structure and practices can lead – over time – to an inefficient, incoherent range that confuses shoppers and constrains growth.
The set up of this structure will vary by industry and business-size. Here are a few of my top tips though which should be relevant no matter if you’re selling coffee or garden furniture!
Take the time to categorize each item in detail
Your data insights can only be as strong as your database.
Every category has a specific set of variables that need to be logged to make sure that when you analyse your sales data, you are seeing the full picture of what your customers do and don’t want.
Lets look at an example: the yogurt category. A massive $3bn category (US data), it has a wide consumer base and a number of variables that are considered at point of purchase:
- Flavor
- Pack Size (single / multi-pack or sharing size)
- Amount of sugar
- Targeted at kids / adults
- Natural / organic
- Texture (set / Greek etc)
- Brand Loyalty
- Dairy / Non Dairy
If you haven’t categorized each SKU fully in your database, you can only read a part of the story. Yes maybe they chose that SKU because it was strawberry but just as important could be that it’s low sugar / organic.
Once the database is set up correctly, you can read the data in enough detail to see real trends in what your consumers want and use that insight to optimize your range
Define what your mix should be
Understanding the performance of each group can help you to design a mix that makes sense for the category and reflects customer needs.
To return to our yogurt example, the data may show that our offering should be:
30% kids, 70% adults
75% single serve; 25% sharing size
80% dairy; 20% non dairy etc..
Category Mix can also call out which are the fastest growing segments and where most innovation is coming so that this mix can be adapted through the year if need
Defining this mix on an annual basis can create real efficiency when it comes to decisions about listing of new items and whether they make sense at a category level.
Make decisions around SKU Count and Category Importance
Understanding the relative importance of one category vs. others enables the business then to decide how much importance to attach it and to make decisions around SKU count and where relevant ‘store space’. $ value of the category is not always the only deciding factor, categories can be of a higher strategic importance even if not as profitable so this ranking of categories will be very individual to each business.
What is the role of the category?
So, in a nutshell, a clear category strategy can act as a benchmark against which to weigh up all decisions on range. It minimizes the opportunity for poor SKU selection and provides a clear set of ‘rules’ for purchasing and other relevant functions to keep everyone on the same page. It needs to be updated regularly through a category planning process that is thorough and looks back on what has happened and forward to the role and goals for the category.
I hope this has been helpful, I’d welcome any comments or feedback at liz@una-solutions.com
