ROI (return on investment) is perhaps the easiest business concept to understand and yet the most difficult to measure. While break even is certainly better than losing money, it's difficult to fully understand what activities generate sales.
For retailers, your goal should be to maximize the ROI for every action you take.
It's easy to calculate the additional sales needed to justify a new sales person, a new sales strategy, a promotion or a new item in a category. But measuring category management success can be complicated by understanding what category management is and its place in your business.
Paying a category manager to pull reports, keep shelves full and build presentations will not provide a high return. Category management provides the highest return when used to drive sales, instead of reacting to day-to-day business needs.
Category management helps new sales representatives sell more, increases sales of new items and promotional effectiveness, and it takes the guesswork out of evaluating new sales strategy results.
Try these three strategies to increase your ROI using category management.
- Take a deep dive into analytics using syndicated POS and consumer information. This will give you a thorough understanding of the category, the items in it, the market and how your customers shop the category.
- Focus on the relationship between the items in a shopping basket with the goal of becoming the destination for all the shopper's needs. Achieve this through a strategic merchandising program that maximizes distribution of both top-selling items and niche items capable of increasing foot traffic and market basket size.
- Review your pricing and promotion strategies to help you stand out in the market. Consumers have a seemingly endless choice of retailers and brands to choose from. The successful strategy will differentiate you in the category and in the market.
A successful category management strategy can differentiate you from your competition, giving you a substantial competitive advantage and helping you "win at shelf."
What are your best category management strategies? Share in the comments.
Daniel Lohman is the owner of Category Management Solutions (CMS) which provides innovative strategic solutions for natural and organic CPG companies interested in gaining a significant competitive advantage.