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Efficient Consumer Response

Efficient Consumer Response. Efficient replenishment Systems, EDI Fewer stockouts Efficient promotion Promotions based on consumer demand Lean inventory to support promotions. Efficient Consumer Response. Efficient assortment Turnover Profit Enhances brand and retailer perceptions

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Efficient Consumer Response

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  1. HED 460

  2. HED 460

  3. HED 460

  4. Efficient Consumer Response • Efficient replenishment • Systems, EDI • Fewer stockouts • Efficient promotion • Promotions based on consumer demand • Lean inventory to support promotions HED 460

  5. Efficient Consumer Response • Efficient assortment • Turnover • Profit • Enhances brand and retailer perceptions • Efficient product introduction • Pull strategy for new products • Based on unmet needs HED 460

  6. Category Management • Technique used by retailers • Product is sub-divided into categories that • Reflect purchasing behavior of target customers • Are managed as separate business units • Supermarkets and mass merchandisers HED 460

  7. Categories as SBU’s • Department is too broad and less strategic • 150-300 categories vs. 15-20 departments • Product/brand is too narrow to approach strategically • 15-20,000 skus in a store and 16,000 new products/year HED 460

  8. Category Management • Integration of Buying and Merchandising responsibilities • Management of price, shelf space, merchandising assortment strategy, promo efforts, replenishment • Affects manuf. sales and marketing • Team approach between channel members HED 460

  9. Category Plans • Jointly developed by retailers and suppliers • Define strategies and financial objectives • GM • Sales/cu ft. HED 460

  10. Buying/Merchandising Decisions • Responsibilities must be integrated • Inventory allocation • Space allocation/analysis • Customer demand HED 460

  11. Category Management • Goal - Retailer • Optimize each part of the store • Allocate space that maximizes Gross Margin/unit of space • Goal – Supplier • To become the lead supplier or channel captain for that category HED 460

  12. Benefits • Increased category sales (5-15%) • Increased category margins • Assists in creating optimal assortments • Reduction of SKU’s in most cases • For Mfct., move from trade allowances (push) to trade promotions (pull) HED 460

  13. Manco example • Merchandising of tape products was difficult • Different buyers bought tape • Solution = tape center • Later mailing center • Prevented other vendors’ access • 19 SKUs to up to 32 feet in office superstores HED 460

  14. Direct Profit Profitability (DPP) • Profit associated with each category • Per unit Gross Margin minus all variable costs • Procurement • Distribution • Sales HED 460

  15. Defining Categories • Consider end uses (frozen, chilled, deli fresh) • Consider substitutablity (fresh/frozen) • Consider complimentary purchase decisions (pasta + sauce) • Base decision on how customer buys • Same “real estate” HED 460

  16. HED 460

  17. Dairy category • Displayed by brand name • Customers shop by type (low fat, full fat, no fat, fruit) • Then individual flavors HED 460

  18. Ready to eat meals category • Type – Chinese, Italian, meat/two vegetables • Cooking method – oven, micro, stove • Low calorie or regular HED 460

  19. Defining Categories • What products should be included? • Beer Category- decisions • Shelf beer and cold beer part of total • Shelf beer = 1 category and cooler = 2nd • Sub category of beer/wine/alcohol • Beer as a solution (picnic, party, meal) HED 460

  20. Destination Traffic building Turf protecting Transaction building Excitement creation Cash generating Image creator Roles/Implied Strategies HED 460

  21. Pasta Category HED 460

  22. Routine/ preferred Transaction building Profit generating Turf protection Roles/Implied Strategies HED 460

  23. Convenience Transaction building Profit generating Image enhancing Roles/Implied Strategies HED 460

  24. Occasional/ seasonal Traffic building Excitement creation Profit generating Roles/Implied Strategies HED 460

  25. Tactics – Traffic building • Aggressive pricing on loyalty products/low margins • Media on frequently purchased items • Prominent space HED 460

  26. Case Study - Toothpaste HED 460

  27. Leading Manufacturers – CM • P & G • Kraft • General Mills • Unilever…Ralston Purina…Pillsbury • Quaker…Kellogg’s…Coke HED 460

  28. Leading Retailers – CM • HEB • Safeway • Wal-mart • Ahold • Kroger • Wegman’s HED 460

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