MKG 320 Exam 2
Category Performance Measures should have what characteristics?
-Balances Architecture- Measures should be internal and external, and focused on both short and long-term results. -Total System- Measures should allow results from all phases of a category's performance to be measured. -Allow for Comparison of Performance Over Time- Measures should be able to track actual results versus forecasts, budgets, and against results of previous periods. -Timely, Accurate, Understandable Measures- Measures allow managers to make good decisions and should impact their behaviors in a manner that is consistent with the overall company goals and strategies. Category measures should be able to be "rolled up" to higher-level financial measures.
What are the minimum retailer requirements to start a Category Assessment?
-Turnover, -profit, -current shelf space management data
Role of Occasional/Seasonal Category
-to be a major provider of these products to the target consumer. -to help *reinforce* the target consumer's image to the target consumer. -to deliver *frequent*, competitive value to the target consumer -to play a *secondary* role in delivering profit, cash flow and ROA.
Role of Preferred Category
-to be the *preferred provider* of these products to the target consumer. -to help *build* the target consumer's image of the retailer. -to deliver *consistent*, competitive value to the target consumer. -to play a *primary role* in delivering profit, cash flow and return on assets (ROA)
Role of Destination Category
-to be the primary provider of these products to the target consumer. -to help define the profile of the retailer in the eyes of the target consumer. -to deliver consistently superior value to the target consumer. -to lead all categories in the areas of turnover, market share, consumer satisfaction, service level and operating expense management. -to lead the retailer's people, systems and technological development toward achieving the corporation mission, goals and strategies
Role of Convenience Category
-to help reinforce the target consumer's image of the retailer as the place for *one-stop shopping.* -to deliver good, everyday value to the target consumer -to play an important role in the area of profit generation and margin enhancement.
Why is it important to define a category?
1. Better retailer/supplier alignment with the consumer: Under Category Management, the appropriate basis for a category definition starts with the consumer: "How would consumers define the category, sub categories and segments based on their needs, and how do they make purchase decisions within this category? 2. Better retailer-supplier alignment Co-defining the category based on consumer dynamics helps retailers and suppliers arrive at a common definition 3. New Perspectives Experience has shown that suppliers and retailers often gain new perspectives of the category upon completion of the category definition work
Name the four critical elements of a Category Assessment?
1. Clear assignment of responsibilities between the retailer and supplier partner. 2. A standard assessment process guided by hard copy and/or electronic worksheets/templates. 3. Information and technology tools to perform the assessment productively and objectively. 4. A willingness, when appropriate, to share the necessary information and data between trading partners.
Balanced Scorecard Categories
1. Consumer 2. Market 3. Financial 4. Productivity
What ten performance measures would you use for your chosen category? Why? *Measures fall under four categories: Consumer, Market, Financial, and Productivity*
1. Out of Stock Rates 2. Sales per Square Foot 3. Loyalty 4. Private Label Sales 5. Customer Satisfaction 6. Transaction Size 7. Opportunity gap 8. Gross Profit 9. Sales Growth 10. Contribution margin
Which two areas of the category business unit are defined in the category definition?
1. it defines the selection of specific Stock keeping unit (SKU) that will comprise the category 2. it defines the structure within the category
Define the word "category"
A distinct, manageable group of products/services that consumers perceive to be interrelated and/or substitutable in meeting a consumer need
How would you define that same category if you were a manufacturer of products in that category, as opposed to being a retailer?
By the consumer and ultimate usage of the product.
a retailer assessment on your chosen category.
Coffee is relatively low service but has the possibility to become a service oriented category. Coffee takes up an extremely large shelf space due to the variety of products, size of products, and many popular brands. Shelving presentation often seems ineffective.
How should data be sorted in order to provide a productive Category Assessment?
Data should be taken from four areas; -consumer, -market, -supplier, -retailer data This data should be structured to enable analysis at category level as well as "drill down" levels within the category
Category Definition
Define the category as a strategic business unit (SBU) and its structure (e.g.sub categories, segments, etc.) from a consumer perspective
Supplier Assessment
It factors the sales and market share trends among suppliers in the category. It evaluates how efficient supplier's information, monetary, and physical flows are. -who is more profitable? -how reliable are suppliers?
a consumer assessment
It is the Why, who, when, where, how of the category
a market assessment on your chosen category.
K-Cups are rising in popularity for offices and homes. Promotion includes sampling, a section where you can choose whole beans to your liking, and advertisements. Largest opportunity gap would be offering more taste oriented and organic coffees in both K-Cups and whole beans.
Whats a better way of defining how the category starts with who in mind?
Key point: "the consumer" is at the forefront.
a supplier assessment on your chosen category.
Many brands are represented in the coffee category, meaning that most supply chains will be inefficient. New coffee products are coming out fairly frequently as more consumers take a liking to coffee products. Consumers will react positively to a lower price so supply chain efficiencies and promotions will transfer to lower prices for the consumer and higher turnover for the retailer.
