The Next Logical Step for Category Management

For the past twenty-five years we have watched the progressive development of what has become to be known as Category Management (CM). Fostered by visionary retail experts, who I often refer to as the Founding Fathers of Category Management, Win Weber, Dr. Brian Harris, Bill Bishop, Tom Richardson and others, Category Management has evolved from its humble beginnings of introducing retailers to a more compatible means to buy, manage, and improve their logistics and merchandising transactions with their consumer packaged goods (CPG) partners, to what it has become today, namely the essence of how food, drug and mass retailers run their businesses.

As Category Management evolved, so did the metrics by which both retailers and brands would measure success. Instead of looking just at the business in terms of total sales and profit, retailers finally had access to much of the same information that their key CPG partners used to evaluate and grow the business at the category, sub category and even brand levels. Further, linear shelf measures such as dollars and profit per foot fueled other tangential merchandising sciences, such as ‘sku’ and price optimization, all were made possible by the platform built by category management disciplines.

For Everything There is a Season, Turn, Turn, Turn

Few initiatives beyond the shopping cart itself have had such a long run in retailing as Category Management. However recent radical changes in shopper behavior are putting pressure on Category Management practices to further adapt to the new dynamics of retail.   It is the shopper that has stolen the show, exploiting an array of new retail options. Consequently, physical store retailers are now vulnerable to a whole new source of ways that they can lose both shoppers and their share of wallet.

Clearly Amazon and other on-line retail players are now undeniably on the bricks and mortar store’s competitive radar. If not, they should be. Further, new smaller and more efficient physical store competitors are on the march with aggressive growth plans.   So how do these new competitive dynamics affect Category Management practices?   In my view, the answer to that question is three fold;

  1. Under the new shopper behavior paradigm complete with on-line retailing, traditional categories such as detergent, canned vegetables, pet food and the like, become increasing irrelevant to a shopper who is now focused on the specific items they buy, not the categories they reside in.
  2. As the bricks and mortar retailers become increasingly vulnerable to new formats, channels and customer touch points, their in-store categories must adapt to improved shopper efficiency.
  3. As shoppers reorganize how and where they buy varies items, retailers and brands must re-organize their categories from ‘how they are procured and merchandised’ to ‘how shoppers acquire them’.

Adaptation to Shopper Choice is Now Dictating Success

For example, from the shopper’s perspective, there are now categories and products that lend themselves to being purchased on a subscription basis, as their consumption is consistent and periodic. Conversely, there are many items that are purchased frequently for more immediate consumption, which are more likely to purchased in-store, on a fill-in shopping trip. Still other items and categories fall into a seldom-used segment, implying they may not need to be merchandised in the same way or same location in the store as more frequently purchased items.

This new ‘overlay’ of what I call ‘Shopper Choice ‘ would extend the disciplines of Category Management to include organizing and merchandising both categories and items according to how the shopper buys them, not just at their specific stores, but across all retailers (on-line and physical) that are included in the shopper’s consideration set.

As retailer’s adapt to new shopper dynamics, so too should their practices of categorization and in-store organization.  Adding a new level of shopper perspective to an existing, effective Category Management platform is not only the right thing to do, but I think it would make the Founding Fathers of Category Management very proud.

From Mark Heckman Consulting

Counting the Votes….In Store.

SWHAT TRIGGERS THE SHOPPERS TO VOTE (FOR THE ITEMS THEY BUY)

What Triggers a Shopper to Vote (for the items they buy) 

By Ray Sorensen with Dr. Herb Sorensen

June 17, 2021

 

Every two years, on the first Tuesday of November, Americans gather around their TVs and radios. They stare at their laptops, tablets, and phones, transfixed by a singular process inherent to all democracies. Every two years, Americans vote in national elections.

Voting is the most sacred process of any democratic society. Dating to Ancient Greece, where every male citizen was obliged to cast his vote on questions ranging from the distribution of wine to declaring war on enemy states, the vote is the basic building block of democracy.

But, in our modern, capitalistic society, not all votes are cast at the ballot box. Many of our collective choices are measured by the purchases we make. The process by which we cast our votes for one product over another is the building block of retail. The results of these votes may not determine who lives in the White House or the direction of foreign policy, but they impact our economy and our lives as consumers.

When a shopper casually chooses to place one item in her basket and not another, that choice can spell success for a product line, a brand, or a manufacturer and failure for others. When a shopper selects one item from among the 40,000 items on the 40,000 square feet of shelves in an average supermarket, he is casting a vote for that item above all other items in the store. The more votes an item receives from shoppers, the more worthy it is of its place on the shelf.

