Some people think that knowing “the right answer” is important in business. Of course, they are correct, but what is even more important is knowing the right questions. You can’t get the right answer unless you ask the right question.
But what questions should you ask? How do you know what you don’t know?
When my partners and I developed the discipline of category management in the early 1990s, we wanted to torture test the process and the data it required by challenging one another in two ways:
1. To think of incisive questions that could help us understand the business.
2. To identify how we could answer those key questions with the data that was then available.
We quickly realized that identifying the right questions was even harder than finding the right answers. That was because we didn’t know what we didn’t know. This drove us to develop a way to know what we didn’t know.
The result was a game we invented called “I wish I knew.” In designing that game, we came to understand that you can't know what you don't know until you know what you do know. So, we created an approach to organize what we did know into what we called “The Voice of the Shopper.”
This was a standard taxonomy (who are the shoppers, what are they buying, why are they buying, when are they buying, where are they buying, how do we influence the shoppers to buy).
We organized all of the brand’s data into this taxonomy and then we were ready to understand what we didn't know.
We went around the room and each person asked a question based on the data voids that had become apparent. Each questioner would start by asking, “I wish I knew…” (IWIK). These questions drove us to capture new data and in many cases, created evaluative metrics that became standard in the CatMan process.
Every retailer and manufacturer would benefit by playing a game of IWIK. If you think you know everything about your brands and categories, try answering the following:
Which promotions on which brands generate the most incremental profit for the category? Do you know the rank order by brand and promo value?
Why is the answer to this question important? Because the purpose of a promotion is not to optimize brand volume but to optimize retail profitability. What categories and brands generate the most incremental ROI when given an endcap display? Why is the answer to this question important? Because endcap space is among the most valuable space in the store and different brands, and categories perform differently on an endcap.
Optimizing the categories and brands on endcaps can significantly improve retail performance. The same logic applies to digital “endcaps” on weekly digital inserts.
In what categories and brands are you underperforming vs. retail competition? These are the categories where the retailer is leaking volume to retail competition.
What are the following metrics by brand in your most important categories?
- Brand loyalty.
- Annual purchase worth in the category for purchasers of brand X.
- Percent of brand shoppers who are exclusive to the brand.
- Percent of brand volume generated by exclusive users.
At this point you might reasonably ask, does any of this have any practical value?
Here’s a true story that illustrates the importance of knowing the percent of brand volume represented by exclusive users of the brand:
About 15 years ago, Walmart decided to unclutter at stores by reducing assortment across the board. They called this initiative “Project Impact.” Management arbitrarily decided to remove several thousand SKUs.
At about this time, I attended the annual conference of FMI, where I met with the CMO of Walmart to discuss issues of mutual concern. At our breakfast meeting, he expressed concern about the long-term impact of removing all of the SKUs from the store. He told a story about one of his own employees who was forced to shop at another store in Bentonville because his favorite SKU of jam had been removed from Walmart as a part of Project Impact.
While he was telling me this story, I took a paper napkin off the table and began to do a computation. At the end of his story, I told him he was right to be concerned. I calculated that Project Impact was going to cost Walmart between 2% and 3% of its volume.
I thought he was going to have a heart attack.
How had I calculated that? I slid the napkin with the computation across the table. I told him that most brands have a significant component of their volume contributed by a small number of people who are exclusive users of the brand. That number can vary from 15% of volume all the way up to 40% of volume for any given brand. If the brand Walmart delisted during Project Impact had only a 10% share of total category volume, removing it from the assortment would cause the exclusive users to go elsewhere, thereby costing Walmart something in the range of 3% of the total category volume (30% of 10%).
Walmart stopped the expansion of Project Impact after it realized it was doing significant harm to the store’s overall volume—about 2% or 3%.
The various “I wish I knew” questions above are but a fraction of the issues that make a difference for a brand, for a category and for a store.
I strongly recommend that every category manager create a voice of the shopper and then go through the exercise outlined above. I bet you find dozens of answers that will help your volume and profit.
Gordon Wade is a longtime thought leader in CPG. He was one of three people who created the discipline of category management for the CPG industry in 1993 and then led a 17-company industry consortium in updating CatMan 2.0 in 2017. He has written white papers on multiple subjects, including AI, in-store robotics and e-commerce data analytics. He is an honors grad of Harvard and an alumnus of P&G’s marketing department. He can be reached at email@example.com.
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