Category management is a concept that involves breaking the many products that are offered by a company down into separate groups. By doing this, the hope is that the company can more efficiently manage each individual aspect of the business. Category management tries to increase the profitability of each category within a business by dividing up the management responsibilities and focusing on smaller components.
Category management is commonly used in the retail world. One of the most common uses of category management is in the grocery industry. Within a grocery store, shoppers will find everything broken down into categories. Most grocery stores are going to have category managers in charge of a specific portion of the store.
Category management breaks every aspect of the store down into smaller, independent businesses. This means that every category within the store is looked at as if it were an individual business. That category has to be profitable to keep doing business. If the category suffers, the owner of the business may decide to shut it down.
When companies engage in category management, they will typically make product decisions based on the category as a whole. When they evaluate new products, they do not necessarily look only at the product itself. Instead, the company will look at the product and try to determine how it fits into the category that is already present in the business.
Category managers have to be able to work together to make a business successful. Every manager of a category has to be willing to compromise and work for the good of the business as a whole. Category managers have to be liaisons and they have to be good at working with other people.
One of the big reasons category management is commonly used is so the profitability of a company can be increased overall. Without this type of management, when a new product is introduced, the sales of that product might increase while sales from a similar product decrease. If a business does not look at what a new product is going to do to other similar products, the profitability of the business could suffer. By utilizing the proper type of category management, the company can look at new products and determine what it is going to do to the products it already carries. In this way, the company can make the right decisions for its individual business model.