Stage 2 - Getting the Range Right
(Reading time 20mins)
Introduction
The range refers to the products that shoppers will actually buy in-store or online to satisfy the needs of the end consumer and inspire new consumer behaviours.
Here are the four steps to the right range
Category definition
For example – is the category Men’s Toiletries, Shaving or Razors and Blades?
Decision Hierarchy
How does the shopper make choices in our category?
Flexing the Range
Adapting the basic range to meet ranging objectives.
Making Money
Range analysis should consider financial KPIs as part of Category Management
Find out more below…
Category Definition
What products?
What products/services are inside or outside of the category?
What categories are we competing with?
“A category is a distinct, manageable group of products/services that consumers perceive to be interrelated and/or substitutable in meeting a consumer need.” ECR Best Practice
Decision Hierarchy
A decision hierarchy is essential for shaping categories and ensuring that the category appeals to the evolving needs of the shopper. It shows us the process a shopper follows when making a purchase from a category. Through market research, you can build a view of the decisions that shoppers make in store.
Knowing your category’s decision hierarchy can help influence category layout. Shoppers want a simple shopping experience. They want to be able to quickly find their way around a category to locate the product they want. It can also influence the range stocked as you need to ensure that all of the shoppers needs are fulfilled by the range offered.
What is the structure?
How should we structure and arrange the category?
How should we name the category and its sub categories?
Coverage rules
To meet all shopper needs, we would need to list every product in the category – so how do we decide what to list?
What are category coverage rules?
Retailers need to balance a credible range that covers most consumer needs with the space and other operating constraints. Coverage rules set out the criteria on which the range is created.
Strategically, how broad or narrow should each sub-category’s range be?
What percentage of each segment’s sales do we wish to ‘cover’ (ranked by sales value)?
Coverage rules will depend on several things:
Role the category plays for the retailer
Store format
Total category shelf space
How does Category Role affect coverage?
Every retail environment is different and this affects the role our category plays for the retailer.
This in turn affects how many products we can range and the proportion of shopper needs that will be covered.
For example, in a specialist grooming outlet (destination) we would include more of our range.
In a convenience store, as the fixture space and range would be much smaller we would have less of our range.
Flexing the Range
Retailers and suppliers will want to adapt the basic range to meet their ranging objectives.
Typical factors are:
Retailer profile: Shopper types, quality vs value perception, regional variations
Category growth: Focused Category Drivers (see EPC category vision)
Innovation: New products to the retailer or category to inspire and attract.
Gaps or duplication in the relevant segments: Spaces in the Range Attribute Matrix where no product sits (gap) or where there is more than one product performing the same role (duplication).
Making Money
Range analysis should consider financial KPIs as part of Category Management
Profit: Product mix for total profit pool
Margin: % or $ per SKU
Cost: Stock turn or inventory holding
