Category Management is not the most obvious marketing discipline and therefore, we wanted to explain how it fits within marketing sector. We start by discussing what is Category Management, then look at what does a Category Manager do? and finally see how much Category Managers earn?
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What is Category Management?
Over the past year, retail spending in the UK exceeded £300 billion; in other words around £4,750 per person, or almost £100 per week per person. Multiple retailers – chains, whether they are smaller convenience stores such as Spar or massive supermarkets like Tesco – constitute the lion’s share of the retail market with traditional high-street retail declining. Whilst statistics from July 2015 showed that the trend of consumers carrying out a weekly shop at an out-of-town supermarket is giving way to a more ‘as and when’ style of shopping, these daily purchases are increasingly made in urban stores such as Tesco Metro. Accordingly, there is a clear incentive for producers and manufacturers to try to develop and maintain relationships with these multiples in order to ensure their products are stocked and sold in the retailers’ stores.
Just as a walk down a high street a century ago would have taken us past a butcher’s shop, a grocer, a baker, a greengrocer, an off-licence and a fishmonger, a stroll around a modern-day supermarket will go past aisles of a similar breakdown, with some more recent additions – frozen ready meals, chilled ready meals, snacking, soft drinks, impulse and such like. Within each individual aisle, there may be smaller sub-divisions such as carbonated drinks, energy drinks, chilled juices, concentrated drinks and waters, and naturally there are many different suppliers who offer ranges within these sub-divisions.
In order to buy or sell a certain type of product most effectively, it makes sense to have someone who specialises in those products and their market overseeing the process. As such, retailers will employ category managers to oversee the buying (procurement) process, and suppliers will have category managers who aim to represent their products in the way which will allow them to sell the most. Depending on the size of the market involved, and the business they work for, these category managers may oversee a broad category such as ‘soft drinks’ or they may focus more closely on a more specific category, such as carbonated drinks.
What does a Category Manager do?
As Brand Recruitment specialises in marketing jobs, for the purpose of this guide, the focus will be on category managers working for suppliers, rather than procurement category managers who work for retailers.
It is a category manager’s job to try to maximise the company’s profit from selling products within a specific category. This could be a broad category such as ‘Confectionery’, or a more closely defined category such as ‘snacking’. In any category, as well as their flagship brands, the company may have older products which are nearing the end of their life cycle and less in demand. A category manager must manage all of these products sensibly – as well as suggesting new products to be developed – in order to maximise the amount of exposure his company has on the shelves of the retailer’s outlets. To do so, a category manager will analyse data collected and sold to them by market data companies such as AC Nielsen. This information is collected from a variety of sources including loyalty cards (such as Tesco Clubcard or the Nectar card) which help the data company to profile and segment who is buying what, what age and sex they are and so on so forth.
It could seem sensible to push flagship brands exclusively to try and maximise revenue on the back of their popularity, in doing so ‘paying back’ some of the money recently invested in developing and marketing these brands. Yet in reality the less popular brands can also provide breadth and depth to the category, and more flexibility on pricing, so they are important tools for any category manager. The ability to offer a retailer the ability to offer their customers a ‘buy one, get one free’ offer on an older, slightly tired brand means that the supplier’s products are on the shelves rather than a competitor’s, and also provides – an admittedly narrow – profit on existing products which cost little to develop, produce or market. On the other side of the equation, retailers operating in a price sensitive environment (such as during a recession) will see the merits of offering their buyers these price-led deals.
The insight which the category manager uses may indicate that there is scope for increasing the size of the category by developing new products to expand the range. If we think of the gradual introduction of diet colas, cherry flavoured colas, caffeine-free colas, colas with a twist of lemon and such like, we can see an example of category expansion – partly fuelled by indications of demand for more variety in the cola market, partly fuelled by marketers persuading consumers that they really do want or need these things! The development of existing products and the introduction of new products are all aimed at increasing the company’s share of the category; hopefully one of their products will become a ‘category killer’ which dominates the category to such an extent that competitors’ efforts are futile.
In a similar way, the insight data may indicate that the category is dying – take video tapes, for example. What does the supplier do? Do they invest in trying to conquer a larger share of a shrinking market? Do they diversify and try to ‘convert’ consumers to newly developed products? Or do they simply let the decline run its course with little or no investment and then gracefully bow out? These are all decisions which category managers will be involved in.
Therefore it is the category manager’s job to ensure that their company is providing the market with the products that consumers desire, and, whilst working with the retailers, to try to ensure that their products are not only occupying as much of the retailer’s shelf space as possible, but that they are also placed in the most beneficial parts of the shelves. For this purpose, planograms are used, which are effectively a map of which products go where. The difference between being at eye level and on the bottom shelf can mean a difference of hundreds of thousands of pounds of sales, so there is naturally fierce competition amongst suppliers to persuade retailers that their products should be in pride of place. The retailers will consider what the market demand is for various products, how much promotion is being done for them, and the profit margin for each of them. It is a category manager’s duty to be aware of all of these aspects of not only their own products, yet also those of their competitors.
In this hugely analytical world, it may seem strange that there are maybe a dozen suppliers as well as the retailer, all looking at the same data, in order to try to achieve a similar goal. As a result of this, many retailers employ a system which uses ‘Category Captains’, also known as Category Champions. These category captains are actually category managers from one of the suppliers, and it is their role to effectively advise the retailer what the best tactic is for maximising profit from the category, using all of the products available from all of the suppliers. The advantage for the retailer is that the analytical process is essentially outsourced, and the benefit for the category captain and their company is that they have direct and exclusive access to the retailer which gives them a clearer path to promoting their products. There is a need for a certain degree of restraint, as if the retailer detects that the category captain is suggesting their own company’s products rather than those of a competitor which would make the retailer more money, it is most likely that the retailer will ignore their advice and appoint a different category captain.
Category Managers come from a variety of backgrounds, and there is no ‘typical’ personality that will succeed. Obviously some category roles are more analytical, involving a lot of time dissecting the insight, whilst others are more customer-facing which will have less emphasis on number-crunching and more focus on relationship building and negotiating.
How much do Category Managers earn?
These figures have been taken from our Marketing Recruitment Review and Salary Survey 2016 and show that Insight and Category Managers earn a very competitive salary against Marketing Managers.