Report Summary

Through a shopper's eyes: Adopting a customer-centric approach to category management is an Economist Intelligence Unit report, sponsored by SAP. The findings and views expressed in the report do not necessarily reflect the views of the sponsor. The Economist Intelligence Unit's editorial team conducted the interviews and wrote the report.

Consumer attitudes about the goods and services they purchase were shifting long before recession gripped the global economy. G Robert James, vice-president of strategy and insights for The Great Atlantic & Pacific Tea Company Inc (A&P), the US-based supermarket chain, coined a term for this new group of consumers: "the iPodian Society". "We saw a dynamic shift in consumer expectations in around 2000 to, 'everything a retailer does has to be configurable so that it suits my lifestyle,'" he says. The challenge for retailers attempting to win over the iPodians, he admits, is that "many of us are still in an 8-track world."

Retailers have not transformed their strategies to address effectively this new consumer mindset. It's not for lack of effort, however. In order to drive sales, many retailers have adopted a strategy called category management, a concept introduced in the early 1990s that involves the grouping of products into strategic business units, or "categories"—for example, deodorant or canned vegetables—and customising their placement and presentation on a regional or local basis to meet shopper needs.

Category management requires a higher level of collaboration between a retailer and its manufacturing and distribution partners, who must share insights and information as they work towards a common goal: increased profits for the entire category, not just a particular brand.

In the years since its inception, category management has been standardised around an eight-step approach, which ranges from defining the category to developing the strategy to devising and implementing specific tactics, then reviewing (and responding to) the results. Some retailers, however, view this framework as too unwieldy in an increasingly dynamic, consumer-driven environment. Now, more retailers are looking to take a more consumer-centric, solutions-based approach to category management in order to improve the category mix and influence buying decisions at the point of sale.