MBM Glossaries: Category Management Definition
This glossary contains our Category Management definition and a list of terms frequently used when discussing Retail Category Management. For a comprehensive guide to how supplier collaboration can maximise your profitability, check out our Ultimate Guide to Category Management.
This is money owed by the retailer to the suppliers for goods, services. An Accounts Payable Department ensures the correct settlement of these debts.
Activity-Based Costing / ABC
A type of accounting method that allows businesses to understand how and where it makes a profit. ABC works by identifying major costs and related activities on a product level.
Goods or services that consumers can buy after buying an initial product or service. For instance, service parts, maintenance, repairs, and other complementary products.
Also referred to as Range. This refers to a variety of products chosen based on select attributes including retailer strategy and consumer need to maximise efficiency and returns on a store or a specific category.
How consumers know, understand, and recall details on a certain brand. This includes the ability to identify a brand’s product and established behaviours. Such as sales or product launches.
AWP (Average Weight of Purchase)
The average amount bought by each household which purchased the Market/Brand in that time period. This can be expressed in terms of Spend (Expenditure), Volume (Kgs) or Units (Packs).
The amount that a shopper spends in-store, basket size can be then viewed by the number of items (units sold divided by the total value of units).
Putting together products in a shelf or fixture to lower consumer confusion. Blocking can be done horizontally or vertically on a fixture.
Blocking together products of the same brand.
When sales switches within a brand. E.g shoppers buying a smaller size of the same product instead of the larger one.
A shopper’s affinity to repeatedly purchase products or services from the same brand or manufacturer. Moreover, continuing to purchase from a specific brand even when competitors provide a newer or better offering.
Big Box Store
A term for major retail chains such as Best Buy, Tesco, and Target. The name “big box” resembles the fact that they are often rectangular in shape.
The point at which a campaign or product covers its costs.
Creating a visual impact by stacking products in bulk. This is often done to give an impression of value or large discounts to encourage bulk buying.
The attention created to centre around a product, service, or brand both from media and public audience.
The number of items or products in an outer case.
The grouping of products or services in response or to reflect consumer behaviour or purchase occasion.
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 maximise profit and sales while ensuring consumer satisfaction. This includes optimising, for example. promotion, pricing, shelving, and the assortment of products or services based on market data. Category Management is a continuous process that adapts to market research and is driven by data. 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 looks like a family tree. It 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. It explores those that can be made better. Including, 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 group of consumers, stores or locations that possess similar characteristics. Cluster groups can be targeted by range to help meet consumer needs better. Stores and locations can also be clustered to help manage their catchment area.
The conscious grouping together of products with similar packaging or product colour to encourage sales.
Having the skills and the attitude to be able to do something efficiently.
Also referred to as brand switching or brand cannibalisation. Occurs when there is s switch on sales from one brand or another usually because of a promotion.
A product or service’s end-user. A consumer and shopper may not necessarily be the same. The shopper is the individual or individuals buying the goods. In families, parents are usually the shoppers, for example, and the entire family, including the children, are the consumers.
Is based on the penetration measure. For example, conversion of tomatoes in retailer x – would be % of GB that buy tomatoes in Retailer x divided by % of GB population that shop in retailer x (regardless of if they buy the category or not).
A paradox coined by psychologist Barry Schwartz in his 2004 book. 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 overwhelming the consumer.
A product’s average sale on a given timeline.
Items falling into this category generally occupy less space and does not offer promotions as frequent as Core Categories. These are items that consumers don’t buy regularly. For instance, greetings 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.
Also called a cube. The space in a shelf that a 3D cube occupies.
Repeat purchase/experience of a specific brand or product as a result of an overwhelmingly positive experience.
Days on Hand
Also referred to as days stock, is the average daily inventory divided by the daily average movement of a unit.
The decreasing quality of decision making of an individual after he or she has made a series of decisions.
Depth of Product
The physical space from the front to the back of a tray of product.
Depth of Range
The number of sizes or variants of a product within a range.
Direct Store Delivery
When a manufacturer foregoes delivering to a Retailer Distribution Centre (RDC) and directly delivers it to the retail store
X number of stores that has a stock of the product. There are different ways distribution is measured including % of the total market or total store of a retailer.
Direct Product Cost. A way of assigning all the costs related to a product from manufacturing, stocking, handling, to store display.
Direct Product Profitability. Defining the actual profit made by the retailer or distributor from a product after DPC.
Positioning a product in more than one place in the store, usually to signify multipurposeness of a product. E.g Baking soda in the cleaning aisle and the baking department.
Efficient Store Merchandising
Optimising allocated store space to avoid being out of stock and also maintain minimum stock levels.
A part of a store’s shelves or fixtures that a shopper sees first when approaching the shelves. This is based on the fact that customers will notice goods displayed at eye level first.
Recording a shopper’s eye movement as the fixture or shelf is scanned.
The linear [hysical space occupied by a product.
Also called units per facing. The number of units that can be placed from the front to the back of a single shelf or fixture.
The distance between the top end of a product to the underside of the shelf above it.
The number of shoppers purchasing in a shop or a chain of shops in a period of time.
Anticipating how a promotion will perform. The PRO tool can be utilised to create a proper estimation.
The 4P’s is a marketing mix geared towards targeting a specific demographic for a product offering. The four P’s include Product, Price, Promotions and Place.
The average number of occasions that the specified market was purchased by a market buyer in that time period.
Information on consumer demographics matched with their location to produce consumer profiles or consumer classification.
Also referred to as shelf or fixture. This is where products are displayed on.
Also called aisle end or fixture end. The selling space is positioned at the end of an aisle. These spaces are often for promotions or new products.
The physical space from the base to the top of a product.
The grouping of products on a fixture in horizontal order.
The number of horizontal facing of a product on a gondola.
Usually refers to a category segment or brand. It is the horizontal space taken up by items or products.
A place on a shelf that creates interest or sales in a product.
Additional sales due to marketing and promotions.
Additional display that adds to interest or excitement to the shopper’s experience. Includes use signages, plastic display units or cardboards.
Also called stock level, is the level or amount of stock available.
The monetary value of the stock available.
An unplanned decision to buy a product or service. Can be from an impulse category but not limited to one, and if purchased defined as such and then labelled as an impulse buyer.
Key Performance Indicators. Metrics that are identified as essential in monitoring performance or growth in a category.
The time between the order placement and the delivery of goods.
The proportion of category spend Retailer A’s customers spend in Retailer A. Can be either a value or a percentage.
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 by having an individual pose as a shopper. Consequently, this will examine the quality of service, products, or other industry practices.
Focusing on a single market segment.
A product’s risk of becoming obsolete or impossible to sell. This includes time-sensitive perishables such as fruit and vegetables as well as technology. Furthermore, those that can easily become out of date have an obsolescence risk. Something that category management aims to minimise.
The percentage of GB households purchasing the specified market at least once in that time period.
Mobile version of stores. Often set up in event grounds, parks or other spaces that can attract attention. For instance, Pop-Up Stores are portable and used for a limited time.
Point-of-Sale happens when the transaction occurs. Typically, the customer receives an invoice or receipt upon completion of payment for goods or services.
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 estimates. Moreover, it allows them to define further steps 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 deduction of the amount spent.
The amount Retailer A customers spend anywhere on the category in that time period. Can be either a value or a percentage.
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.
Category role is a term used to give a category a place in the importance of a retailer. If a retailer were to assign a category a role they would ask themselves these key questions;
- What is our share?
- What is the market growth outlook?
- Ultimately, asking, how many resources should we put into it for what return?
Return on Investment. The amount of time and goods sold necessary to earn back an investment. This is often expressed as a percentage or timeline.
These are occasional purchase products, often in bought during specific periods (seasons) of the year. For instance, cards and roses for Valentines Day, and turkeys and cranberry sauce at Christmas.
Allowing customers to pick and measure goods by themselves without the help of an employee. For example, vending machines, fill-all-you can scheme, and even automated groceries.
Loss of goods can result from different factors such as damages during transit or mishandling, clerk error, shoplifting, or employee theft.
The total cost a product incurs whilst it is held as inventory. This includes, for example, handling, warehousing, shrinkage, depreciation, and other fees that accumulate.
Supply Chain Management (SCM)
The management of the flow of goods and services 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. In addition, it highlights their shopping behaviours and motives.
Often referred to as more traffic being more customers or higher penetration.
Traffic Building Strategy
A tactic used to attract consumers into an aisle, category, or even the store. For example, advertising promotional prices or substantial discounting helps achieve this.
Trip Spend (£) / Trip Volume (Kg)
The average sterling value per transaction / The average purchase weight per transaction
Turf Protecting Strategy
This is a reactionary strategy to defend a category’s existing market share. Furthermore, if a direct competitor applies a discount on a ‘protected product’, the retailer will match the strategy.
The art of arranging display and shelves. In addition, it includes the creation of 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.