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"We need to work together to optimize the system as a whole, not to seek to optimize separate pieces... Optimizing separate pieces destroys the effectiveness of the whole. For the organization to work well as a whole, the components must work together"


- Brian Joiner

CASE STUDY | Category Portfolio Management at Retail

The foundation for budgeting, strategic resource allocation and internal alignment

Specialty retailer reshapes their annual planning process with a fact-based approach to category management. The goal: maximize "the total box" by clearly defining the role each category plays, understanding the interdependence it has with other categories, and resourcing it based on its lifecycle and growth potential.

Our retail client was challenged to create material value for their financial stakeholders through improvements in their overall merchandising effectiveness.  They needed both topline growth and margin improvements, but plans at the category level highlighted that operating costs were too high and margin gains were coming up short.  Additionally, the cross functional support teams were being stretched to support multiple agenda with limited resources.  Leadership was not aligned as to how hit their goals.


The ROIG Group recommended using Portfolio Management as the strategic foundation for the planning process. It is a fact-based approach that enables the development of a category strategy that also optimizes the collective whole.  When truly embraced by the organization, Portfolio drives the allocation of resources such as labor, inventory, advertising, floor space, and more.  Additionally, it becomes an effective communication tool as it provides a common language and framework for the entire retail organization. 

We used a 7-step process that starts with understanding the key business drivers and challenges unique to our client and their competitors.  We modeled and scored the data and then incorporated objective consumer data as to the category's "importance to the brand." 


Each category - both product and services -- was then assigned a strategic role that defined how that class of product created value for the retailer.  Role puts structure around the strategic position of each product grouping.  (Typically, there are 4-6 defined roles, such as Primary Business Driver, Traffic, Profit Generator, etc.)

Then we assigned an "intent" designation that describes to what degree that value is to be created by that category.  This factor takes into account growth rates and lifecycle aspects.  (Typically, there are 5-6 defined intents, such as Aggressive grow, Maintain, Exit, Nurture, etc.).  Role and Intent designations create very clear strategic roadmaps that clarify KPIs, capital investments, and resource plans.


Our client made three sizeable strategic shifts as a result of the new portfolio designations.  This enabled them to not only meet their aggressive financial goals, but to exceed them. 


The first was in the area of advertising support.  We modeled each category's responsiveness to advertising support and were able to significantly reduced ad spending on categories that did not see a lift with the resource.  In this case, several were Convenience and Profit in nature. Our client was able to leverage in-store placement as well as on-line "we recommend" communication to build the basket rather than drive the basket.

The second was in the area of human resources.  Maintain businesses were over-resourced at the corporate office as well as at the store level whereas key growing categories were very stretched.  The model helped them course-correct and redeploy resources to the highest growth areas.

The third shift was in store space allocations.  Our client had an annual planning process dedicated to new stores, remodeled stores, and store updates.  The portfolio process enabled them to apply a fact based decision method to determine which categories received more space and where that space was located in the store. We supported the Portfolio designations with Earned Space modeling to make specific recommendations and adjustments.

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