Are you sick and tired of hearing about category management? I know I am; I would have thought by now the talking would be over and the process would be well established in the automotive aftermarket.
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The AASA Vision Conference on March 14, focused on the theme “Essentials for Creating Supplier Value,” the featured speakers and panelists reinforced the theme of collaboration between channel partners.
When you think of collaboration, the typical scenario entails give and take, and some type of compromise is reached at the end of the negotiation. Please note: category management is not a negotiation. Category management is a discipline and is based on data, and there is no better neutralizer in customer relationships than data. I was once told, “Data takes the emotion out of it,” and I can’t think of a better place to take the emotion out of it than when sitting with a customer.
So how do we stop talking about category management and put it into practice? I am going to borrow liberally from several presenters at the Vision Conference to give you some insights as to how to implement the practice.
1. Dedicate someone in your organization devoted to category management.
We are all busy and under-resourced but you should make the investment with one person and one customer to get it started. Who is the person? Someone who is analytical, who knows your product category, and who is able to “take the emotion out of it.”
Can you train a salesperson to be a category manager? Yes. Are all salespeople able to be category managers? No. Typically a category manager is a compliment to your sales team -- someone who arms them with data. Being this is now March Madness, I liken your category manager to a good point guard; someone who sees the whole floor and can identify a scoring opportunity by using data.
2. Pick the right partner.
If you don’t have the practice firmly established, invest in a partnership with an expert to get you going. AASA has several solution partner members who are specialists in category management. Find someone who has implemented the discipline within multiple organizations if possible; consult with them, invest the money, and treat them as an employee.
3. Pick the right customer.
Partner with someone that you know has the same goals in mind as yourself: someone who is open to using data as a decision maker as opposed to extracting two points of flesh during a negotiation. Most importantly, pick someone who has the data and is willing to share all the data (and yes, they can and do exist amongst our channel partners).
4. Decide what data you will need.
Most often you will need regional sales data by SKU from your customer, regional registration data from a third party provider, replacement data (Some high level product categories are available on the AASA Web site), product lifecycle analysis, and Web price shops. When you merge this data, you will have a powerful set of tools. Decide with your customer what the data is going to look like, how often you are going to review, and how often you are going to make recommendations.
5. Make an investment in the data.
I confess: I have purchased a lot of data in my time and for whatever reason never fully took advantage of it. All the data providers are willing, able and capable of providing insights and recommendations on how to use the data. Use the data and the support that comes with it – the data providers want you to succeed as well.
6. Become disciplined.
Remember that person you asked to be “The Category Management” expert? Don’t assign them to be the SAP rollout coordinator, don’t ask them to perform miracles without the proper support or time to do the job right.
In turn, your category manager should be reviewing the data on a daily basis. What are the price shops for the day? Is a retailer running a promotion on a competitive product? Did they pull the latest sales data from your customer? Did they plug in the new part numbers that were added from product management last week?
7. Communicate internally.
Make sure that your organization understands your commitment to category management. This includes product management, sales, materials management, cataloging and, yes, even finance. It does no one any good if the sales are starting to take off and you can’t secure the part because of poor communication.
8. Be willing to make sacrifices.
It won’t be all wine and roses to start with. You may have to accept returns, you may have to review your pricing, you may have to increase your inventory at some point. This is a long-term investment and should be viewed as such. The results will come.
When done successfully your customer will ask you about more product categories. When done successfully it takes the emotion out of it and puts you on a neutral plane with your customer. When done successfully you will grow your sales and your channel partner’s sales, and you will have greater, more profitable market share.
9. Document your success and failures.
There will be some air-balls; find out why. Document from the time you start returns, warranty, margin and, of course, sales. We all do this but use the implementation date as a line of demarcation and measure against it.
10. Let AASA know what you need.
We take our role as “The Voice for the Supplier” very seriously. What can we do to help? Organize a category management session? Find additional associate members that can help in the process? We rely upon you to give us feedback. Tell us how you are using category management and additional tools you need to take it to the next level.
It’s time to stop talking about category management and put our efforts into a practice that has been in place on the consumer products side for decades. It’s time to level the playing field by using data as a neutralizer. It’s time to realize that we have to stop over-inventorying the market and stop closing our eyes about the returns exposure. It’s time to see the whole floor and recognize that we sell products that consumers need, not want, and we have to ensure that our products and brands are there when the need arises. Let AASA know how we can help.
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