As a species, we love to categorise. We make sense of the thirty thousand items on our supermarket shelves by breaking them down into a number of manageable chunks.
Whether you own a supermarket or an online store, you can satisfy your customers’ needs by providing them with simple to understand categories. If you create a larger number of categories, you can give the impression that you have more items in stock – even without adding more physical products to your shelves.
What is category management?
Category management is a retailing process wherein all similar products from a range are grouped together in categories. For example, cherry tomatoes, baby spinach leaves and cucumbers might be categorised together in a salad section. Category management draws on industry and consumer trends, making use of research and sales data.
The key to making category management work is making sure you provide what the shopper wants from the category. They need to be grouped together into categories that reflect customer needs, based on how products are used, consumed and purchased. Some categories are very useful in some stores and useless in others, such as colour categorising. Keeping all of the red fabrics together makes sense in a haberdashery but keeping all red items together in a supermarket results in some bizarre and impractical groupings.
Category management helps to provide shoppers with the items they want when they want them
When we shop in-store, we tend to have categorised shopping lists in our minds, such as 'fruit and veg' or 'baked goods', that help us to complete our shop more efficiently. We like to 'chunk' the shopping task into smaller, more manageable sections that we can achieve on autopilot.
When we get to the supermarket, we expect our mental categorisation to match up with the categorisation that we see on the shelf. If the supermarket has missed something we feel is a necessary part of the category, buns in the barbeque section for example, then we feel frustrated and annoyed. But with careful placement, a well-designed category can persuade us to put one more item in the basket — perhaps a bottle of Pim’s at the end of a picnic section.
Research by Mogilner, Rudnick and Iyengar found that when shoppers were provided with a larger amount of subcategories they felt more satisfied with the range on offer. This effect is most obvious in shoppers searching for 'new' products, as once they have chosen a product to buy long-term they are usually unlikely to change products without the product having been discontinued or a lifestyle change, such as giving up caffeine requiring a different coffee choice.
Of course, this can only be applied so far; if you get to the point where virtually every product receives its own category, the categories are then perceived as useless.
Diversity within your categories will increase customer satisfaction even further
What’s important isn’t the number of options you have on offer within your categories but the differences between the options; the difference is what increases customer satisfaction, as well as the suitability of the categories. Do the products on offer within the range tally up with what your shoppers actually need or are there things missing? Is there an unnecessary distance between items that really should be close together, such as rice and curry sauces? Shoppers are often thrown when a product they expect to be there isn’t – for example, categorising couscous as a health food rather than stocking it near pasta and rice causes shoppers to assume that couscous isn’t stocked at all.
Category management isn’t just for Christmas
One key area in which many supermarkets employ category management is in occasion categorising -- grouping a diverse variety of products together on a theme, such as Christmas or Valentine’s Day. By thinking outside the box -- shoppers who are buying steak might also be interested in wine, for example -- you can sell an event rather than a product. These will also improve customer mood as they imagine the situation they are using the product in, such as a special night in.
How you can improve your category management
When your products are grouped together into categories, there are sometimes obvious gaps that nobody notices. The shopper doesn’t register it because most shopping utilises short-term rather than long-term memory, quickly forgetting obstacles and the reasoning behind their purchases, and the store isn’t able to easily gather this information without recording shopper behaviour. When surveyed, shoppers tend not to remember their obstacles and missed buys -- their most standard request is for lower prices.
A good example of a missing product is shown in the laundry aisle of a supermarket in Johannesburg some years ago. Shoppers would be able to buy the laundry powder without thinking but were struggling with fabric softener, with many failing to purchase any. It emerged that many customers didn’t have access to hot water for laundry, so the hot-water-only fabric softeners were useless to them. As soon as a cold water fabric softener was put on the shelves, sales increased dramatically.
So categorising is useful and profitable in many ways. It can increase customer satisfaction, leading to more impulse buys and also identifying areas in which further products are required.
Phillip Adcock is the founder and Managing Director of the research agency Shopping Behaviour Xplained Ltd, a shopping research organisation using psychological consumer insight to explain and predict how customers will behave. SBXL operates in seventeen countries for hundreds of clients including Mars Chocolate, Tesco and B&Q.