The Toilet Paper Lesson: A great opportunity to understand category management.
It happened long ago in my first job in the Retail industry; I was the Category Analyst for the Non-Edible Grocery Categories in the Convenience Stores unit in an Oil & Gas Corporation. I remember having worked for almost a week optimizing that assortment and I had the opportunity to show my work to a Sr. Manager who was visiting Argentina.
The meeting started on time. I was with my boss and we went directly to present the subcategories, Laundry Care, Dish Care and Household Care. We made great assortment suggestions of removal and replacements. I also had a few starring moments presenting a pricing strategy for dishwashing products and then, we started presenting the last subcategory: Paper & Plastic. It was going incredibly well, everything seemed to make sense and then, the Manager said, “Can I ask you a question?”:
“Why did you decide to conserve two options of Toilet Paper?”
We tried to make our point being eloquent and accurate, but he stopped us and said:
“Let me teach you something about convenience stores. You know that we do not have a lot of space, and TP is not an expensive or profitable product right now and its four packs take up a lot of space. But definitively we have the challenge to include it in our value proposal for Non-Edible Grocery products”, he continued…
“The first option we have is the cheapest TP in the market. Its margin is far below the average, its turn is a little bit better than the other option. On the other hand, we have the best quality TP and It is also the most expensive, but its margin is above the average. Which one would you choose? He asked.
We were looking at each other, a little bit disconcerted, and we decided to choose the cheapest one, justifying it by its turn and some other KPI that were right. Then he started to present us his idea:
“Figure that you stop the car in the service station, you don’t fill fuel, you just enter to the store looking for toilet paper. This is the real MOT (Moment of truth), right? Then you must decide, Option 1 or Option 2? Which one would you choose? Are you really choosing?”
“The truth is that you don’t choose, you just pick up a TP and rush out to solve your problem. You do not care about the price, about anything. Then, with the problem solved, you think about your experience and realize if it was soft, hard, resistant, or not, and there you are with 4 rolls of toilet paper. If the experience with the product was so great, you are glad, you don’t care about the price you had paid. You just take it to your home share it with the family, and maybe that brand could replace the brand that you are using. I think we can use that in our favor when we negotiate with our vendor, don’t we?”
“But if the experience with the product was bad, then the four rolls go directly to the trunk of the car or to a garbage can and then the customer will perceive us more expensive than our competitors and will remember our brand with a disgusting situation.”
Then he said… “The analysis you have made is impeccable methodologically. But I believe than choosing just the better toilet paper for our assortment would help us to concentrate volume and bringing a great experience to our customers. It also will put us in an advantage position with our vendor in price negotiation.”
This could be just a funny example, but the lesson here is that you have to put yourself always in the shoes of the customer understanding how and why they buy each product from us. Well defined category roles according to customer needs are the key to give greater shopping experiences and to accomplish the company strategy. Nowadays, it is also mandatory to assign roles for categories in every channel because the cases of use could be different between each one. Using data to make decisions, helps organizations to understand customer’s behavior but it is not 100% enough to explain every detail. It is worth complementing it with field experience so that’s why people says that “the perfect data scientist must be 120 years old”. In our companies we must detect and retain people with a strategical thinking and field knowledge, they are a key complement to data driven decision makers to make better customer experiences.
2021 | Grape Retail Marketing