Development of Decision Support System Based on Category Management Concept to Increase Sales Performance of a Category

January 3, 2009 at 5:23 pm Leave a comment

A. Category Management

Category management is a process that involves managing product categories as business units and customizing them on a store-by-store basis to satisfy customer needs. [Nielsen Marketing Research, 1992]. Category management is a circular process with 5 steps. Those steps are [Nielsen Marketing Research, 1992] :

  • Reviewing the category
  • Targeting consumer
  • Planning merchandising
  • Implementing strategy
  • Evaluating result

The step that is going to be discussed is the 1st steps which is reviewing the category. Basicly this 1st step was done to answer these questions below [Nielsen Marketing Research, 1992] :

  • How is my brand market share vs its competitors ?
  • How is the comparison in term of currency, volume and profit ?
  • What is the market leader of the category and how much is the lead ?
  • How is my sales trend, across categories and sub categories ?
  • How is each performance of my retailer account in term of market share category ?
  • How is each account handling product variation, price variation, promotion and shelves allocation for my brands and its category?
  • How is one category affect another? And vice versa
  • Are there any chances of cross-merchandising or cross promotions on certain category?

B. Category Classification by consumer-based category roles

Retailers influence category volume by taking marketing actions that either: (1) increase store traffic; and/or (2) increase the probability of category purchase by consumers who already are in the store. Sanjay K. Dhar et. al [2001] argue that the retailer’s success in generating category demand through either traffic building or in-store tactics depends on the role the category plays in both the consumer’s and retailer’s portfolio. One popular classification scheme promoted the Food Marketing Institute (FMI) utilizes consumer-based category roles defined according to the percentage of households that buy the category and the frequency with which it is purchased.

Categories are classified into “high” and “low” penetration (percentage of households that purchase the category) and frequency (average number of times per year category is purchased) categories and fall into one of four groups: (1) staples (high penetration/high frequency); (2) niches (low penetration/high frequency); (3) variety enhancers (high penetration/low frequency); and (4) fill-ins (low penetration/low frequency). Since consumer motivations to make purchases in staples will necessarily be different than in fill-ins and similarly among other category groups, then the effectiveness of specific marketing actions to differ by category. [Sanjay K. Dhar et. al, 2001].

C. Model Development

The models that being developed here are combination of AHP multi-criteria decision model with some changes in the weighting at criterias and alternatives level [Kadarsah Suryadi, Sadewo and Edwin Salim, 2003], a category review methods from Nielsen Marketing Research with some modification to adapt the data lackness. And category classification methods that were developed by Sanjay K. Dhar et.al [2001], on journal “Effective category management depends on the role of the category”.

Some models that were developed based on category management concept, like the one by Sanjay K. Dhar et. al. (2001), Fader dan Lodish (1990), Food Marketing Institute (1995) and Nielsen Marketing Research (1992), all are using national-scale datas. While the models in this papers use a local-scale datas (only from one retailer). The model structures are as follows :

  • Section A : On this section we used model that developed by Saaty, Analytical Hierarchy Process (AHP), with some modification on the weighting methods. Penulis menggunakan metode dasar Anaytical Hierarchy Process (AHP) karena We use AHP because it is fit for decision making process that involving multi-criteria and multi-judgement (multi-user) [Saaty,1980].
  • Section B : In this section we classifying categories into 4 groups, so that we can identified the right promo variabel that have a direct effect to each categories performances. Those 4 groups are [Sanjay K. Dhar et.al, 2001]: (1) staples (high penetration, high frequency) , (2) niches (low penetration, low frequency) , (3) variety enhancers (high penetration, low frequency), atau (4) fill-ins (low penetration, low frequency).
  • Section C :We called this section Category Performance Analysis. The goal of this model is to identified the under-perform categories. To judge whether a category under-perform or not, we used a standard parameter, that is a market share. And we called this parameter Category Performance Indicator (CPI). How is the model work is like this : Compares the share value of category Xn with share value of (PT. X)n , if share value of (PT. X)n is larger then that category is an under-perform one.
  • Section D :Consist of 3 models: (1) Brand Performance Analysis, (2) Item Performance Analysis, dan (3) Promo Analysis.

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