Product Category Management: Definition & Elements

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Product category management involves the pricing, merchandising, and promotional efforts in a retail space. In this lesson, you'll learn more about what product category management entails.

What is Product Category Management?

Have you ever thought about how certain products end up on your local store's shelves, how the prices are determined, and how one product seems to get more ideal placement, such as on the end of an aisle? Believe it or not, it's all a part of the retail supply chain responsible for getting products from the manufacturers to the consumers.

Product category management is the act of managing all of the stock-keeping units (SKUs) in a particular product category and organizing their price, their appearance, and promotional strategies while meeting the goals of the store and the needs of customers.

For example, product category management would include the pricing, shelving and promoting of all of the types and brands of laundry detergent in a store, not just Tide. Employees tasked as product category managers must simultaneously think about the best pricing, placement and promotions of the store's entire row of laundry detergent offerings. Other product categories might include pet food, coffee or snack foods.

Product category management is effective not only for retailers, but also suppliers because it helps create increased sales and product turnover and decreases the number of markdowns and unpurchased inventory sitting on store shelves.

Elements of Category Management

Inside of product category management, there are four elements that must be managed together:

  1. Price - what each item in the product category sells for. A hot, brand new item on the market might be priced higher, for example, while an economy product may hit the lower end of the price range. Price is determined by consumer trends and the competition.

  2. Shelf space - determining how much space to give to each item. Product category managers need to ensure they're given adequate store shelving space to all of the product in a particular category.

  3. Merchandising strategy - includes the variety of products provided for consumers' wants and needs, and how and where items are displayed in the store to generate consumer interest.

  4. Promotional efforts - includes signs and displays inside a store that draw consumers' eyes in sales or promotions of particular items in a product category. This increases the visibility of a product and, retailers hope, sales.

Roles in Category Management

For product category management to work, there must be employees who enable it to function. Among these are the category manager and the category advisor.

The category manager is equipped with the knowledge of their particular category to make the best decisions about pricing, store shelving placement and merchandising strategies. They also work with vendors to establish promotional efforts for individual products throughout the year. They have an understanding of what consumers want and what their market needs and how to present products in a way that will make them successful.

A category adviser works with a category manager in some scenarios to help the entire product category be successful. These advisers are suppliers or vendors chosen because they are a dominant force in their particular product category.

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