Online category management: 5 principles to help CPGs succeed on the digital shelf

This article outlines strategies for category managers to enhance their performance on the digital shelf, particularly focusing on key aspects like omnichannel assortment, price tier distribution, search management, and content optimization. We’ll also cover how ecommerce sales management software is directly related to these principles, as it focuses on optimizing sales performance, managing the ecommerce channel effectively, and aligning product strategies across multiple platforms to maximize results.

5 principles for category management

Little attention has been paid to what the shift to online means for CPG category managers. We’ve summarized the 5 principles for successful online category management.

As CPG companies continue to adapt to the shift to online, I believe not enough attention is being paid to what the shift to online means for category management.

A lack of bandwidth is part of the problem. Although ecommerce has grown exponentially, it’s still a drop in the bucket compared with brick-and-mortar sales. This makes it easy for category managers to default to a store-first mentality, and feel justified in doing so.

There are also understandable growing pains. The move to ecommerce requires a fundamental change in mindset. Even the most digitally-minded CPGs I work with find it takes time for that to fully trickle down through their organizations.

Here are five principles category managers should consider.

Principle #1: Think omni-first for assortment

To win on the digital shelf, your assortment strategy needs to be omni-first.

Shoppers don’t buy online the way they buy in-store. Category managers who don’t take account of the differences will lose out on sales – online as well as in-store.

A key part of category management is developing a category management strategy that takes into account the differences between in-store and online consumer behavior. In an omnichannel world, category managers need to align their category strategies to support both physical and digital sales. For example, larger pack sizes that are more popular online because of delivery convenience require different inventory management to in-store stock.

To address this category managers must think omni-first when managing their procurement categories. This means that product offerings need to cater to both online and offline shopping behavior and allocate the right goods and services to meet consumer needs across channels. A successful category management project involves using data analysis to understand how consumer demand shifts between platforms and ensure seamless integration of category management practices that support both in-store and ecommerce.

Principle #2: Aim for good distribution across price tiers

One notable trend observed during COVID-19 was people splurging more on premium grocery products.

Consumers stuck at home indulged in more expensive groceries like wine, high-end coffee, and artisanal cheese. This shift, coupled with an increased interest in health and home cooking drove sales of premium products. But as market conditions change, it’s important to re-evaluate pricing trends and have a balanced product portfolio across price tiers to capture the broadest customer base.

A key principle of effective category management is to balance the assortment across different procurement categories so that products meet customer needs at different price points. This is especially important during times of inflation, where the total cost of goods affects consumer behavior.

By understanding consumer preferences and market dynamics, category managers can develop category strategies that offer value across premium, mid-range, and budget products and customer loyalty and maximize sales across the entire product range. Overemphasizing either end of the price spectrum poses risks, especially considering economic turmoil amid inflation post-pandemic.

Principle #3: Proactively manage search

With most add-to-carts coming from the first five search slots, no CPG category manager can afford to ignore search.

Identifying your highest-priority items and focusing on getting those into baskets is critical. This means taking time to really understand your retailers’ search algorithms so you can win in organic search, and proactively managing spend on paid search.

Resist the temptation to spread your search dollars too thin. Because those top five search positions are the most important, you need a clearly defined search strategy that helps you get it right on a few key priorities.

These could be your highest-selling online items or new innovation. Whatever it is, make sure you’re crystal-clear about which parts of the assortment you want to focus on and what you’re trying to achieve.

Procurement teams need to focus on the core areas of product demand and make sure the most important products are easily found by the consumer.

Managing search also means a strategic approach to promotion and content based on market analysis. Rather than trying to win on all search terms category managers should prioritize the top-performing products and allocate resources to improve their ranking. This means better management of spending categories and resources is focused on the areas with the most potential for cost savings and sales.

Principle #4: Condense product listings where possible

In any category management process simplifying product choices is key to improving the customer experience and customer satisfaction. Online shopping overwhelms consumers with too many options and makes it hard for them to decide.

One key insight from consumer behavior is that consumers deselect irrelevant products before making a final choice and that’s where category managers can step in to consolidate product listings.

This is easy to do in store, where there are visual cues helping shoppers navigate the shelf, but much more challenging online. For any given item, there could be multiple different flavors, formats, or pack sizes, all with their own product listings. Unless your online content is super clear and well structured, shoppers will struggle to narrow down their choices.

A good way to address this is to create condensed product pages that allow shoppers to explore all variants of a product from within a single product page. Not all retailers enable this functionality at the moment (Sephora does it best in the US, in my opinion), but where it is available category managers should focus on executing it well.

Consolidating product listings by combining variants such as size, flavor, or format into one product category page allows the consumer to see all options at a glance and reduces decision fatigue. This improves the customer journey and also category performance by driving more targeted traffic to key products. Data analysis can be used to see which product variations are most popular and prioritize those in search results and promotions. A category management strategy that simplifies the buying process means higher customer loyalty and a better brand reputation.

Online shopping can be overwhelming. Having all the relevant information available in one, easy-to-navigate listing really helps the shopper figure out what they want to buy.

Principle #5: Don’t set it and forget it

Few things get CPG category managers into trouble faster on the digital shelf than a ‘set it and forget it’ mentality.

Just because you’ve set up your content and your products correctly with your PIM or the retailer doesn’t mean they’ll stay that way forever. There are lots of reasons why content gets messed up or changed, so you can’t assume that doing it once means you’ll never have to look at it again.

One common problem one can see is online images being pulled in from retailers’ own asset libraries instead of the gold standard image provided by the supplier. This is easy to fix, but it requires somebody to spot the problem in the first place.

Good category management requires continuous monitoring and improvement with a focus on data-driven insights and supplier relationship management. As market trends change product listings, pricing, and availability can change fast so category managers need to stay proactive and adjust their category strategy as needed.

Tools like ecommerce sales management systems allow category managers to track category performance in real-time so that all products are aligned with the overall business objectives. Regular audits of procurement categories ensure supplier relationships are optimized and category managers are making decisions based on the latest market intelligence.

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