Category Management and Cross-Merchandising to Ensure Customer Loyalty

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Category management is a retailing concept in which the range of products sold by a retailer is broken down into discrete groups of similar or related products; these groups are known as product categories. Each category is independent of each other and is treated as separate strategic business units. These units have their own set of turnovers or profitability targets and strategies. Including category management in your retail management plan helps in building a collaborative relationship between retailers and suppliers. This is because category management requires collaboration from both sides in terms of exchange of information, suggesting strategies, sharing of data and joint business building. The main focus is to opt strategies in such a way that it affects the turnover of the category as a whole, not just the sales of specific products. Strategies like introducing an effective merchandising methodology like cross-merchandising or a planogram for product distribution in the store can be beneficial for the profit of the total category and be beneficial to the shoppers of that category as well.

There are tools and methodologies that can be used in the merchandising of a store. An effective combination of these can be a significant sales booster for the retailers. Exercising Category management along with using planograms as a tool for easy product arrangement is one such effective combination. To enhance this combination even more, cross-merchandising can be incorporated as one of the protocols while planogramming. Cross merchandising is the methodology used to present products from different or same categories having a logical connection in a customer’s perspective and placing them together on the shelves to increase sales. The associations made between various products are used to compel customers to make the purchases they never planned for. For instance, one of the cross-merchandising plans is to place bread, butter, bacon and milk together so that when a customer grabs bread he/she is reminded to buy all the others. These strategies when put in effect will leave the retailers with better work efficiency, excellent sales records, great customer experience and customer loyalty.

Different ways cross-merchandising can be used in your store

Cross-merchandising can be done while field marketing. For example, if there is an instore field marketing for microwave ovens then while demonstrating a chocolate cake can be baked. When the customers see the aesthetically appetizing cake, they want to bake one for themselves. The ingredients like cocoa powder, chocolate, sugar, baking powder can be placed on a shelf close to the location where the demonstration is going on so that they are compelled to grab them on their way to the billing counter.

Newer cross-merchandising display ideas can be created by analyzing the customers’ behavior while shopping according to different categories (like age, gender, single or married etc.). This will help customers to relate to your display and in-store experience more, and therefore are more likely to purchase more. The most unexpected and famous buyer persona discovered is the famous diaper and beer correlation.

Cross-merchandising according to the time of the year or seasonality is also possible. For example, if it is the summers and kids enroll for summer camps then the stores can have a display to showcase all the camping necessities. This is cross-merchandising by experience.

Cross-merchandising utilizes the product’s physical location in the store with reference to other items and help the customer’s mind to make relations between related items while making purchases. This type of merchandising helps the retailers to influence customers and lead them towards impulsive shopping and create successful shopping patterns for the category management study. Cross-merchandising helps customers save time while shopping, increase sales, attract customers to the store and ensures customer revisits.

Category management, in brief

In the case of category management, the shelf space planner is continuously expected to understand the customer purchase pattern while making any decisions about the product placement on the shelves. The consumer decision making process is the center of all shelf space decisions. Hence, the spending capability of the customer will impact which products should be kept in the store, and where it should be kept. Because of the fact that in category management the customers’ shopping behavioral patterns are studied before making any decision we can say that this a management that is from the customer, for the customer. It works on the customer first principle to please every customer that walks in and attain his/her loyalty.

Category management is a 7step cycle that is devised after understanding the customer decision tree that includes acquisition, behavior and conversion concerning purchases of a given category. The steps are,

  1. Define the category: what products fall in this category and to determine the specific SKUs (Stock Keeping Units).
  2. Defining the role of the category to make strategic decisions and judge the successes.
  3. Gather information on the current performance to identify the gaps.
  4. Decide objectives and targets for the category.
  5. Devise an overall Strategy and specific tactics.
  6. Deploy the same.
  7. Review the results and loop back to step 1.

The various category management measures that can be included in the plan are as follows,

  1. Assortment planning
  2. Floor space planning
  3. Visual merchandising
  4. Inventory management
  5. Planning product price
  6. Promotional activities

The above mentioned measures can be taken into consideration as per requirement in the category management of the store in order to augment the benefits in whichever direction the retailer wishes.

Towards the end of this read it can be summarized that Category Management and planogramming incorporated with cross-merchandising strategies aims to provide customers with what they want, and when they want it. To do the same, products are clustered into categories and arranged in the store according to their usability, consumption or how they are purchased. The ultimate goal of Category Management, planogramming and cross-merchandising is to see improvements in sales, provide an excellent shopping environment, provide great customer shopping experience and ensure customer loyalty. Customer loyalty can be considered as one of the very important achievements a store can earn as this ensures customer revisits.

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