Is the resistance to category management a justified response, or is all this cynicism unwarranted?
I have this fantasy where I do an aftermarket version of "Jay-Walking." It's exactly like the popular segment on "The Tonight Show," where Jay Leno walks up to people on the street and asks them seemingly simple questions and gets some of the most outrageous answers imaginable. Leno might say, "Tell me what you know about Condoleezza Rice," and he gets a response like, "Isn't that the casserole with broccoli and cheese?"
Well, I entertain myself with a personal version of the Leno feature that I call "Bobbing for Answers." I ask aftermarket folks poignant questions about topical aftermarket issues and imagine what sort of responses I might get. Most recently, I was asking the question, "What is category management?"
"I'm not sure. My marketing folks have described it for me three or four times, and I still don't understand what it is."
"It really doesn't matter to me...I'm a WD."
"I think that's where you make better displays and add features and benefits to your packaging."
"It's spending a bunch of money on research and getting nothing for it."
"It may work for selling toothpaste, but I can tell you selling water pumps is a different story. You can't 'category manage' a water pump. They fail, they get replaced; it's that simple."
Perhaps my imagination is too vivid (or perhaps I have actually heard some of the previous comments made). I share this fantasy version of my comedic aspirations to re-engage a point that I started in this column last month ("Category management moves beyond fuzzy dice," December 2006, page 46). In that installment, I covered what category management is and what it is not. This month, I want to examine why the resistance is forming and what we need to do to stop it.
Like some of the responses from "Bobbing for Answers," I have begun to detect a negative undercurrent relating to category management. I spent quite a bit of time at the AAPEX Show talking with people and trying to understand where the typical aftermarket practitioner's head was on the subject. What I heard had a haunting familiarity to it.
The comments and concerns could be grouped into three broad categories: financial objections, understanding/relevance and trust.
I say the comments had a "haunting familiarity" to them because they were reminiscent of attitudes I have heard in the past on a number of other progressive initiatives, ranging from brand management or data standards to automated replenishment or data pools.
Interestingly, all those initiatives, like category management, came to the aftermarket after proving themselves in the consumer package goods industry.
Over the years, I have observed that the aftermarket tends to greet concepts from outside the industry with a full measure of cynicism. We tend to distrust that with which we are unfamiliar, and category management is unfamiliar to most. Because I fear the aftermarket might be preparing to toss the baby out with the bathwater, I decided to examine the objections and concerns of category management to understand if they truly are justified.
Financial objections
Let's start with the most quantifiable of the three types of objections: the financial issues. It is imperative that any business initiative should have an appropriate return on resources employed.
Make no mistake, the practice of category management requires data, and data gathering is expensive. I wrote last month that as an industry, we historically have not been terribly keen on research. We tend to rely on "conventional" wisdom, casual observation and intuition. Such predispositions are 180 degrees out of sync with category management.
The discipline of category management requires that decisions be fact-based. Point of sale data is one key source of the facts required, and the other is extensive knowledge about end users. It is this data fuel, skillfully blended, that powers the category management machine.
A common source of the point of sale data is the research company The NPD Group. Participating resellers (both retailers and program groups) report their actual sales by SKU to NPD, which then categorizes and compiles the data by product type, outlet and brand and distributes it to subscribers. (It should be noted that the data is amalgamated and no data from individual participants is ever revealed.)
That data becomes the foundation for comparing sales performance within a specific category in a variety of ways. For instance, a reseller might discover that he is underperforming in selling premium product over his value line when compared to his peers. Such insight could lead the reseller and his vendor partner to develop training or marketing programs to fix the mix. Likewise, compiling end-user data and developing an understanding about how the products are used in the category can lead channel partners to package and present products differently — and actually make them more valuable or easier for customers to use.
Perhaps most importantly, it provides fact-based insight for emerging new business segments and new product development opportunities that represent much needed growth in our industry.
