Taking a New View of Category Management

Most category management efforts are driven by the hard and seemingly immutable logic of scanner data. SKUs with strong sales receive more facings, while weaker items are downsized or discontinued. Although this process usually works on an incremental level, we'd all agree that sales data tells us only part of the story at retail: It can tell us what happened, but not why, nor what would have happened with an alternative category configuration. Therefore, retailers are often left hypothesizing, and larger opportunities -- to re-energize categories and drive sales -- may be missed. With this thought in mind, I'd like to share several insights regarding the underlying factors driving category purchase decisions, and their implications for enhancing category management efforts. Defining OpportunityIt is frequently quoted that 66% of purchase decisions are made at the point of sale -- and we've all seen significantly higher figures for impulse-driven categories such as single-serve beverages. However, this overall figure is far less relevant than understanding the nature of decision-making in a given category. In other words, which specific decisions (regarding brand, size, quantity, etc.) can we consistently influence at the shelf? When we speak with shoppers in store, we find that the primary opportunity in many categories lies in driving an additional purchase and/or a "trade-up" to a larger size or premium product. In these cases, category organization should highlight "trade-up" brands or products, by placing them immediately to the right of more popular varieties. Price sensitivity and receptivity to store brands also vary widely by category, and they have significant implications for category organization. Since shoppers tend to view and compare products horizontally, a vertical layout (with brand blocks organized vertically) will encourage comparison across brands and drive higher sales of store brand items. Many marketers and retailers "do their homework" in terms of uncovering shoppers' decision hierarchies and shopping processes. However, these insights are often applied in the context of facilitating the shopping experience (organizing the store and category to match the shopper's decision tree), rather than maximizing revenue. And, unfortunately, these two factors -- shop-ability and revenue generation -- sometimes work at odds with one another, as we don't necessarily want to encourage "Grab and Go" shopping. Clearly, successful category management requires balancing the shoppers' needs ("Getting People to What They Want") and the marketers' priorities ("Showing People What We Want Them to See"). Unseen is UnsoldTo understand exactly what people do see (and miss) as they shop, we regularly employ patented eye-tracking technology, which documents shoppers' viewing patterns and focal points as they consider product categories. Across hundreds of studies and numerous categories, the primary findings are quite consistent: Shoppers do not view product categories fullyIn fact, we find that shoppers typically begin with an initial scan of a product category, in which they actively see and consider only about 50% of the brands on shelf. Most shoppers then return to a smaller consideration set of one to three brands, from which they make their final selection (possibly after checking prices, ingredients, etc.). These patterns help to explain why so many new products that pre-test well in forced exposure studies end up as disappointments: They are never seen and "given a chance" at retail ("Unseen is Unsold"). Shopping begins at a point of visual contrast, rather than at a pre-determined location or with a pre-selected brand. Most shoppers tend to "ground themselves" somewhat centrally in front of a product category (or smaller sub-category) and begin viewing at the product or brand that creates the greatest visual contrast. Importantly, this process is primarily physiological, rather than considered. In other words, a shopper begins with what catches his/her eye (mostly likely due to a bold color, a strong logo or a unique shape), rather than making a conscious decision to "look at" a certain brand. From their starting point, shoppers tend to scan or drift in the manner that they read, moving to the right and/or downward. Centrally located products at arm-level (rather than eye-level) are the most likely to be seen and considered. These viewing patterns result in higher levels of attention for products placed centrally in the category, because when a shopper starts in the middle of the category, he or she is less likely to scan leftward (against normal reading patterns) and the person may "check out" before considering products on the far right. Similarly, when a person starts at or slightly below eye-level, he or she is less likely to scan upward (against reading patterns) than downward toward products at arm-level. In fact, we've seen that products on the top or bottom shelves are seen about 30% less consistently than those at arm-level, which translates quite directly into lower sales (as confirmed by scanner data). Ensuring Shop-Ability Although the most easily navigable plan-o-gram is not necessarily the most profitable one, common sense does suggest that significant degrees of confusion and frustration can't be good for business. Across categories, we've found that if shoppers have not found what they are looking for in eight to 10 seconds, they may indeed walk away. In addition, since shoppers tend to have a "ceiling" as to how long they will spend in a category, additional time spent searching (for their initial purchase) implies less time available to consider an additional purchase. Finally, when faced (and overwhelmed) with confusion, shoppers tend to "default to the familiar" rather than try something new. Typically, we find that horizontal "brand blocking" facilitates shop-ability, by creating familiar "color blocks" that allow shoppers to narrow their shopping experience (within a given brand) and then consider "trade-up" or incremental purchase within that brand family. For shoppers, comparing products across brands tends to be more time-consuming, because of differences in layout and information delivery/location across labels. Putting the Pieces Together In considering these three underlying factors behind purchases (in-store decision-making, shelf visibility and shop-ability), we have identified several tactical insights applicable to optimizing shelving and product placement. On a higher level, however, these issues speak to a more comprehensive approach to category management efforts: Category management must be rooted in a clear understanding of which purchase decisions can consistently be influenced at retail -- and which ones hold the greatest potential to drive revenue/profitability. The more specific your strategy for increasing revenue (i.e., drive incremental purchases of this particular SKU), the easier it will be to act upon. Plan-o-gram decisions should be made with the understanding that shelf placement/positioning has a direct impact on visibility and purchase.To this end, priority items -- new products, trade-ups, store brands -- should be placed at arm-level, immediately to the right of visually dominant brands (which shoppers are most likely to see). By the same token, familiar brands -- with strong brand blocks and high loyalty -- can potentially be placed in less compelling positions (top or bottom), because many shoppers will take the time to find them. Category management efforts should be pro-active, rather than simply reactive (by adjusting to scanner data).Being pro-active involves developing/exploring new category layouts (based on insights regarding decision-making at retail) and later testing them across multiple criteria (viewing patterns, shop-ability and sales). By following this process, marketers can identify what works -- and, as importantly, uncover exactly why some options failed and how to improve them. Armed with these insights, they will be better equipped to move beyond incremental change and to develop break-through category management approaches that will drive profitability. Scott Young is president of Perception Research Services, a company that conducts more than 500 research studies annually to help guide, assess and improve point-of-sale marketing. He can be reached at 201-346-1600 or syoung@prsresearch.com.

Taking a New View of Category Management

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