It is something important in terms of category management because it is one of the main difficulty of category management. In the retail business, suppliers provide products for customers, but need to go through a client, the retailer, in order to do so.
Hence, the supplier needs to take care of two peoples' expectation:
- The customer: They need to define a product that will match their needs, will be better than the competition, and will have an affordable price.
- The retailer: They need to propose high level of sales, good profit, low inventory, among other issues.
Of course, the goal of category management , both for the category management staff of the supplier and retailer, is to respond to both people. The difficulty is when there is one of both that is not fullfilled. Seth Godin recently wrote a blog post about the difference between the client and the customer. I believe he explains well the difference.
It is always better when the client is the end user (the customer) of one product, because it ease the customer relationship management process. Hence, one supplier (or provider as Seth is writting) needs to have two specific approach for the same purpose: selling a product to an end customer.
Let's not forget also that the supplier (or provider) do not always define products matching customers' needs. Sometimes (quite often actually) they launch new products to increase the profitability of a production unit: I acquired a new plant that do plastic tubes, I am going to put my best products in plastic tubes. I bought a brand recently, I am going to get my flagship product with the flavor of this new brand...
I believe that category management is efficient when it starts from customer needs. Of course, both the supplier and retailer may have industrial or economic interests, but in order to make long term decision, and analyzing all the different economical aspects of the decision, they should focus on how the category development may benefit the end consumer.
This article is part of the category management series. Here are the two previous articles: