It’s a standing quip on the conference circuit that category management in groceries is like teenage sex: everyone is talking about it; hardly anyone is doing it; those who are, are doing it badly; and so on. Many current category management partnerships fit the joke. Each side has been so thrilled that the other side wants to get into bed with them that they’ve jumped immediately, without considering their long-term suitability.
With last week’s launch of the Institute of Grocery Distribution’s Efficient Consumer Response (ECR) scorecard, that should change. From now on, would-be partners will be using the scorecard to assess each other, weigh their good points against bad, and probe their relative maturity and likely fit. The scorecard offers would-be category management suitors something that teenagers never had: the chance to test their prowess across a range of 36 measures in the privacy of their own homes; to use those scores to test would-be partners’ strengths and weaknesses and discuss them using a common language; and even a chance to benchmark their prowess against rivals free, courtesy of Coopers & Lybrand.
Key point for brand marketers: three of the scorecard’s four main areas of focus drive right to the heart of packaged goods marketing: assortment (or ranging), promotion, and new product introductions – and the journey is unlikely to be comfortable. For example, if you can be confident that your promotional displays will be mounted correctly with adequate stock, at the correct price and supporting point-of-sale material available in over 50 per cent of target stores, you score two out of four in the “joint promotion execution” stakes. Full marks demand 95 per cent plus compliance and 100 per cent availability on all promotion lines for the entire period of the promotion, ending with stock levels on target. Likewise, if you have some irregular and unstructured discussion about new products with individual trading partners, you score two out of four for “joint production definition”. Only if you are jointly identifying opportunities which drive your development programme are you moving towards full marks.
Even more unsettling, perhaps, is the thinking behind these questions: challenge every activity a company undertakes in the context of the total supply chain and ask what “value does it deliver to the end consumer”? If it doesn’t, chop it.
Looked at through these harsh spectacles, many current marketing activities become prime candidates for the ECR chop. Take innovation. Has marketing’s recent obsession with new product development, niche marketing, range and brand extensions really benefited the consumer? Or has it merely added layers of cost and labyrinths of operational complexity to the supply chain, only to end up baffling the consumer in front of the shelf? If I have a cold, for example, should I take tablets, soluble tablets, sweets, lozenges, liquids, linctus, powders, capsules, coated capsules, liquid capsules, nasal sprays or vapour rubs?
And what about promotions? Even assuming they achieve an overall (rather than short-term) sales uplift, once the cost of planning them, paying consultancies, printing different packaging, creating point-of-sale material, negotiating trade discounts, producing different packs such as “20 per cent extra” bottles, shipping and stocking them, how much extra cost do they add to the total system? Each year, the industry spends a good 2bn on them, but for what benefit? Chances are that many promotions (and advertising campaigns) are pushing slow-selling lines and brands which consumers don’t want anyway. This is a triple whammy: oodles of extra cost for pushing a product that shouldn’t have been made in the first place to people who find shopping irritating already.
Or take ranging. Who says that consumers want 1,500 different lines of yellow fats, 149 alcopops, and 360 variations of hairstyling products? Putting many of them to sleep may not only dramatically cut costs, from raw materials through production line, lorry, warehouse to store shelf. It may also boost sales by adding clarity.
Some companies are already embracing ECR-marketing logic. For example, P&G is axing its portfolio: better to do it yourself than realise half-way through an ECR category management exercise that the retailer is going to do it for you. As one Coca-Cola executive recently remarked: “The whole point of category management is you go into it without preconceptions. You let the process guide you to the outcome. So in this context, your brands have to take care of themselves. If you don’t trust your brands, you should not get involved in category management.”
When P&G ECR manager Julian Slade spoke at the IGD conference, he said things that would have been unthinkable from P&G just a few years ago. Instead of talking about consumer loyalty to brands he talked about “building shopper loyalty to both store and brand”. That’s not a slip of the tongue. It’s an expression of P&G’s now firm conviction that the old marketing mantra of identifying and meeting consumer needs is a recipe for disastrous product and cost proliferation unless tempered by a retailer/shopper perspective. We have entered a new era when brand marketing has to dovetail into retail marketing or risk irrelevance.
Even category management is moving to a new level. Many manufacturers still spend small fortunes on category management projects on the assumption that the space allocated to the category will remain the same. But that raises a question: “What is this particular category doing for the retailer’s total offer?” The competition – for retailers’ time, attention and resources – is fast becoming key. As a result of the ECR agenda, Walkers Snack Foods’, for example, has determined “to make our category the fastest-growing, most attractive category for retailers in any channel”.
These are just some of the ways that those who don ECR-spectacles end up looking at marketing in a new light, and shaking out attitudes, objectives, ways of working, measurement systems, costs, and organisational structures that have become embedded within their marketing over decades.
Yet many old school brand marketers still dismiss ECR as peripheral. But then they would, because they’re still not listening. At the IGD scorecard launch, just seven of the 350 delegates in the capacity audience came from the brand or marketing management side of brand companies.