Trade Marketing

Category Definition & Segmentation

• Step 1: Category Definition & Segmentation
  • Objective: Understand how shoppers find categories and products.
  • Consider the logic behind product placement in stores and on shelves.
  • Analyze the link between shopper flow and store/category design (positive or negative).
  • Consider changes when moving from hypermarkets to convenience stores or from downtown to suburbs.

Key Questions Addressed

• How easily can shoppers find categories and products?
• What logic dictates the placement of categories inside the store, and products on the shelf?
• Is there a positive or negative link between shopper flow and the floor plan/category design?
• How do these factors change across different store formats (hypermarket vs. convenience store) or locations (downtown vs. suburbs)?

Efficient Consumer Response (ECR)

• ECR aims to make the grocery sector more responsive to consumer demand and remove unnecessary supply chain costs.
• A category is defined as a distinct, manageable group of products/services that consumers see as functionally or naturally interrelated and/or substitutable in meeting a consumer need.

Category Definition Importance

• Importance: Category perception can vary among retailers, manufacturers, and consumers.
• Impact: Incorrect category definitions can lead to lost sales and negative consumer experiences.

Consumer Understanding

• Segmentation: Segmenting consumers involves understanding their:
  • Age, sex, and life stage.
  • Shopping and purchasing behaviors.
  • Attitudes and motivations.

Shoppers vs. Consumers

• Shoppers: Purchasers of a product before end use.
• Consumers: End users of a product or service.

Shopper/Consumer Differences

• Shoppers = Consumers: Prioritize flavor, price, and promotions.
• Shoppers ≠ Consumers: Mainly influenced by doctor recommendations and product attributes rather than price or promotion.

Product/Category Engagement

• High Sensitivity: Shopper = Consumer (e.g., coffee, snacks).
• Low Sensitivity: Shopper ≠ Consumer (e.g., baby food, pet food).

Category Definition Process

• Define consumer needs.
• List interrelated and/or substitutable products.
• Create measurable and manageable segments.

Importance of Grouping

• Grouping should not be too large (lacking strategic focus) or too small (ignoring the bigger picture).
• Evaluate products from retailer, manufacturer, and consumer perspectives.

Category Segmentation

• Segmentation is a detailed grouping within a category, bringing together products highly similar and directly competitive in the consumer's eyes.

Segmentation Benefits

• Presents the order of priority in which shoppers/consumers filter through a range of products to make their purchasing decisions.
• Helps identify directly competitive products.
• Aids targeted decisions on category strategy and tactics (promotions, pricing, range).
• Contributes to consumer-centric product placement, easing the buying procedure.

Understanding Consumer Preferences

• Understanding consumer preferences allows retailers to:
  • Stock and merchandise products based on consumer needs.
  • Communicate product benefits effectively.
  • Enhance or develop new product offerings.

Fabric Softener Market Case Study

• Shoppers prioritize price, then scent vs. care.
• Shoppers select fabric softeners by pack type and product formula.

Category Roles

• Destination: Shapes retailer image and gives a competitive advantage.
• Core/Routine: Expected by consumers but doesn't drive retailer selection.
• Occasional/Seasonal: Meets seasonal demand variations.
• Convenience: Reinforces one-stop shopping image.

Category Role Percentages

• Destination: 5-7% of total categories.
• Core/Routine: 55-60% of total categories.
• Occasional/Seasonal: 15-20% of total categories.
• Convenience: 15-20% of total categories.

Assigning Category Roles

• Importance to the retailer's target consumer.
• Importance to the retailer.
• Importance to competitors.
• Category's market outlook.

Quadrant Analysis

• Winners, Opportunity Gaps, Sleepers, Question Marks.

Quantitative Analysis Grid Parameters

• Consumer: Annual expenditure, household penetration, purchase frequency, planned purchase.
• Retailer: Turnover, gross profit, operating cost, net profit, turnover/meter, profit/meter.
• Market: Market share, market growth.

Category Assessment

• Helps understand current category performance.
• Offers detailed knowledge at subcategory and brand levels.
• Identifies opportunities for improved results.
• Provides insights for developing category strategies and tactics.

Basic Category Assessment Analysis

• Performance by segments (sales, volume, units).
• Growth by segments.
• Performance by channel.
• Growth by channel.