Brands and manufacturers spend millions of dollars each year trying to understand why shoppers choose certain items over others. The complexity of this task becomes apparent once we understand that in most cases the shoppers themselves do not know why they select a specific item. Their motivations lie deep beneath their conscious minds.

Habit drives most of our shopping purchases. Let’s look at the example of a shopper who wants to purchase a bottle of ketchup. Like countless shopping trips before, she has stopped at her regular grocery store on the way home from work to pick up a few items for that night’s dinner.

She enters the aisle where she knows she can find ketchup. But she is not thinking about ketchup. Perhaps she is thinking about an important project at work, a trip she plans to take this weekend, a bathroom faucet that needs repairing, or perhaps she is on the phone with a friend.

As her conscious mind is occupied by any number of things far more engaging than ketchup, her eye is met with a wall of red. Hundreds of bottles of ketchup, half a dozen brands, different sizes, different flavors, sugar free, organic, low sodium, and even “catsup” all vie for the shopper’s attention. But our shopper is not interested in 99% of the items screaming at her from the shelf.

Our shopper does not need to consider her decision. She knows which bottle of ketchup she wants. She knew which bottle she would purchase before she even entered the store. She will buy the same brand of ketchup she has bought dozens of times before. Her choices and actions on this shopping trip are driven by the habits formed over a lifetime of shopping trips. Her only objective now is to find that one bottle among the hundreds on the shelf.

As our shopper’s eye scans the shelf, her subconscious mind receives a cue that alerts her to the specific bottle of ketchup she wants. Perhaps it was the size and shape of the bottle, perhaps it was the typeface on the label, or a particular logo or design, something prompted our shopper to pick up this specific bottle of ketchup and place it in her basket without ever consciously thinking about it. 

And, just like that, a vote has been cast for that specific ketchup item. Every day, in every aisle of every store, shoppers are casting votes for thousands of items in much the same way. They rarely ponder or consider their votes beyond the simple declarative: “This is the one I want”. They move through the aisles, their conscious minds occupied by forces often outside of the supermarket, and they react to subconscious cues, triggers, which alert them to the few specific items they seek among the thousands on the shelves. 

Often, shoppers cannot tell you what triggers their purchase of a specific item. But for brands and manufacturers, understanding a product’s trigger and its connection with shoppers is key to success. 

In January of 2009, the number one orange juice brand in North America, Tropicana, launched a new package design. PepsiCo, Tropicana’s parent company, had spent $35 million on the new packaging and accompanying advertising campaign. According to the advertising agency that developed the campaign, the goal of the redesign was to modernize Tropicana’s image.

The agency drastically changed Tropicana’s packaging. They changed the typeface, replaced the tagline, “Pure Premium” with “100% Orange”, and, most egregiously, removed the iconic orange with a straw sticking out of it and replaced it with a generic glass of orange juice.

The orange was now the cap, which was shaped to look like half an orange sitting atop the carton. This complimented the ad campaign which featured the slogan, “Squeeze, it’s a natural”. Customers “squeezed” the orange as they removed the cap.

Clever. Very clever.

Tropicana’s sales dropped by 20% in the first month after the debut of the new packaging. PepsiCo immediately reversed the changes, but not before losing more than $50 million on the whole debacle.

In part of his statement on his company’s reversal, Neil Campbell, president at Tropicana North America, said: “We underestimated the deep emotional bond they (the customers) had with the original packaging… That wasn’t something that came out in the research…”

PepsiCo had spent millions on researching the changes to Tropicana’s packaging before they launched the new design and campaign. They had, presumably, asked shoppers their opinions about the changes and shoppers had, presumably, responded favorably. In focus groups or in-store interviews, shoppers could not have told PepsiCo they did not like the changes to Tropicana’s packaging because the changes did not impact them on a conscious level.

While bland, there is nothing outwardly offensive about the redesigned package. It tells the shopper, who is consciously observing the package, everything she wants to know. It’s Tropicana orange juice.

It was not until shoppers faced a wall of orange juice choices and their subconscious minds could not find the trigger that alerted them to the specific carton of orange juice they sought that they realized the failures of the new packaging.

No matter what questions PepsiCo asked, shoppers could never have communicated the subconscious importance of the iconic straw sticking out of the orange, or the typeface of the Tropicana name, or the tag line: “Pure Premium”. It was not until they had been removed that both shoppers and PepsiCo realized their value as auto-triggers, beacons among the dozens of competing orange juice brands on the shelves, alerting shoppers; “Here I am! I am the one you are looking for!”

If shoppers cannot tell brands and manufacturers what subconscious cues alert them to specific items on the shelves, how can brands and manufacturers know what the valuable triggers of their products are?

