Providing category management analyses is a powerful value-added service. According to a 1999 survey of consumer goods and retail executives, organizations that provide category management analyses for key accounts average 17-26% higher sales and 9-17% higher margin dollars, year to year, with those accounts. The value these organizations obtain from category management exceeds the cost of the systems that deliver it.
Using category management analyses, retailers typically achieve similar gains in sales and margin points, according to a 2002 survey of retail executives. Not surprisingly, category management is catching on among more and more retailers. It is widely practiced in grocery and now being applied by general merchandise retailers that range from mass merchants to boutiques to convenience stores.
Slashing the High Cost of Category Management
Historically, a key drawback to category management has been its cost. On average, it would take retailers over 400 hours to prepare a set of analyses for one large retail account. As expected, it was traditionally only the largest accounts that would receive category management analyses due to the high labor cost and a shortage of skilled workers to prepare the analyses.
Today, however, there is a new way to streamline and automate most of category management so that retailers can cost-effectively deliver superior customer service-and superior sales and margin results - to many more accounts. Business intelligence (BI) systems can now automatically prepare category management analyses. And it's estimated that more than 80% of the value of category management analyses comes from automated analyses, which are prepared for a mere 10-20% of the traditional costs. This way, retailers can leverage their BI investment for other purposes.
Adding Value for More Retailers
It is even possible for consumer goods organizations to offer category management support for much smaller retail accounts at virtually no incremental sales cost. This approach uses retail self-service access to category management BI over a secure Internet connection. This could vastly expand value-added service to smaller accounts at little cost, creating a competitive advantage while competitors try to catch up.
To make automated category management work, retailers must provide point of sale (POS) and other business data to the consumer goods organization. They must configure the system to fit the individual account's business situation. Retail merchandise managers can do all of this with secure self-service access. Then the retailers can download the results in a neatly prepared report.
Additionally, account managers visiting merchants can download up-to-date category management presentations for face-to-face discussions with retail buyers, merchandise managers, category managers, etc.
Taking a BI approach to category management has an additional benefit: consistency. Automation of the process for developing category management analyses increases the consistency and completeness of those analyses. Knowledge by top category management analysts becomes transferred to more employees, brokers, and other account team members with customer-facing responsibilities.
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