Category Growth Strategy

Category in a Cost of Living Crisis

4 min read

Jan 16, 2024 5:01:50 AM

Unless you’ve been living under a rock you’ll know we’re firmly in the midst of a cost of living crisis. Consumers are cutting back, going out less, limiting luxuries. Shoppers are scrutinising spend, buying different things in different ways. Retailers are under pressure, competing for footfall week after week with deeper deals and loyalty-driving tricks. If you’re a brand owner right now, it’s fair to say that navigating all this is pretty tough.

So why, with all this pressure on price and so much short-term fire-fighting, are we seeing more organisations than ever before adopting a category mindset, grounding their brand and commercial plans in a Category Growth Strategy that looks years into the future?

To answer this question we probably need to start with what a category approach is in the first place. A category mindset means looking beyond your brand to the category that it sits within, and identifying ways to grow that category along with your brand. Clearly, a growing brand means you’re happy, but – importantly – a growing category means your customer is happy. Which means they’re more likely to support you and your initiatives as there’s a net gain to them, and you’re not just winning at the expense of a competitor brand. A category growth approach is the definition of win-win.

Now, growing a category isn’t a dark art, quite the opposite. There are, in fact, just three ways to do it. You can get more people to buy the category; you can get them to buy the category more often; or you can get them to spend more in the category, either through trade up to more expensive products, or by encouraging them to buy more. In other words, you need to change people’s behaviour.

But who are these people whose behaviour we need to change? Well, we like threes in category, and there are three groups of people we need to consider: the consumers that use our products; the shoppers that buy them; and the customers that stock them. You can’t get people to use a product unless you can get people to buy it. And you can’t get people to buy your brand unless a retailer stocks it. A category mindset means getting under the skin of all three of these groups of people, understanding how they behave, why they behave in that way and how that’s changing. This triple lens insight sits at the heart of a category approach, helping you to identify the change needed to inspire and excite more people, to buy a category more often, and to spend and buy more in the category, ultimately driving growth.

Now, most brand owners will be able to reel off insights about their brand’s consumers, shoppers and customers. But with a brand-only approach they might miss elements that are impacting the category but not their brand directly. A quietly emerging trend, shifting consumer behaviour away from you. An emerging channel that isn’t covered by the regular databases, where you’re not available. The shopper insight that’s about to turn the fixture on its head that you haven’t uncovered because it doesn’t impact your brand – or so you think. Thinking beyond your brand helps you to widen your lens, getting a more complete view of the world and enabling you to spot growth opportunities – for the category and your brands. You might just learn something new!

So now that you’ve had your lesson in category, what is it that makes this approach so important when times are tough? We think there are three key reasons.

A category approach helps you understand a changing world more quickly
In times of change, like a cost of living crisis, people’s behaviour changes fast: consumers consume differently; shoppers shop differently; customers stock differently. You need to be ready to spot these changes, and (more importantly) you need to be able to translate this quickly into your brand plans, your commercial plans, your customer plans – so that you’re responding to changing trends and habits: giving consumers products that suit their needs, in formats and pack/price options that shoppers want to buy, in a way that helps the customer to have a point of difference. An organisation with a category mindset will be able to do this more quickly than one thinking only about the impact on their own brand.
Thinking category means thinking beyond price (and better customer relationships)
When the pressure is on, it’s far too easy for price to become the lever that everyone pulls, and the next deal becomes the topic of most conversations between brands and customer. But in actual fact, research shows that when purse-strings are tightened, it’s not always a race to the bottom. Often people respond to a reduction in spending power by changing the pack size they buy, or shopping more or less often. In fact, in some categories people are willing to purchase more expensive products IF (and it’s a big IF) they clearly understand the benefits a product offers and it has a value to them – in other words, it meets their needs. So it’s value, not price, that you need to deliver. This can open up different conversations with customers, sharing ideas that drive longer-term, more sustainable growth for brands and categories without the need for deep promotions, helping retailers build a relevant, enticing offer that suits their shoppers, and helping suppliers build stronger, more collaborative customer relationships
A category strategy gives your whole organisation a clear vision to aim for
Category doesn’t sit in one function – it’s a way of thinking that needs to exist across an organisation. A Category Growth Strategy uses triple lens insight to identify an ambition for the category based on growth drivers, which can then form the basis of internal strategies. So whether you’re in sales, marketing or operations, you’re aligned behind a joint vision of the future – you know where the market is heading and what your brand needs to do to win. In tumultuous times this doesn’t mean you won’t still have to ride out the choppy waters, but having a ‘north star’ means that you’ll be equipped to ride them in the right direction, without going too far off-course, putting you in a better place for the future.

We think a category mindset is important all the time, but when trading conditions are tough the benefits become even more valuable.