Category management moves beyond fuzzy dice

In recent months, I have come to realize that category management is very much like supply chain technology or data standards in that a significant number of top managers in aftermarket companies understand very little about it. And as it is with supply chain technology or data standards, most aftermarket executives are self-conscious, if not defensive, about their lack of knowledge.

Taking a cue from consumer goods

Category management, like so many marketing and technology innovations (brand management, minimum advertised price, automated replenishment and data pools), comes to the aftermarket out of the consumer package goods industry.

Sometimes I think we aftermarket people suffer from low self-esteem, especially when we are confronted with ideas and concepts that come from outside our industry. We have a tendency to greet them with a caustic eye and say something like, "well maybe that works for selling toothpaste, but I can tell you selling water pumps is a whole different story."

I suspect that our incredulous attitude is born out of ignorance. We tend to distrust that with which we are unfamiliar. But before examining its resistance, we must develop a more robust understanding of what category management is and why it is critical to adopt it.

Affinia's Jeff Stauffer, who became rather intimate in the ways of category management during his tenure marketing antifreeze and cleaning chemicals, has a wonderfully concise and understandable definition of category management. He says category management is "a proactive discipline built on fact-based decision-making and a complete understanding of the buying habits of all end users of a given product category. That information, along with extensive demographic and category sales data, additional quantitative/qualitative research and competitive market statistics, is used in collaboration with channel partners to maximize sales and margins in the category."

Let's break down what is said and implied in his brilliantly succinct definition.

Calling it a "proactive discipline" implies that there is a structure and process to category management that requires an understanding of its methodology to make it work. That means some education and training is required to practice it.

Many offer training on the subject, but an initial problem was the very fact that category management came out of the package goods industry.

In that industry, the consumer is king because he or she is the one who stands in front of a retail shelf and makes a purchasing decision. While that is true for a limited number of aftermarket products (waxes, chemicals, lubricants, accessories, etc.), for most of us, our "consumer" is the repair technician. He or she makes the purchase/source/brand decision, not the car owner.

In the initial training to the aftermarket, many of the consumer-focused trainers failed to realize this essential point of difference with the aftermarket and turned off many of the early adopters. But, category management is not just for fuzzy dice anymore.

Assuming a new perspective

The next key passage is "fact-based decision-making." The aftermarket struggles with facts; opinions are another story. We are awash in opinion and speculation.

I recall during the spike in gas prices this past summer different people explaining with equal passion how high gas prices would both kill our businesses and help them. Few could cite many hard facts on the subject. Category management requires data, and lots of it.

First and most essential is the retail sales data from NPD Group (the company gathers it and syndicates it for the industry) that reports sales by product type, outlet and brand. That becomes the foundation for a sales benchmark of a specific category from one outlet or geographic region to the next. It is how a reseller can discover that he or she is underperforming in selling premium brand pads to peers. The reseller may learn that while sales of serpentine belts are quite robust, other similar operations are selling one tensioner with every five belts, while he or she is only selling one with 10. That insight can lead the reseller and the vendor partner to develop training or marketing programs that can bring the sales mix up to par with peers.

The most essential element in Stauffer's definition is the part about understanding the use and consumption of a product from the end-user's perspective. If anything epitomizes category management, it is this.

Far too many manufacturers and resellers have a "we know what's best for the market" attitude. Category management is the exact opposite. It operates from the assumption that the predispositions and perceptions of the manufacturer or the reseller have little, if any, validity and what the end user thinks is paramount.

This is a very difficult adjustment for many up-channel aftermarket practitioners to make. Just think about some of the bigger product trends over the recent past.

Few aftermarket suppliers paid attention to fit, form and function until technicians turning to OEM dealerships punished our practice of over-consolidation.

Most aftermarket manufacturers said that technicians would never accept parts that came from third world countries; now they can't move plants to China fast enough.

The outcome of a focus on the customer is the last essential element of Stauffer's definition: collaboration with channel partners. The aftermarket is a supply chain that exists to serve primarily one customer — professional repair technicians. When we really truly begin to understand how our products are used by techs, everyone in the supply chain gains valuable insight into the most effective techniques that are required to sell these products.

Here are three examples of insights gleaned by category management practitioners through their data gathering with techs that resulted in changes that significantly improved their performance:

    * Learning that when installing certain heavy parts, technicians struggle to line up the bolt holes. By providing a hook that allows him or her to suspend the part during installation makes the job easier and the tech more likely to buy that product;
    * Finding out what other related parts are routinely installed in addition to the primary part, then packaging all those parts together as a kit; and
    * Discovering that many technicians have a different agenda regarding the suppliers and brands of parts they use when working on a foreign nameplate vehicle or a vehicle still under warranty that altered their fundamental product management approach.

Practitioners of category management (both manufacturers and resellers) learn things from their data gathering that causes changes in their product management strategy, the cataloging practices, their inventory models, their purchasing and stocking strategies, even in their research and design practices. And those changes make them much more valuable suppliers to their customers.

Yet, as with industry standards and supply chain technology, the naysayers' voices seem to be the loudest out there. Why? That's a question we will have to address next month.