Retailers expect more than ever from their CPG partners as they face growing shopping challenges, keeping up with consumer demand, and adjusting to ever-evolving trends. If you want the ever-valuable category captaincy, be prepared to answer these questions.
If You Want Category Captaincy, Prepare to Answer These Tough Questions from Retailers
As retailers face growing challenges, keeping up with demand, and adjusting with ever-evolving trends, they’re starting to question the role of their category captains. These people or teams have traditionally assisted retail buying departments, acting as unbiased analysts who worked to deliver the retailer’s goal for the category. Mike Gervasio, President of Category Leadership at PepsiCo and Chairman of the Category Management Association, was quoted in Retail Wire as saying, “It took the pandemic to really shake the behavior of the CPG industry; there’s entirely new problems to be solved.” He said that the industry has been accelerated by 5 years in just a matter of months and that companies have to acquire new sets of data and tools in order to deal with new challenges.
Against the shifting backdrop of consumer behavior, retailers have a real need for a different kind of category captaincy from their CPGs in order to keep them onside. CPG leaders need to prepare for these tough questions from retailers.
Is Your CPG Prepared for These Retailer Questions?
How can we grow the joint profit pool?
Relations between CPGs and their retail partners have fallen to their lowest levels in 5 years according to Bain & Company (2021). However, a well devised joint business plan can deliver more than 10% of incremental profit pool growth for both parties in a single year, helping to strengthen relations.
How can CPGs help us to glean better insights from our mass of data?
Whilst retailers sit on huge amounts of EPOS and loyalty card data, they are not as advanced when it comes to AI, data, and analytics. In return for closer collaboration, there is an opportunity for CPGs to use AI platforms to add value for both parties at a much more granular level to grow the joint profit pool.
How do we get to grips with category management for e-commerce channels?
Retailers are having a tough time adapting to e-commerce, curbside delivery, and marketplaces where category management becomes even more complex. In theory, online sales could give consumers access to endless long-tail choices, but at the same time this creates a logistical nightmare. Retailers need support on how to optimize choices when it comes to assortment and pricing for the online world whilst meeting customer needs.
How can you help us to make assortment adjustments faster and in a more agile way?
Retailers are working to adapt their offers and store formats quickly as the trend toward smaller store formats and neighborhood markets means difficult choices need to be made. How much space should be allocated per category? How can we get the most out of everyinch of that space? Retailers and CPGs need the ability to make assortment decisions in real time. Waiting for annual or bi-annual reviews means potential revenue is leaking away.
How do we ensure the category is managed properly?
When one CPG is the captain of a category in a key retail account, there is always the question of how impartial their recommendations are. AI and machine learning can support CPGs with business case modelling so category decisions are transparent and scientific.
How do we deal with such high levels of product innovation?
Record numbers of product innovations are launched every week. New categories, brand extensions, and even new flavor or fragrance variants mean there’s no shortage of variety. Meanwhile, shelf space is shrinking. Retailers need assistance to model every change made on the shelf to make sure they can maximize revenue.
We how can we localize our assortments at scale?
Over the years, retailers have become better with store clustering and assortment localization. But many want to take their assortments to the next level, delivering even more value to shoppers based on local needs, preferences, cultural differences, and even price elasticity. This is an area where technology can help.
You want to raise your prices, but can you help us understand price elasticity?
One of the biggest tensions between retailers and CPGs is price increases. As a CPG, you face pressures on cost of goods, logistics, and marketing. Meanwhile, retailers want to protect their value proposition and price perception. You can help retailers understand price elasticity down to individual store level using a platform like Insite AI.
Can you help us to develop new store formats and optimize the space?
Spacial optimization is key, especially with increasing smaller store formats where every inch needs to count. Add value for the retailer by helping them understand the spacial elasticity of your products. Prove to them the profit opportunity of allocating additional facings to your SKUs.
Shoppers only buy your products when they are on promotion – Help!
Getting pricing right from the start is crucial. Some products are priced too high, so they tend to only generate volume when on promotion. Likewise, a low everyday price that’s too low means that promotions erode margins even further. Use technology to optimize pricing and understand the demand transfer that happens when prices go up and down. Create appropriate promotional strategies accordingly for the optimal revenue outcome.