Category Management first came into light in the 1980’s when it was coined by Dr. Brian F. Harris as a business strategy to maximise possible profit by getting manufacturers to work with retailers to optimise processes, grow sales, and ensure profitability for all parties.
In this glossary, you will find a list of commonly used category management terms. For a more in-depth guide to category management in the retail world, visit our Ultimate Guide to Category Management
Pertains to liabilities owed by the retailer to the suppliers for goods, services, and other incurred expenses. An Accounts Payable Department focuses solely on making sure these liabilities are settled properly.
Goods or services that are highly likely to be bought after a consumer buys one product. Service parts, maintenance, repairs, and other complementary products fall under this category.
How consumers know, understand, and recall details on a certain brand. This includes a consumer’s ability to identify a brand’s product and established behaviours such as sales or product launches.
A shopper’s affinity to repeatedly purchase products or services from the same brand or manufacturer even when competitors provide a number of new or better purchasing opportunities.
Big Box Store
A term for major retail chains such as Best Buy, Tesco, and Target. These large establishments earned the name “big box” because they are often rectangular-shaped.
The point by which a campaign or product will earn enough to cover costs but no profit yet.
Attention created to centre around a product, service, or brand both from media and public audience.
A recurring review of categories and subcategories to evaluate the performance of the share, sales, and profitability of goods.
A tactical approach to managing groups of products by creating mutually beneficial partnerships between traders that aims to maximize profit and sales while ensuring consumer satisfaction. This includes optimising promotion, pricing, shelving, and the assortment of products or services based on market data. Category Management is driven by data and is a continuous process that adapts to market research. Also referred to as CatMan or CM
Category Hierarchy / Category Decision Tree
A consumer’s hierarchy of priorities that influence their decision-making on their purchases. The decision tree is commonly visualised as a family tree that specifies product attributes such as brand, flavour, price, size, etc.
a detailed strategy on how to help achieve specific business objectives by utilising proper category management. Category planning involves diagnosing strengths and existing opportunities of a business that can be improved on and how the entire chain of producers, suppliers, and retailers can benefit from the plan.
A relatively new brand that challenges the top players, creating a strong market presence and aggressively works toward taking a significant market share from its competitors
A number of products with similar packaging or product colour that are grouped together to promote better sales.
A product or service’s end user. A consumer and shopper may not necessarily be the same as the shopper is the individual or individuals buying the goods. In families, parents are usually the shoppers and the entire family, including the children, are the consumers.
A paradox coined by psychologist Barry Schwartz in 2014. The Consumer Choice Paradox first appeared in Schwartz’s book “The Paradox of Choice: Why More Is Less”. It explores the fine line between giving consumer options so they have a variety of products to choose from and having too many choices that the consumer feels overwhelmed.
A product’s average sale on a given timeline.
Items falling into this category generally occupy less space, does not offer promotions as frequent as Core Categories. These are items not usually found on a shopper’s list for instance greeting cards, plastic covers, or electrical tape.
These are the most frequently purchased products such as coffee, tea, cereal, milk, bread, and salty snacks. There is a strong competition in these categories in terms of promotions, what kind of space it gets and pricing.
When two or more products from different categories are displayed together to help generate additional sales.
Repeat purchase as a result of an overwhelmingly positive experience or repeat experience in a brand or specific product.
The decreasing quality of decision making of an individual after he or she has made a series of decisions.
A part of a store’s shelves or fixtures that a shopper sees first when approaching the shelves. Goods displayed at eye level usually are noticed first.
Anticipating how a promotion will perform. The PRO tool can be utilised to create a proper estimation.
The 4ps is a marketing mix geared towards targeting a specific demographic for a product offering. Th four Ps include Product, price, promotions and advertising and place.
Drastically lowering the price of items for a limited time to create excitement and to make way for new inventory.
The different available products for sale and how they are displayed as a way to spark interest and draw customers into buying.
A means of observing and evaluating consumer experience, the quality of service, products, or other industry practices by having individual pose as a shopper.
Focusing on a single market segment.
A product’s risk of becoming obsolete or impossible to sell. Perishables such as fruits and vegetables as well as technology that can easily be outdated have obsolesence risk that category management aim to minimalise.
Mobile version of the stores that can be set up in event grounds, parks or other spaces that can attract attention. Pop-Up Stores are meant to be portable and used for short-term periods.
Point-of-Sale happens when a transaction is finalised and an invoice or receipt is issued to the customer.
When one is uncertain of the absolute worth of an opportunity in Category Management i.e how a promotion or a new strategy will perform, the PRO tool is utilised. It stands for Pessimistic, Realistic, and Optimistic values. These ways of estimation allow users to share educated estimates and enable them to define what steps are needed to be done to have a better chance of achieving set estimates.
When items from luxury lifestyle brands and high-end retailers implement high prices to exude exclusivity and status.
Financial returns or earnings after amount spent is deducted.
Ready to Eat (RTE)
RTE items are any item of food that does not need cooking or has already been cooked and can be eaten straight away. For example, porridge needs to be prepared, whilst cornflakes can be eaten straight out of the packet.
A person or shop that directly sells goods to a consumer or shopper.
Radio Frequency Identification. An electronic system that allows users to track and organise products.
Return on Investment. The amount of time and goods sold necessary to earn back an investment. Can be expressed as percentage or timeline.
These are products purchased occasionally in certain periods of the year. Typical examples are cards and roses on valentines, turkeys and cranberry jelly on Thanksgiving, or generally desirable foods during different seasons.
Allowing customers to pick and measure goods by themselves without the help of an employee. Vending machines, fill-all-you can schemes, and even automated groceries are all self-serve.
Loss of goods that can result from different factors such as damages during transit or mishandling, clerk error, shoplifting, or employee theft.
The total cost a product incurs including handling, warehousing, shrinkage, depreciation, and other fees that build up the longer an item is stored.
Supply Chain Management (SCM)
How the flow of goods and services are managed from the processing of raw materials or talent up until the point of consumption.
The intended demographic of a campaign, product or strategy.
A customer profile created by grocery giant Tesco to describe their typical customer, their shopping behavior and motives, and how they can attract these “families”.
Traffic Building Strategy
A tactic used to attract consumers into an aisle, category, or even the store. This is usually achieved by advertising promotional prices or discounts far from the regular price.
Turf Protecting Strategy
Sometimes referred to as Turf Protecting Strategy, is a means to defend a category’s existing market share. If a direct competitor applies a discount on Turf Protecting products, so must the retailer to match the strategy.
The art of arranging display, shelves, and creating floor plans to increase sales
Someone who buys large quantities of a product from different vendors, often at a discounted price.
For further tips and information, you can take a look at our Ultimate Guide to Category Management and our Category Management YouTube Channel. Also, check out our award-winning blog to see more Category Management tips and articles.