Retailers, suppliers co-creating category plans to drive mutual growth

Greame Tulloch, South African MD of global customer science company, Dunnhumby says, “What is essential in category assessment is understanding what is important at a shopper level; what marketing levers, and combination of these levers, will have most impact in driving results – including price and promotions, assortment of merchandising, innovation, media and communications as well as availability and services. In the work we do for retailers and suppliers, we look for the important levers for each category, where there is elasticity and how we can assess performance on that particular category via the particular levers.”

According to Dunnhumby, retailers should prioritise categories that are aligned to their strategic aims and their strategic customers. Through the power of their data, retailers can now understand the dynamics of each marketing lever on individual categories and for specific customer segments. Being transparent with this gives retailers greater insight into category requirements in a more powerful way than ever before.

Category assessment

One of the areas where suppliers can make a valuable contribution is in a category assessment, where they bring their own expertise, shopper understanding and awareness of the wider market. They may even have an informed and objective view of how the retailer is performing. But that view must be rooted in data-driven insight, and crucially should also be based on a clear understanding of the retailers’ shoppers. Suppliers with a deep understanding of category priorities and category dynamics (marketing levers) are best placed to help a retailer understand category performance.

Stefan Cloete, director category planning and activation Mondelēz South Africa says, “Shopper and consumer expectations and demands are evolving at a rapid rate. When you consider the impact of things such as e-commerce, discounter format and lifestyle, it is evident that shoppers have less time and energy for shopping. The current economic environment is creating intense competition resulting in more volume being sold on promotion. This adversely impacts the margins of both retailers and manufacturers.

“Effective category management is only possible if manufacturers combine their knowledge of consumer and category trends, both locally and globally, with the shopper insights of retailers. The outcome of this collaborative process will provide the shopper with a pleasurable shopping experience, relevant products and innovative category solutions that fulfil their needs. Done holistically, category management can create value, not just for the shopper, but also for the manufacturer and retailer. Collaboration in category management will deliver profitable growth and a sustainable relationship can be achieved for both the manufacturer and retailer.”

Planning process needs open minds

In the traditional category management approach, after the category assessment is complete, the category plan is built and owned by the category managers from the retailer. At best the plan may contain some inputs from suppliers and is shared with them, but this is the exception rather than the norm. The new approach is different: rather than being created in isolation, the plan is to collaborate to co-create between the retailer and their product suppliers, aligning as best possible to strategic priorities for both sides, but with shopper needs always the driving force.

Both parties need to go into the planning process with an open mind about the actions they may be led towards. Without both parties adopting an approach that’s founded in data-driven insight and led by a strategic process, there can be little hope of consensus. Combining the expertise from both parties, and their knowledge of the customer and market, results in a superior category plan which maximises opportunities for both parties based on what matters most to customers.

Head of trade and shopper marketing for national brands, Rob Densem comments, “Dunnhumby assists in bridging the gap between supplier and retailer strategy, allowing for mutual objectives to be set and achieved. It is through a more textured understanding of the shopper that we are able to better deliver against ever evolving needs and demands. It is, in addition, during times of economic hardship that its role becomes that much more relevant and important in achieving mutual success.”

Upgraded insights tool

Making the process more seamless, Dunnhumby recently updated its insights tool, Shop, which empowers retailers and brand owners alike to make confident, data-led decisions that improve the customer experience and grow sales. Retailers use Shop to understand their customers’ behaviour and category trends and brand owners or suppliers have access to the same platform to optimise their products, their innovation strategy and all aspects of category management which together provides the framework for a transformative working relationship for the direct benefit of mutual customers.

Clear priorities and a shopper-first approach with a solid understanding of shopper needs, provide a strong platform for suppliers to leverage their position. However, it takes both parties coming together to share their knowledge and ideas to make it a success. The only way to make that happen is through action, and either party can take the lead there. Many suppliers often go down the route of a big unveiling of insight without really understanding the needs of their shopper, through transparency and collaboration from both suppliers and retailers the insight provided can be more actionable.

Tulloch ends, “Of course, ‘retail is detail’ and this applies firmly to category management. As detail specialists, the company works with retailers to provide a holistic understanding of the store, the roles categories play in meeting shopper needs, and the key levers for success within each category. For suppliers, there is a critical role to play that can contribute to getting the detail right. Getting it right means getting it right for the shopper. Getting it right for the shopper grows loyalty for the retailer and drives engagement for suppliers, creating a solid foundation for sustainable growth.”