SAN ANTONIO — Category management is too focused on product to serve today’s retailers well, argues Delhaize America Shared Services chief executive officer Rick Anicetti. What is needed is a new approach that puts a retailer’s customers at the center of the equation.
Category management is too focused on product to serve today’s retailers well, argues Delhaize America Shared Services chief executive officer Rick Anicetti. What is needed is a new approach that puts a retailer’s customers at the center of the equation.
At Delhaize, that approach is called Customer-Centric Category Management. Anicetti calls it the “intersection of customer marketing, shopper insights and product expertise.”
At SymphonyIRI Group Inc.’s recent Summit 2010 event, Anicetti explained how the company’s approach has evolved over the years. Its Food Lion chain, for example, took a one-size-fits-all approach during the 1970s and 1980s, using the same format, the same merchandise and the same pricing strategy in all of its stores.
“We were the perfect example of an efficiency machine, built on productivity, and we were very successful with an approach based on the leveraging of price,” Anicetti says. “Unfortunately, in the ’90s an awful lot of the luster came off that rose.”
The breakdown of that model set Food Lion on a journey that led the company to customer segmentation and then to clustering, ultimately resulting in the development of the Bloom and Bottom Dollar Food chains.
More recently, the company’s quest for insights into the behavior of its customers has led to the development of two laboratory stores that each use 120 cameras and sophisticated facial recognition software to track every customer. The system follows customers from the moment they enter the store until they pay for their purchases and leave.
Delhaize plans to add two more lab stores, Anicetti said.
“By the end of October, we hope to have more than 600,000 individually mapped customer transactions and customer trips, each of which we can attach to transaction data, which attaches to loyalty card data, which attaches to segmentation, clustering and trip mission analysis and insights.”
The goal is to get a better understanding not only of what customers buy, but also of what can interrupt the purchasing process and cause shoppers to leave without buying a particular item.
Delhaize intends to share its various customer data with the consumer packaged goods community through a series of vendor collaboration tools that Anicetti said are “not revenue enhancing” for the retailer.
Vendor Pulse, for example, offers store-level and item-level product movement data, which can be used to improve in-stock positions and inform inventory planning and promotional planning. The Shopper Insights Portal, meanwhile, is designed to share shopper and trip insights with vendor partners, providing details about store clusters, customer segments and trip missions. Delhaize also has a Vendor Collaboration Team staffed with analysts who can help suppliers mine this data.
In addition to using its customer insights to collaborate more effectively with vendors, Delhaize intends to integrate them into its own category management planning process. Part of Delhaize’s process involves treating each category as either a “cluster” or “standard” merchandised category. Cluster merchandised categories require differentiation across store clusters and banners in order to maximize sales, while standard merchandised categories can be treated the same way in all stores.
Anicetti concluded his presentation, called “A Framework for Profitable Collaboration,” by arguing that retailers and manufacturers need new tools to gather and mine insights about customer behavior, and need to use that knowledge to shape their category management activities. The traditional form of category management, which has changed little in the last 25 years, is not sufficient for success in a market that is in flux because of economic pressures on consumers and competitive pressures on retailers and their suppliers.
“What’s needed is a uniquely different form of collaboration that will span the entire supply chain,” Anicetti argued. “And the winning opportunity will require talking about more than just selling more boxes, even though the suppliers who can plug and play into that kind of collaboration will in fact sell more boxes.”