What is Category Management

What is Category Management?

Over the years I have heard the word “Category Management” in many different contexts being “used and abused” and “fluffed up”.

Category Management is more than Sourcing, however Sourcing is a fundamental corner stone that Category Management builds on.

In my mind, solid Sourcing processes a willingness to drive change and to be a driving force in the marketplace, for the long-term are fundamental building blocks for successful Category Management. On top of that comes four pillars, namely…

• Break-through thinking (pushing the envelope)
• Customer focus
• Cross-functional collaboration
• A data-driven and fact-based approach

In my experience there are a few fundamentals with regards to implementing Category Management successfully. You need…

• Relatively humble category managers that understands the importance of collaborating closely with the sales organization
• To have defined product categories, preferably from a market perspective
• Some sort of strategy and planning where you look at internal and external information and data and make some analysis, to identify how you should develop your category. Here it is crucial to work closely with the Sales Organization (or internal customer) and to work both bottom-up and top-down
• A one-pager lever tree showing which handles/ actions you can typically work with in your organization. This serves as top-down inspiration.
• Segmentation, in some shape or form, e.g. Kraljic segmentation or “Good, Better, Best” quality/ price segmentation. This also helps the strategic thinking.
• Your strategy and planning should end up with both concrete Category Optimization initiatives and operative actions, that you can follow-up on (be careful not to over formalize things, especially in the start).
• Clear, but “good enough” KPIs that you can track and that take a market/ end customer perspective
• Relatively clear roles and responsibilities in relation to your Category Optimization initiatives
• Good governance that is adapted to your organizational culture (i.e. don´t over or under do it – see diagram below). This typically means that you should start with very simple governance and then build on that year-on-year.
• Effective continuous work, e.g. with adapting and updating your product assortment. To create an Annual Wheal/ Calender that is followed can often be a good approach.
• Agility to update your plans continuously depending on market signals

The key advice would be to adapt your approach to the culture of your organization. If you apply a too rigid approach in an organization that is extremely short-term and “action now” focused you will alienate the organization and build the silos that you want to tear-down. On the other hand, if you apply a too relaxed approach in an organization that is long-term and process focused, then you are also increasing the overall risk. You need a balanced approach to minimize the overall risk.