The only way to understand what triggers a shopper to choose one item over another is through observation. By witnessing the moment a shopper decides to cast her vote for a specific product and seeing exactly what the shopper’s eye sees immediately before she selects an item, a brand can determine the trigger, or triggers, that initiated that subconscious action. By observing what the shopper observed, a brand can identify its most valuable auto-triggers.

The most accurate way to measure what the shopper sees is through point-of-focus, eye-tracking headwear. In these studies, a shopper agrees to wear a pair of eye-tracking glasses that measure and record the shopper’s eye movements as they shop. Researchers then analyze the data recorded by the eye tracker to determine what the shopper looked at and what they focused on as they selected items from the shelves.


Researchers have used wearable eye tracking technology to study shopper eye movement and focus.

No brand, manufacturer, ad agency, or market research company has the resources or ability to outfit millions of shoppers across the country with eye-tracking glasses. As shoppers cast their votes, endorsing one item out of thousands, millions of times a day, how can we count these votes? More importantly, how can we understand what motivates each vote?

Existing, patented technology developed to observe the shopper from the shelves and record the moment of choice could revolutionize our understanding of shopper behavior. Dual camera technology designed to record the actions of shoppers in the aisle in relation to specific items on the shelves can deliver the power of millions of observations per day to the brands and manufacturers.

While less accurate than eye tracking glasses worn by shoppers, this shelf-based technology can deliver a reasonably close approximation of a shopper’s eye movement and focus, enabling brands and manufacturers to identify the triggers that initiate the purchase of their specific items.

This technology has not been developed in a vacuum. Cashierless stores, mobile and cloud technology are converging to provide brands, manufacturers, and retailers with an unprecedented understanding of their shoppers. Connecting these systems and combining the data they harness with insightful analysis could empower brands and manufacturers with the kind of personal selling techniques that have been lost to retail for more than a century.

Making every vote cast by every shopper count, in every aisle, in every store, every day will enable brands, manufacturers, and retailers to sell more.

Here’s to GREAT “Shopping” for YOU!!!
Your friends, Ray and Herb Sorensen

The Necessary Re-invention of Center Store

 

Most of us would agree that over the past twenty years the lion’s share of the focus and creativity within the supermarket has occurred on the perimeter of store. This is true for a number of reasons. Retailers have deliberately placed their fresh foods departments on the perimeter to be close to prep rooms and refrigeration. In addition, the majority of the store’s best deals reside on end cap displays on the back and front aisles of the store.

This all made a lot of sense until it was discovered that over time, fewer and fewer shoppers were entering the “center” area of the store and further, the categories and items found in this forgotten area were beginning to suffer from the resulting under exposure.

Consequently for the past two decades, retailers and their brand partners have frantically worked to devise new incentives to lure the shopper from their current behavior of remaining on the perimeter to venture down the long and arduous aisles of Center Store.

Some of their efforts have paid dividends, but despite new ‘intrusive” signage, fixtures and fixture configurations, Center Store is still very much under siege. While gains in Dairy, Frozen and Salty Snacks are encouraging, the majority of the remaining Center Store categories have seen sharp decreases in unit salesand in some cases as much as three to five percent over the past five years*

Further, the driving forces behind Center Store decline are largely out of the control of bricks and mortar retailers. For example;

  1. Smaller household sizes yield fewer stock-up trips, meaning fewer trips down the center aisles of the store.
  2. New Competition, in the form of smaller specialty stores, sometimes called ‘category killers’ have diluted the sales of supermarket Center Stores over the past decade, with more of this ilk of competition to come.
  3. Finally, shoppers have found that buying those Center Store items consumed on a regular basis such as baby products, pet food, water and beverages, paper and detergent can be conveniently purchased on-line and scheduled for home delivery.

 

This downward trend of Center Store performance begs several questions, chief among them is “Can Center Store survive without radical changes?’

 

If you believe as many do that the answer is an emphatic “NO”, then the next logical question is what should and what can be done. The transformation of Center Store should begin with an honest assessment of the factors that are attributing to its diminished shopper relevance.

From the shopper’s view, research and intuition tell us that today’s Center Store presents a number of negative issues for shoppers;

  • (Configuration): Long aisles within Center Store are uninviting to shoppers as they look down the aisle from the perimeter and quickly become visually overwhelmed.
  • (Item Count): Once down the aisle, there are too many items crowded into tight category sets that make it difficult find items. Variety is good, but too much variety suppresses sales.
  • (Visual Clutter): Overuse of large signs, shelf tags and other point of sale materials clutter the shopper’s view even more. In an attempt to make things better for the shopper, retailers are providing a busy shopper too much to read and absorb.
  • (Size): Many Center Stores simply occupy too much floor space and are counter-efficient, consuming too much of shopper’s precious time in order to find what they are looking for.  ‘Bigger’ has become an albatross, rather than the panacea retailers once regarded it to be.