But NPD data and primary research at the service and repair level are not cheap, and a dedicated person or service may be required to properly manage and apply the data. These costs probably seem frivolous to executives unfamiliar with the benefits, causing "research aversion" and hindering the wide adoption of category management. This has been exacerbated as margin crunch put a profound strain on marketing budgets in general and research budgets in particular.
As is the case with most reduced marketing expenditures, the immediate impact is rarely felt. Cutting out half the ads for a year, doing one less promotion or skipping a market study will not have a discernible impact on sales in the first year and probably not in the second. The problem occurs as budgets shrink and management grows accustomed to the lower levels of investment. I'm quite sure the advent of category management and the need for more research data is causing more than just a little heartburn for many aftermarket companies whose budgets have slowly shrunk in this manner.
But the reality is that category management, properly funded and implemented, can have a significant, positive impact on the bottom line. One company (with whom I consult) gained enough insight from what it learned in its line review to change how it packaged and presented its products to achieve a 17-percent sales increase with channel partners who took on its revised line.
Understanding/relevance
The second area of concern seems to be a general lack of understanding of category management and its relevance to the aftermarket. The perception of what category management is and how it applies to the aftermarket has been distorted by the way it has been communicated.
That is, as aftermarket people, we have been trained on the discipline by package goods people, and the examples and case studies that have been used have had a strong consumer products focus.
I was recently in a meeting with a veteran sales manager and the newly appointed director of category management for an aftermarket parts supplier. The category management director had recently been to a seminar and was telling the sales manager about a senior marketing person from Proctor & Gamble who made a powerful presentation on the subject. The P&G guy spoke of the unswerving commitment his company had to category management, so much so that they had placed P&G category managers in the homes of consumers to "observe, learn and understand how their products were used by consumers."
Where my friend stepped in it was when he said, "they wanted to really understand when and how people want to clean their toilets and what the expected results should be."
I have not seen eye-rolling of the like since I told my teenage daughter I thought she was too young to have a cell phone. Very few veteran aftermarket people can see any connection between how consumers clean their toilets and selling more auto parts. Can you see where a misperception might have developed among "C-level" aftermarket people that category management is a consumer goods-only discipline?
As I said last month, category management is not just for fuzzy dice, chemicals or waxes anymore. It's about understanding the use and consumption of a product from the end-user's perspective: in our case, most of the time, the professional technician. The Automotive Aftermarket Industry Association (AAIA) Category Management Committee is developing and defining the concept of hard parts category management.
Trust
The last of the three areas of objections I identified was trust, an issue that seems to be a recurring theme in this column. Category management is a discipline that requires a pretty significant leap of faith for it to work.
Manufacturers need to have faith that if they invest in the research and buy the data relative to their product segments, it will offer a modest return at first, but will increase exponentially over time. By working the data and following the leads it provides, their businesses will improve as their channel partners' improves.
Resellers need to understand that it is only through reporting their sales data and sharing it freely that they can flourish. Helping the category means helping the customer. Success is not found in a self-serving agenda.
I have heard a manufacturer say he wanted to become the category leader with a particular reseller so he could convince his channel partner to "throw out his competitor's line." Such a mind-set will only assure that he never will be the category leader. I have heard resellers who make decisions based on what is good for them, not what is good only for the customer, which is a losing strategy.
So what do we need to do as an industry to keep from tossing the category management baby out with the bathwater?
As with data standards, automated replenishment and data warehouses, the problem with implementation seems to rest with convincing the bosses that the activity is worth the investment. The product managers, marketing managers and many salespeople seem to understand its worth; it's the people who control the budgets who remain incredulous. We need to change that.
Perhaps our industry associations need to create a means to introduce/orient top aftermarket brass to category management. I sincerely doubt that they would sit still for a training session, but perhaps a more practical method could be found, like a white paper and an accompanying video or a Webinar. Somehow we need to educate the right people on what category management is and why it's important. Moreover, we must show that it not only represents a solid return on investment, but that it is what progressive companies must do to survive.
Bob Moore is president of Bob Moore & Partners, a consulting firm that specializes in the automotive aftermarket. Moore can be reached at [email protected].
