How do you determine which categories to invest in?

1 Define your category roles

Before you can decide which categories to invest in, you need to define the role and purpose of each category in your sales strategy. A common framework for this is the BCG matrix, which classifies categories based on their market share and growth rate into four quadrants: stars, cash cows, question marks, and dogs. Stars are high-growth, high-share categories that require investment to maintain their leadership position. Cash cows are low-growth, high-share categories that generate steady cash flow and require little investment. Question marks are high-growth, low-share categories that have potential but also risk, and require investment to increase their share. Dogs are low-growth, low-share categories that have low profitability and may need to be divested or discontinued.

2 Analyze your category performance

Once you have defined your category roles, you need to analyze how each category is performing against its objectives and expectations. You can use various metrics and indicators to measure your category performance, such as sales volume, revenue, margin, market share, customer satisfaction, loyalty, and retention. You can also compare your performance with your competitors and the industry benchmarks, and identify your strengths and weaknesses. You can use tools like SWOT analysis, PEST analysis, and Porter's five forces analysis to assess your internal and external factors that affect your category performance.

3 Evaluate your category opportunities

After you have analyzed your category performance, you need to evaluate the opportunities and challenges that each category faces in the current and future market conditions. You can use tools like market segmentation, targeting, and positioning to identify your ideal customers, their needs, preferences, and behaviors, and how you can differentiate your value proposition from your competitors. You can also use tools like market sizing, forecasting, and trend analysis to estimate the market potential, demand, and growth rate of each category, and how they may change over time. You can also consider the impact of external factors like technology, innovation, regulation, and competition on your category opportunities.

5 Monitor and adjust your category portfolio

Finally, you need to monitor and adjust your category portfolio regularly to ensure that you are achieving your desired results and adapting to the changing market conditions. You can use tools like the balanced scorecard, which tracks your progress and performance across four perspectives: financial, customer, internal, and learning and growth. You can also use tools like the PDCA cycle, which involves four steps: plan, do, check, and act, to continuously improve your category portfolio. You can also use tools like the feedback loop, which collects and analyzes data from your customers, employees, and stakeholders, and uses it to inform your decisions and actions.