Category insight bonds marketers to retailers

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M&M/Mars becomes captain of shelf for all candy brands

Category management is igniting such profound change in package-goods marketing even M&M/Mars is talking about it.

The notoriously secretive candy marketer recently cooperated with Northwestern University's Center for Retail Management to publish a breakthrough category plan using real data from M&M/Mars' dealings with an unidentified retailer.

Many marketers talk about category management, a collaboration between marketers and retailers to maximize category performance by providing product assortments and pricing that precisely meet shoppers' needs. Few have put their category plans on display as M&M/Mars has.

The secrecy reflects category management's importance: Marketers who master it first are apt to improve their shelf space in retail outlets nationwide.

Perhaps wanting to position itself as a category management expert, M&M/Mars detailed in the case study how it cooperated with the retailer to plan a "routine" candy category--not necessarily an aisle that would awe shoppers with its size, but one that offered good assortment at competitive prices.

M&M/Mars and the retailer put their data and heads together to study the store's shoppers and its candy sales performance compared with other retailers in the market.

After much deliberation, the following was clear: There was definite room for improvement. Looking to boost the store's candy sales 8.2%, increase profit 9.3% and market share 1.4 points, M&M/Mars and the retailer homed in on opportunities.

Fun-size candy would be used to draw traffic; large candy bars would generate profit; specialty candy sold in gift boxes or tins would create excitement; and candy bar multipacks and other packaged candy would build transactions.

Thousands of tactics presented themselves. Prices needed to be changed. Promotions needed to be adjusted. And a number of products needed to be added to or deleted from the shelves.

There was no mercy for dusty brands. One facing of the 16-ounce Baby Ruth fun-size was axed. The same went for certain sizes of Goobers and Toblerone Bittersweet. Gone. Kaput.

York Peppermint Patties fared much better. They were added in the form of a 16-ounce bag. Promising new brands such as Milky Way Miniatures and Brach's bridge mix elbowed their way onto the shelf.

Prices went up for Hershey Nuggets but down for Nestle Buncha Crunch. Russell Stover Assorted would be promoted only in the weeks before Valentine's Day and Mother's Day.

Not everything worked to M&M/Mars' advantage, but many things did. None of its brands was deleted from the shelves. Of the eight new products added, half were from M&M/Mars.

"If the category captain helps build the category, the retailer should make sure that manufacturer is doing a little better in terms of market share," said Robert Blattberg, director of Northwestern's retail center and coordinator of the M&M/Mars study. "I think of it as a quid pro quo."

Interestingly, M&M/Mars isn't the No. 1 U.S. candy marketer, nor was it the top candy brand in this particular store. Hershey was No. 1 by a fairly wide margin. So how did the No. 2 brand earn the role of category captain? "A lot of retailers will use a No. 2 player if they have better information and category expertise," Mr. Blattberg said. "That's why No. 2 and No. 3 marketers are really focused on developing category expertise right now. Otherwise, No. 1 really wins."

Marketers have a lot to offer retailers in the category planning process. Retailers typically track their own sales data and the demographics of their shoppers, but they lack the category insight that marketers have built over years using such tools as focus groups, scanner sales data and household panel data. Manufacturers like Nabisco Biscuit Co. have even installed hidden cameras in grocery stores to observe what happens when a shopper walks down the cookie aisle.

For marketers, sharing this information with retailers--let alone using it to justify the roles their products can play in the overall category--marks quite a departure from the days of old. Then, marketers simply sought to sell as much product as possible to retailers who were just looking for a deal. Efficient Consumer Response "is the arrival of strategic marketing thinking in the grocery retailing industry," said Hugh Roberts, the newly appointed senior VP of ECR at Kraft Foods.

The biggest misconception about ECR, Mr. Roberts said, is that it's merely about squeezing costs out of grocery retailing--cutting down on the cost of warehousing products, or reducing the total trade dollars marketers pay retailers to stock their goods.

Instead, argued Mr. Roberts, "What the industry has to do is put the consumer back in ECR. We can do that in part by developing category management plans that tailor assortments by neighborhood to give consumers what they want." This means Kraft now markets its products to the trade "based on careful understanding of how the retailer is trying to set the store," he said.

For example, cheese typically plays the role of a "routine category" in most stores. Kraft recommends that its Cracker Barrel brand makes a good transaction-building product--one that increases sales and margins in the category. Other cheeses at lower prices could be used to draw traffic to the aisle or boost the category's low-price image.

On the other hand, Kraft advises retailers to use coffee as a prime "destination category," one that truly sets the retailer apart by providing great assortment and superior value. Such destination categories should lead all others in sales, market share and customer satisfaction, according to the Partnering Group, the Cincinnati-based consultancy that helped author the ECR Category Management Best Practices Report.

Destination categories can be a gold mine for marketers. Despite industry consensus that only 10% to 30% of categories in a store should be earmarked as "destinations," the race is on among marketers to shelve their products in these high-profile aisles.

"Retailers allocate more resources--both shelf and display--to destination categories," said Glen Fleischer, senior director of category management and sales operations at Nabisco.

More than 80% of the retailers with whom Nabisco practices category management have assigned the cookie aisle this "destination" status, which leads to stronger cookie and cracker sales at those outlets.

Of course, marketers of more mundane products, such as bathroom tissue or canned vegetables, probably will never convince retailers to bestow "destination" status on their categories. Nonetheless, in any type of category, the trick for marketers is to win space by convincing retailers their products fulfill specific strategic roles in the category.

"Category management is forcing suppliers to be much sharper in the marketing of their products," said Win Weber, president of Winston Weber & Associates, a category management consultancy in Memphis, Tenn. "They have to be more conscious of product differentiation and uniqueness, not just duplication."

Another important change that stems from the implementation of category management: The sales function takes on a substantially more important role in the overall marketing mix. Serving as crucial links between manufacturers and retailers, sales managers need to expand their expertise and become broader business managers, well-versed in disciplines as diverse as marketing and logistics.

The need to develop the new skills is crucial: Mr. Weber predicts that 80% of retailers in the U.S. will adopt some level of category planning within 18 to 20 months. Most leading manufacturers are reorganizing to reflect that reality, but many have a long way to go before their sales forces are up to speed.

"I know of a retailer that has called in several manufacturers to say they are disappointed with the sales force," Mr. Blattberg said. "The manufacturer may have good category management expertise at headquarters, but they don't have it at the account level."

Exacerbating the need for category management expertise in the field is the desire of many advanced retailers to begin micromarketing, or laying out category plans for each individual store in a chain, said Kraft's Mr. Roberts. Kraft and others currently conduct category management over entire retail chains.

"Laying out a category plan is a tremendously manual process," Mr. Roberts said. "We're working on software in-house that would automate the process." Micromarketing will become especially important in destination categories, as retailers tailor their flagship categories to local tastes.

As category management consultant Win Weber sees the future, "Manufacturers are going to have to reallocate consumer research spending so they don't look at brands on a global basis but on a local market, account-specific basis."

Copyright October 1995 Crain Communications Inc.

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