From the shopper’s perspective the entire physical concept of ‘Center Store” is becoming ‘unnatural’ when compared to their experiences either on-line or in smaller specialty stores.

Most deal remedial solutions for Center Store deal with making ad hoc changes to category variety, new fixtures, additional signs and of late new technology such as in-aisle digital engagement through mobile devices. Few if any however, deal with seriously re-thinking the entire concept of Center Store.

Any serious improvement to Center Store must involve the mitigating the four aforementioned negative attributes.   A logical first step in that process involves a re-categorization of Center Store, from the contemporary shopper’s perspective.

The adjacent chart depicts four quadrants of Center Store items that reflect current shopper behavior and options.

 

  • Quadrant 1: Those Top Selling items that are consumed by most of the shoppers for everyday consumption comprise a very important list of categories and items that typically comprise the retailer’s list of top 300-500 items. Sometimes referred to as the ‘Big Head’ these are the items that the shopper must have easy access to, without searching and wandering thorough the Center Store to find.
  • Quadrant 2: The second category of items is really of subset of the first. This group contains Top Selling items that lend themselves to scheduled consumption. Paper Towels, Bathroom Tissue, Bottled Water, Pet Food, Diapers and others are all conducive to having their in-store inventory and space they occupy reduced as shoppers are incentivized to schedule their delivery at home or for in-store pickup (BOPIS).
  • Quadrant 3: This leaves the slower moving items, which unfortunately comprise the vast majority of Center Store inventory. As opposed to the ‘Big Head’, these items comprise the ‘Long Tail’ and their presence in store should be reevaluated. Those Infrequent Selling Items that have High Affinity with Top Selling (Immediate Use) items should be retained in-store, but aggressively merchandised via secondary display with those fast-selling items they have affinity with.
  • Quadrant 4: This group contains items that most food retailers stock because they believe they must carry deep variety in a particular category and have the shelf space to do so. In today’s shopper centric environment, these are the items that make viable candidates for removing from the in-store shelves, de-listing those that show little or no movement, but keeping others that have seasonal value or index higher among the retailer’s best shoppers. These slow moving ‘keepers’ would then be available via on-line or in-store kiosk purchase only.

As monumental of an endeavor as the re-categorization of the Center Store will be for bricks and mortar retailers, dealing with the size and configuration of Center Store will be even a larger challenge. Many of the leading bricks and mortar food retailers are designing and build smaller formats. Within these smaller stores, the process of re-thinking which items are kept and which are discarded is critical.

Equally vital is the determination of how items that do make the cut are arranged in the physical store.  

The adjacent graphic illustrates the beginning of the re-organization of Center Store. Notice that each of the four Center Store Quadrants are contained within this layout as well as multiple opportunities for shoppers to pre-order in-store for immediate consumption or simply pick up to take home.

What is also note worthy is the placement of Top Selling-Immediate Use items positioned where shoppers can more easily access them coupled with the placement of Top Selling-Scheduled Useitems being available closer to the kiosks where they can also be ordered for regular delivery.

As opposed to long aisles with multiple categories, this approach compartmentalizes items according to their relevance to the shopper and how they would likely prioritize placing them into their shopping cart. With this approach there is no ‘racetrack’ around the store’s perimeter, but rather a natural flow from one shopping area to the next.

Perhaps the most critical aspect of this approach is the tangible merging of Center Store with On-line. While reducing inventory and clutter, the retailer offers the shopper an easy and practical means to access additional items via kiosks for either same trip pick up or delivery to the home or office.

Any approach to keeping Center Store categories viable within the bricks mortar store, must be based upon the many options of convenience shoppers available to shoppers. While very basic, this approach can provide a basis of rationale for the food retailers as they seek to reverse the decline of Center Store.

Mark Heckman

 

 

 

Clean Up On Aisle, 1, 2, 3, 4…..

Clean Up On Aisle, 1, 2, 3, 4…..


Just think of your favorite supermarket and how it looks today versus five years ago,  10 years ago and if you are as old as I am, think back 30 years ago.  What’s changed?  

 

One of the first things that come to mind is that most stores are larger and carry thousands of more  items.  More cynically, I don’t remember scanning and bagging my on groceries ten years ago.  In many stores, the perishable departments occupy more space as their offerings and  popularity grow.  

 

But what is more telling to me is what has NOT changed over the.   When you think about how stores are designed, most