What is the difference between Pet Care and Pet Food? Explain your answer
Pet Care as a category includes Pet Food, but Pet Food does not include Pet Care. Pet Care includes toys, food, cages, leashes, litter, health care, grooming services, etc.; all the things that one needs to care for a pet. Pet food includes simply what one gives to pets to eat.
Define and explain the Share/ Growth Quadrant Analysis and Opportunity Gaps
Quadrants include: sleepers, winners, opportunity gaps, and questionables -Provides several key pieces of information about the retailer's current business performance in 5 categories. -Which sub-categories are growing faster or slower in the market? -Is the category role being delivered based upon current performance in the market? -Does a gap exist between the category's performance and its role? -Is the retailer receiving its "fair share" of a category's business? -How important is each sub-category to the overall category?
Market Assessment
Sales and consumption trends of the category, sub category and brands in the market place. It questions the retailer's marketing share and market share opportunity gap. It also addresses the pricing compared to competitors, shelf presentation, assortment, and promotion activities,
What is the retailer's role in the Category Performance Measures?
The Category Manager has the responsibility to recommend appropriate target goals that are consistent with assigned category roles to higher-level management. They should also communicate target objectives to suppliers to enable them to provide programs and ideas that are consistent with these objectives. *Retailers provide internal data.*
The definition of any category starts with who in mind?
The customer
Switching Level
The level in the consumer decision tree at which consumer will switch between products on shelf, NOT walking out of the store
Walking Level
The level within the Consumer Decision Tree at which the consumer will NOT make a purchase in the category --> they will walk out the store and not buy
What is the supplier's role in the Category Performance Measures?
The supplier should help evaluate the target objectives and either suggest changes or commit to working with the retailer in order to achieve these goals. The supplier's knowledge of new trends, new item initiatives, product price increases and changes in category promotional funding are examples of useful information a supplier could provide. *Suppliers provide external data.*
Define Turf Defending strategy
This strategy aggressively positions certain parts of a category to protect the retailer's business in the category from targeted competitors.
Transaction Building strategy
This strategy focuses on increasing the size of the average transaction in the category, aisle, or total store transaction (market basket).
Cash Generating strategy
This strategy focuses on using parts of the category to generate cash flow for the retailer.
Define Profit Generating
This strategy focuses on using parts of the category to generate profits. A profit generating strategy would depend on determining the following: a. Which brand, or segment (domestic, craft, imported) generates the most overall profit? b. Can the volume of sales be increased, or is the volume maxed out? c. If the volume can be increased, then decrease the price slightly, but be sure that the decrease in price will not wipe out the profit generated by increased volume. d. If the volume cannot be increased, try pushing the next most profitable segment
Define Image Enhancing strategy
This strategy is used in a category to help the retailer communicate its desired image to the consumer, in one or more of the following image areas: Price, Service, Quality, and Variety. As a retailer, you want a large variety, and competitive prices, as well as frequent beer "events".
Define Excitement Creating strategy
This strategy is used to communicate a sense of urgency or opportunity to the consumer.
Define and Apply a Traffic Building Strategy
This strategy, when applied to a component of the category, focuses on drawing consumer traffic to the store and/or into the aisle and category. I would choose one popular beer from each subcategory (domestic, craft, import) and have a sale. I would work with the supplier to make sure that I had adequate stock, and reduce the price to draw people to the store. I would advertise this sale in a local newspaper and in flyers.
Would the CDT differ between the retailer and the supplier? Explain your answer.
Yes, While they are both interested in satisfying the need of the customer at the most profitable way they can. A supplier might want to push the most easily transported product, while a retailer might want to fill his shelves with the most desirable product
What is a Consumer Decision Tree? Describe the CDT for the category you chose.
is the Category Structure from a consumer's perspective, which is the identification of the category's key sub-categories, segments and sub-segments. Ensures clear definitions between the manufacturer and retailer to avoid confusion.
What is the purpose of the Category Assessment?
is to obtain organize and analyze the information necessary to clearly understand the current performance of the category and to identify the areas of greatest opportunity for improved results in turnover, profit, and return on assets in the category. Answers the question, "What is the current state?"
Retailer Assessment
it assesses the retailer sale trends, profit trends and trends in product costs. It also evaluates the Return on Inventory and how productive the product supply is. -How effective the shelf presentation, promotions, and pricing
What is determined by the Category Performance Measures?
measures involve setting the category's target objectives in a manner consistent with the category's role and the findings of the assessment step.
Consumer Decision Tree
shows the decision process most typically used by consumer to make a purchase decision -reflects the consumer's purchase decision
Process of Category Definition
step 1: Define consumer's needs step 2: determine the products in category step 3: Develop consumer Definition tree step 4: Identify switching & walking levels
market share
the sales of that retailer divided by the sales of the entire segment or industry, including the retailer's sales. Can be measured by each format type.
