Category management pools all items carried by a sales division into so-called categories which are tuned to customer needs. The idea is to increase customer loyalty and consequently boost revenues and earnings. 
Category Management – Product Range Optimization According to Customer Demand
A pleasant surprise in the store: a young mother does not have to search but can find the items she needs for her toddler in one spot. From baby food and diapers to skin care and clothing. All products well presented in shelves, while interesting offers woo customers to buy and the pleasant atmosphere makes it an enjoyable place to be and stay. This scenario is already a reality in many of METRO Group’s Real stores – thanks to category management.
A Categorical "Yes" to Customer Focus
Category Management describes the joint planning process between manufacturer and trading company. The focus is not on individual products, but rather on entire product groups. Merchandise categories, which are sorted thematically from a customer point of view, such as "Everything for Kids", "Everything for Pets" or "Everything for Barbecue". The aim of the category manager is to improve the range as well as the positioning in the store, which benefits trading companies and manufacturers by generating greater sales. At the same time it eases shopping for customers. In the past a store may have displayed cat food, cat toys and baskets in three different departments, something a category manager would now bundle and display together.
Team Work
In order to manage categories successfully, business partners create a cross-company team. The trading company appoints a category manager and the manufacturer nominates category partner. Both then jointly manage the process and follow clearly defined steps: they identify important customer groups and their needs and devise tailored product ranges and determine sales strategies. The role of the category partner is neutral, which means that category partners are not allowed to increase the proportion of their own products in a category unnecessarily. In some cases the category partner would even be obliged to de-list a product from his/her own company. This would be the case, if the product no longer met the demands of the core customer group and sales figures were clearly pointing downwards.
Good Relations to all Involved Parties
The category manager of the trading company creates a bridge between purchasing and sales. While strategic buyers focus on prices and terms, sales staff are responsible for marketing listed products. The category manager contributes the customer view and closely cooperates with both sides: activities concerning promotions for example are coordinated with sales. Category managers discuss which purchasing policies are to be followed for individual categories.
Data Driven
Trading companies and manufacturers depend on a lot of information for category management. The only way to satisfy customer needs, is to know exactly what they are. The only way to position yourself successfully is to understand your competitors strengths and weaknesses. To make strategic decisions for the product range, METRO Group relies on internal data as well as research results from external providers such as AC Nielsen
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www.acnielsen.de) and Gesellschaft für Konsumforschung (GfK) (www.gfk.com). Regular research results from these institutes give an insight into the purchasing behavior of consumers and the market strength of individual trading companies.
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Learning from Experience
The so-called consumer panel highlights what consumers bought from which retailer in the past year. It answers a whole range of questions which are vital for the decision of the category manager:
