Changing the Game: Category Management E-commerce
The increased use of category management e-commerce and the digitally-enabled shopper have been rocking the retail industry in recent years. These changes have driven the need for more retailer and supplier collaboration. Today, optimising digital marketing for each category is as important as store-centric category management was 20 years ago.
The Shopping Experience
The physical constraints of the store do not limit the online shopping experience. Suppliers and retailers must use new insights regarding how shoppers search and navigate online. This will enable them to rethink categories. Not just online, but also within the store framework. E-commerce includes all sales generated through a connected activity, including websites, mobiles, and retailer applications.
As we think about e-commerce shopping websites, it becomes clear that the definition of a category must expand. The physical constraints of the shelf are no longer limiting. Product adjacencies can change depending on search terms, seasonality, and time of day. Even dynamic factors such as weather and the specific shopper could change product adjacencies. Moreover, shoppers are searching for more than just products. They’re often looking for solutions, and increasingly, services. The rise of online brands like Hellofresh for their home delivery meal-kit is an excellent example of such a solution.
With e-commerce, we are finally able to deliver a true consumer-centric organisation of products. Broader consumer “need states” can define categories. Examples include ‘Breakfast’ or ‘Back to School’. These can span multiple product types, storage needs, and even services. Product usage, like laundry or haircare, can also define categories. A category should create a distinct, manageable grouping of products and services. In short, one that consumers perceive as interrelated to meet their needs.
Taxonomy for a Better Experience Online
Taxonomy describes the classification and organisation of ‘unstructured information’ on e-commerce websites for the benefit of users and the business.
The three main tools of product taxonomy:
1. The category tree (also known as product hierarchy). It helps group products by nature in a set of hierarchised categories.
Example: Home > Frozen Food > Frozen fish & seafood > Frozen fish fingers
2. The attribute list (also known as facets, dimensions or refinements). Additional information attributes used to qualify the products in the same category. When applied to a product, an attribute will need a value.
Example: Milk: level of fat, organic, source etc
3. The value list: for some attributes, the finite, predefined set of possible values.
Example: low fat, cows, ml
Each attribute will apply to several categories and have various values. One attribute links values.
The Importance of Taxonomy
Taxonomy a crucial for the customer experience. It helps users navigate through e-commerce websites in an easier way. It improves their search experience and thus increases the chance of a higher ROI for the business. Instead of sifting through the haystack online, taxonomy helps with search navigation. Furthermore, it leads to a more manageable experience. One that is less time-consuming, more organised and leads to what the shopper needs.
Just as librarians would arrange books according to title, labels and author, this also applies to e-commerce websites. Taxonomy structure also allows the content to be subdivided. Taxonomy sorts information while the metadata describes the category.
To model the listing, should you list products in alphabetical order, or use decision tree insights? The key is to always signpost a category so shoppers feel comfortable and at ease with what they see. To make the shopping experience enjoyable highlight smaller or newer products/brands, just as you would in store.
A website with unstructured content could lead to difficulties when it comes to navigation and searches. Taxonomy directly corresponds with website design in the form of ‘taxonomy view’. Moreover, it helps create a positive user-navigation experience, with the neatly arranged categories.
Decision Tree Insight
The taxonomy of the category/product hierarchies is very important. They should relate to how the consumer shops the category in the store and within their mind. Make it logical and based on consumer data and insight. A decision tree matrix of a product/category can help inform how the taxonomy should be on the retailer site. Apply your category insight into how you would create fixtures and how the consumer would shop.
When thinking about the online world, remember the insight and learnings made through the store-centric approach. The 4P’s of marketing still apply but are executed in different ways online. This is because there are no physical limits. Therefore, the online world enables you to push the boundaries of the solutions you can offer. The challenge is to use tactics that will attract your shopper and enable them to buy your products easily. Align digital strategies with other marketing activity you are engaged in.
The Shopping Journey
Just like an offline store, shoppers have to make there way through the online store to find what they want. For instance, a shopper might walk through a store and want to buy some eggs, bacon and bread. In a physical store, they will need to walk through several aisles to buy the 3 items they want. As they walk the store there is an opportunity to buy other items. Perhaps, those that are featured on the gondola end or within a meal solution. They might see hanging banners highlighting products/brands, or even be offered food samples.
Let’s contrast that with an online store. Typically, shoppers use either their favourites list or shop via the search facility. The challenge is how to interrupt the shop in a way that does not turn the shopper off. A way that adds value to their experience and potentially encourages them to buy more. And not just more of anything, more of what they need and what will give them a positive shopping experience.
Collaborations on Category Management E-Commerce
There are 4 key ways to collaborate with retailers on the e-commerce and digital journey:
- Product Content: Better digital product content represents the first and most foundational point of collaboration. Brand pack shots and lifestyle images encourage browsing of categories, as does the use of videos, e.g. with recipe ideas.
- Impulse Products: This represents an opportunity to drive unplanned purchases. Most retailer sites and apps still lack a compelling way to drive such purchases. For example, the battery category in-store depends on impulse purchases. This is why they are near the till, a category that is less representative on retailer sites in share. We need to make sure when we do interrupt the shopper it is a positive experience.
- Cross Selling: This is where the virtual world of the internet can maximise the opportunity. It allows products and categories that would not be near in-store to be brought together. For example, frozen, chilled and ambient can all be in the same place to drive full meal solutions.
- Personalisation & Loyalty: A huge opportunity exists for suppliers and retailers to use investments from promotions and create loyalty by personalising the offer to the shopper.
Further Collaboration with Retailers
- Align with online goals: Suppliers and retailers need to align with the overall aims for category management e-commerce.
- Category/solution definition: Suppliers and retailers should work together to create groups of products and services that meet consumers’ needs. In most cases, this would have already been done by the retailer. You could, however, add to this using the latest shopper behaviour insights.
- Vision: What is your vision and does it align with the retailer? – important to have the shopper at the heart of it.
- Role: As in the original category management process, categories will still have different roles for a retailer. They must consider both the shopper and the competitive marketplace.
- Measure: Ensure measure with KPI’s that will be used for success. Both the supplier and the retailer should agree to the KPI’s.
- Execution/Activation: These are plans and programs that reach shoppers and create behaviour change. Promotions form part of this along with recipe development and other personalisation.
- Review, Reflect and Refine: Category management e-commerce allows for much more agility throughout the delivery step. It’s much easier for suppliers and retailers to respond and adjust to any deficiency or opportunities identified by KPI measurement.
Category Management E-Commerce Activation & Strategies
We need to make up for the loss of the physical shopping experience. These are the things that are hard to replicate online. For example, touching the product, speaking to the staff, tasting products in-store etc. High-quality images are essential – even better a video, e.g. showing a recipe idea.
The four P’s of category management e-commerce are:
- Build traffic
- Convert the shopper
- Build order value
- Drive frequency and build loyalty
Online purchases are driven by the interrelated and dynamic system of the “four P’s”.
Before we sell anything, we have to get qualified buyers to the site. Our options are direct traffic from brand awareness (brand website and product); organic search traffic; pay-per-click & search engine marketing; affiliate programs; display advertising and email campaigns. This is generally taken care of by the retailer. There are opportunities to use your own brand to direct the shopper to the retailer site to buy the product or use your own branded shop.
Convert the Shopper
This is all about optimising the shopper once they land on the retailer grocery shopping site. Not about trying to sell them things they don’t need or want. This comes from a deep understanding of shopper behaviour and trying to make sure you can help the shopper further. Not constantly showing pop up adverts to try and tempt them. Personalising the experience so they spend more time browsing on the site. Just like you would do in the store, create the theatre on the site that they would expect in-store. Make the transition to categories easy to navigate by-products. Look to inspire them with recipe ideas, add in videos on the latest non-food offerings you have.
Build Order Value
A high conversion rate from qualified traffic is great, but how much do they buy? How can we create product bundles and maximise cross-sell and upsell opportunities to get the most out of each marketing pound? Keep the shopping experience at the heart of this, delight the shopper.
Drive Frequency and Loyalty
So, you’ve driven customers to your website and sold to them. But, how do you get the customer to repeat their purchase? There are a variety of retention tactics out there, everything from loyalty programs to weekly emails. These are generally covered by the retailer but can be matched with branded product offerings.
Strategies to Drive the Shopper Experience
This section is about honing your skills and insights as you discuss category management e-commerce with the retailer. Unless you have your own branded shop e-commerce site, the first few strategies are aimed at the retailer for intervention. Building upon the 4P’s above, we then develop strategies to enhance the experience for the shopper. This, in turn, helps build the basket of sales for the retailer. Below is the 5 point action plan:
- Awareness – Pull me in – Build traffic
- Browse – Help me find – Increase purchase and impulse
- Choose – Help me buy – Buy product
- Develop – Grow my basket – Cross-selling
- Experience – Lock me in – Increase customer value
Focused on non-users or light-users of e-commerce – this strategy is used to build traffic. It is most efficiently applied to higher penetration categories or categories with higher purchase frequency. As top of the loyalty funnel, this strategy will often have the widest targeting of shoppers. Tactics, including the digital media channels, will often be relatively broad reaching. The use of social media platforms is part of this, thus you can include your own branded versions.
This strategy is focused on purchase facilitation – increasing purchase desire, navigating the purchase process, or creating impulse purchases. The browse strategy is especially important for categories which have less penetration or a lower percentage of e-commerce sales. This strategy typically targets shoppers who have engaged in e-commerce shopping. It helps them to find new categories or segments that they may not have considered. Think like a shopper, use decision tree insights to map this out along with some common sense.
Here we want to drive shoppers to choose and buy specific segments or products. The target will be shoppers that have already engaged in the category. They’ve been attracted, they’ve browsed and now we want to make sure they buy. Tactics will often focus on product benefits. Make sure product information is readable. Comprehensive product content and effective site merchandising are critical for this strategy.
The aim for this strategy is to build the basket of the shopper. This can be useful for segments that are adjacent or complementary to the purchased product, and for impulse segments. It’s an opportunity to help the shopper explore a wider solution set of products. Meal solutions is a perfect example of this.
Focussed on shoppers who have already purchased a category. The aim is to drive a return to the site/brand for future purchase. Tactics will focus on increasing satisfaction and building an ongoing relationship. Again, this is usually the role of the retailer. Often using email marketing, for example, along with loyalty programs to keep the engagement high.
Online shopping is only going to increase, along with the advancement of digital technology. The growth and development in the use of social media should be high on the agenda of suppliers and retailers. This, combined with the rise of influencers. It is important, therefore, that you still keep up best practice category management principles embedded in the new digital age.
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.