Optimally designed online shopping categories can increase sales. This long-term, strategic approach is often referred to as e-commerce category management.
In this article, you’ll learn more about what’s involved in achieving an effective approach. You’ll also discover how digital marketing plays a role.
We’ll go over how to implement an easy-to-follow 8-step strategy for maximizing engagement and sales. The key is to balance accessibility, unique merchandising, and customer behaviors. This can all be achieved through understanding and implementing data and analytics.
Read on to learn more, starting with the fundamentals of category management.
What is category management?
With category management, products are grouped together. The focus is placed on the needs of consumers. This structure allows for more efficient purchasing by anticipating customer demand.
The goal is to not cluster similar products together, but instead to group them by complementary items. That said, category management has been standard in physical retail for decades.
For example, you’ll find pasta alongside sauces in a supermarket. Similarly, hiking gear, clothes, shoes, and backpacks are usually in the same aisle of a sporting equipment store. This concept applies to e-commerce environments.
Cooperation between retailers and manufacturers
Optimal category management is based on functional cooperation between retailers and manufacturers. It works when both parties want to achieve a triple-win situation for satisfied customers, higher profits, and more sales. Within this context, product groups or service categories are viewed as strategic business units.
To be effective, a holistic approach that engages various departments in the company is needed. As mentioned above, this also involves input from manufacturers. Retailers control the product groups, while manufacturers provide detailed knowledge of categories. In the end, both sides are interested in finding the best possible solution for customers.
Tasks of a category manager
Typically, an effective strategy is managed by a dedicated person or team. They are usually responsible for the following tasks:
- Analysis of shopping baskets
- Definition, structure, and optimization of product groups (category management)
- Strategic planning of featured products
- Merchandising and purchasing for the respective product segment
Goals of category management
Category management is a strategic approach designed for long-term goals. The aim is to achieve higher customer satisfaction with an easy-to-navigate shopping experience. This generates more sales and improves the overall brand image.
Also, effective category management provides a competitive advantage. If done properly, consumers will come to trust a store for its expertise in certain product groups.
E-commerce category management
As you might imagine, category management not only applies to physical stores, but also to e-commerce. That said, it’s fairly new to the digital environment and there is room for development. Similar to brick-and-mortar retail, an online store can meet customer needs with structured product categories. This, along with an optimal user experience, can increase customer satisfaction and boost sales.
8 step strategy for E-commerce Category Management
Below, you’ll find an 8-step process that applies to both physical and online retail environments. This involves a systematic and structured approach. It’s encouraged to repeat the steps as much as necessary for implementing optimization and growth potential.
The basis for decision-making will come from data related to online marketing analytics. Therefore, close coordination with relevant teams and departments is essential.
Strategic coordination
Before the process begins, you should discuss strategies and goals with manufacturers for your future product groups. This will help avoid potential conflicts.
1. Understanding consumer behavior
This stage is about learning about your customers through purchasing patterns. You’ll want to pay attention to which products or services they choose. To do this, it’s helpful to analyze quantitative and qualitative data provided by market research.
2. Category importance
This step is where you’ll determine how important the selected product category is in your store’s overall portfolio.
3. Category evaluation
As soon as you have defined a product group, you’ll want to analyze its performance. Sales and various key figures on purchasing behavior will help assess where there is potential for development, particularly in comparison to competitors.
4. Category goals
To monitor the success of your product category, you’ll define specific and measurable targets. These relate to customer profiles, financial reports, market share, and performance. This is important for reaching specific audiences, achieving a certain turnover, and determining featured product categories.
5. Strategy development
At this stage, you’ll develop strategies to help achieve the previously defined goals. These are handled through marketing and procurement. Marketing involves conversion rate, average basket value, and profit. Procurement, on the other hand, focuses on more efficient processes.
6. Tactics for your category management
It is recommended that you and your team define a concrete action plan for the product range, placement, and visibility in your online store. With this, you’ll want to implement effective pricing, communication, and advertising strategies. If executed properly, these tactics will all help boost performance.
7. Implementation of your action plan
Now that you’ve defined goals, strategies, and measures, it’s time to implement your plan. For successful e-commerce category management, you’ll want to assign responsibilities and set deadlines.
8. Review
With your plan set, you’ll want to regularly review product group performance. This will help identify potential for growth and optimization. It’s important to implement improvements regularly. The aim is to design your product range as efficiently as possible.
E-commerce category management and digital marketing
There are many overlaps between e-commerce category management and digital marketing. You can use data provided by both areas to inform overall strategies. This will help determine the right campaigns to run to boost sales and performance.
Product allocation using keywords and clickstream data
As mentioned above, useful data is collected by digital marketing efforts. In addition, it’s important to pay attention to user behavior involving clickstream data and UX design.
This information helps determine which products belong to certain categories. It also is useful for identifying product range gaps so you can add relevant items to respective groups. Additionally, you’ll identify opportunities for cross-selling or upselling strategies.
Optimal website category structure
In addition to what’s already discussed, category managers can use data from digital marketing to identify optimal paths for product selection. This helps create an easy-to-navigate website for customers.
If your visitors are shopping through specific products or brands, you’ll want to make these entry points accessible. It should be simple to select paths through corresponding filter attributes in the search function of your website.
In some cases, themed landing pages, personalized product recommendations, or a brand landing page are worth pursuing. The aim is to offer visitors on your site an outstanding customer experience through an optimal website structure.
For example, category management can be used to structure “barbecue” products such as aprons, spices, charcoal, etc. This would be considered a product group. You may also want to create a themed landing page for barbecue season, which would not only feature products but also content for party inspiration.
Growth potential based on conversion rate and consumer behavior
With the help of digital marketing data, including website traffic, conversion rate, bounce rate, and average shopping basket value, there’s potential for growing sales.
For example, if you notice a category isn’t performing so well, you can improve discoverability in your e-commerce environment. With this, it’s possible to improve overall success.
E-commerce category management offers growth potential
As explained, you can increase customer loyalty and generate higher sales with strategically thought-out e-commerce category management. A long-term approach allows for enormous growth potential for your store. All these efforts can improve loyalty and customer engagement.
Frequently asked questions about e-commerce category management
What is e-commerce category management?
This is the management of the website layout and navigation, and SEO optimization of product listing. It also oversees product information accuracy, including images, descriptions, and pricing.
What are the goals of e-commerce category management?
The overall goal is to optimize the website for increased revenue. This includes conducting the right test for optimizing conversion rates.
What digital marketing data is useful for category management?
Category managers can analyze keywords and click performance to optimize category performance. It’s also worth looking at bounce rates.
What features help with online category management?
Features useful for category management include on-site search and product filters. The goal is to allow customers to easily find the product they want.
