Thanks for your very relevant and important question.

When implemented properly and holistically as a best-practice, a customer-centric strategy plays a significant role in enhancing virtually all areas of merchandising and category management. It is this integration and alignment across all areas of the organization that is a key driver of increased sales and profits.

Why is that? If you think about it from a customer’s perspective, merchandising and category management are the factors that most influence choice of retailer, sense of value and overall shopping experience. The products you carry, the prices you offer and the customer shopping experience in-store are all driven through the category management process. As such, if the retailer’s goal is to optimize value proposition to best meet valued customers’ needs, it is essential for merchandising and category management to be an integral part of this process.

So, in response to your specific question on the key opportunities for customer-centricity to influence and enhance category management, the optimal answer is -- all key areas.

In terms of some specific examples, here are some of the key areas:

Category Planning: This is certainly the first area that should be integrated. Once a retailer has developed a comprehensive enterprise customer segmentation strategy, incremental category-specific insights for priority customers should be a key part of category planning. These insights should be used to determine the role of the category, assessment of performance relative to competitors, and strategic positioning of the category -- all based on understanding the specific needs of best customers.

In addition to supporting the category plan, assessment, role, and position, customer-insights can then be used to address key category tactics such as:

Price: By understanding the price sensitivity of your key customers by item and the importance of the item to those customers, you can apply customer insights to ensure your base retails are strategically set to appeal to your best customers. In addition to current KVIs you have identified, you can complement that list with the KVIs specific to best customers to ensure you are maintaining a strong price image and competitive price index on the items that matter most

Promotion: Similarly, it is critical to understand the relative price and promotional sensitivity and responsiveness of your best customers to your promotional investments. That way you can ensure you plan your promotional calendar based on what works with best customers and drives key trips, categories and item purchases.

Assortment: Once you have identified your key customers, enhance assortment planning by focusing on carrying the items that matter most to them, in addition to the items that are driving the highest overall category volume. This ensures that you keep your best customers coming to your store for key trips to drive customer profit in addition to maintaining a focus on category profit.

Performance Measurement: Lastly, customer-centricity requires new ways of measuring success and performance for category management. By implementing customer scorecards that track sales, profit, trends, growth and migration by key segments in key categories -- in addition to traditional category performance reporting -- retailers can truly integrate category management with customer management for increased success and sustainable competitive advantage.

Thanks again for the question,


Brian

It’s a great question that is certainly on the minds of retailers across North America. In these tough times, it’s important to remain focused on adjusting strategies to adopt to the market conditions of today and tomorrow. While we know that consumers significantly change their shopping habits in the face of the current economic conditions, we also know that consumers are likely to continue a number of grocery store habits that they adopted during this faltering economy over the long-term. Precima just partnered with ICOM Information & Communications on a research study to understand the long-term impact on shoppers’ behavior in an economic downturn. A few interesting findings include:

• 82% of U.S. consumers said they intend to continue cooking at home instead of eating out
• 80% plan to keep using coupons as much as possible
• 78% will continue to make fewer trips to the store to save on gas

Given that many of these consumer trends are here to stay, it is imperative for retailers to develop customized strategies to respond to changing consumer needs. Some of the most interesting results from the survey dealt with which habits consumers are less likely to continue when the economy improves:

• only 54% of U.S. consumers intend to keep buying generic or store brands
• 44% will continue to switch from favored brands to value brands

The most fascinating part of the study was the fact that we were able to determine that not many consumers (only 32%) had actually switched from their favorite brands to value brands to save money. This is where grocers can make the most impact on market share by understanding which brands are most important to consumers and why. If grocers can understand this behavior, they will have a significant advantage over their competitors.

I hope that helped to answer your question. I should also mention that Precima will be partnering with ICOM to provide an additional in-depth analysis of the latest shopping trends in a free webinar: Frugal America: How Retailers Can Take Advantage of the Slumping Economy’s Lasting Impact on American Shopping Behavior. The webinar will take place on October 1, 2008 at 1:00 PM EST. For more information, please visit: http://www.precima.com/webinar_registration.html

It’s a great question and very timely as we just completed some research on that very topic. The initial premise of the research was to understand how consumer’s grocery shopping habits have changed given the current economic conditions and we assumed that the efforts around the stimulus checks would have been very successful for grocers. However, the research actually showed that it didn't necessarily have the desired effect.

Approximately 84% of U.S. consumers in the nationwide survey conducted by ICOM Information and Communications said they did not use the check they received from the federal government to purchase groceries. This statistic was a surprise to us as we recognize that a number of leading grocers spent a lot of time and effort to develop innovative promotions designed to stretch rebate checks on grocery spending. Our initial assumption going into the research was that these efforts would have resonated with today’s cash-strapped families. Unfortunately, it is clear from this research that grocery stores were not top of mind for rebate recipients, and consumers didn’t believe the grocery store was the place to get the most out of their rebate money as they focused instead on high gas prices, paying down debt, purchasing durables or saving. Given these budget priorities, it’s fair to say that grocers did a relatively good job at stretching rebate checks for consumers and gaining a share of consumer spending.

Was there an opportunity for grocers to do more? Perhaps. While it is clear that consumers have a number of pressing financial priorities, we certainly know that the current economic conditions have significantly impacted how people shop for groceries. Here are some thoughts on promotional strategies that may help to capture an incremental share of consumer spending in the current economy:

Develop promotional strategies focused on stretching the family food budget in places they are most feeling the economic squeeze. For example, consumers are certainly feeling the squeeze at the pump and are looking for one-stop shopping and other opportunities to find incremental savings on gas. Given the success of grocery-gas promotions, this clearly represents an area of opportunity.

Further, retailers with loyalty data have the unique ability to take this one step further by identifying the items that are most important and most price-sensitive to cash-strapped customers and develop incentives that have the greatest cost-saving appeal. As an example, retailers have an opportunity to help consumers eat at home. There is an opportunity to capitalize on the current consumer trend to save money by eating at home with offers tied to convenience items such as home-meal replacement items that take the place of take-out or restaurant meals.

I hope this helped to answer your question.

The shift to customer-centricity means moving from traditional category management to insight-driven customer management. Here’s an example. Historically, in order to determine optimal assortment, a category manager would rank products by sales volume and contribution to profit. From there it was often just a matter of de-listing the lowest-performing items.

In the new world of customer-centricity, those financial metrics still apply – but managers also have to look at what products resonate with the best customers. Some items that do little for a category’s bottom line may add significantly to overall profit, because they play a critical role in keeping these shoppers coming back. Armed with customer-centric data, management can develop more nuanced ways of measuring category performance in relation to overall and individual customer profitability.

The good news is that we know from a large body of research that while many consumers base their shopping decisions on price, they are clearly influenced by other factors too, such as quality, service, location, particular brands or products and the impact of loyalty marketing programs. Keep in mind that often, the most valuable customers are price sensitive on a few select items but not their entire shopping list.

So, price isn't everything. Given that, some retailers focus on a niche and can command a premium by offering higher quality products or a superior in-store experience. If you can't fit a niche, you can still differentiate yourself and avoid across-the-board discounts by drilling deep into customer data to gain useful insights into what matters most to your key shoppers.