Irrespective of the size and scale of a business it involves sales. Either one is selling goods and wares or service and consultations and charging for the product. The business that is selling either raw materials or processed goods has to deal with inventory management.
Category management is one strategy that allows the managers or the owners of the business to keep their costs low and inventory in check. This is required to avoid disappointment that cannot be reversed without incurring a loss.
Be it a global conglomerate or a local pizzeria, category management aids in better optimization of resources, inventory levels, targeted sales, vendor management, and reduction of overheads and costs.
A pizzeria can outsource their dough and sauce preparation to a supplier who specializes in this category akin to how Apple undertakes branding, marketing, and sales and outsources the manufacturing to vendors like Foxconn to make and assemble iPhones.
Delegating the work allows the business to concentrate on core competencies and build thereon. This is precisely the reason Apple is a trillion-dollar company without manufacturing its products and outsourcing it to the one who is good in this category. With CM, one can:
Optimize Sales
Multiple SKUs increase the visibility of the brand. However, over time some of them are not just laggards but decrease the profitability. A manager can identify the popular and profitable products and maintain optimal inventory to align with the demand and supply constraints when they flex category management strategies.
There is no risk of either overstocking and forced discount sales or understocking where the business is not able to service the customer and loses their loyalty to the competition.
Targeted Promotions & Campaigns
Based on consumer insights and preferences using category management, one can scale their sales campaign to exceed expectations through targeted promotions. The cost of campaigning and advertising reduces considerably as the business is aware of the demographics of the earmarked consumers by their preference data.
Based on their behavior, purchasing patterns, and search history looking for a product, creating a campaign that can attract them is designed for an effective sales strategy.
Higher ConsumerEx
Consumers may not remember to give a review for a service that meets the normal standards. However, they will never forget an exemplary one where one can go out of the way to do something for a consumer, nor they forgive a sub-standard service.
Category management allows a business to conduct its operations seamlessly so that customers can find what they are looking for easily. By labeling and sorting the products based on categories, it is easier for a consumer to pick what they need.
Conclusion
Category management was used in ancient civilizations and recorded history has details for Egyptian markets that were divided based on the wares that they sold. Similar products were grouped and sold in specific shops. The practice allowed consumers to shop easily and offered efficient trade.
Years later, with AI-driven insights and dashboards, predicting consumer preferences using tools like category management platforms has become easy for businesses looking to grow and use the data wisely.
Article and permission to publish here provided by Mariana Wilona. Originally written for Supply Chain Game Changer and published on October 22, 2024.
Cover image provided by Mariana Wilona.