Category Management – 7 Critical Success Factors For An Aggregation Approach

One of the perennial debates for category managers is when and how to aggregate spend in terms of approaching the market. Often that requires collaboration internally; getting different business units, functions or countries to agree a common collaborative approach so that their spend can be taken to market as a coherent whole. Anyone who has been through this process will know it is not always as simple as it sounds.

Therefore, before the category manager even tries to do that, they need to look at a number of critical success factors. Here are seven points that must be considered before the decision is taken to drive – or attempt to drive – such an approach.

  1. Clearly, there must be a strong business case for the collaboration; there must be a high probability of a good return arising from the effort and resource expended in the process.
  1. The internal units and key executives around the collaborative "network" must be ready for the proposed programme. In our experience, it may be better to omit a business unit or country if they aren’t ready for collaboration; working incrementally to gradually bring more participants on board is generally more successful than trying to force through a “big bang” approach.
  1. Senior management support is generally needed if this is an ambitious programme of aggregation and collaboration – there will be push-back at some point from somebody!
  1. There must be a suitable supply base that can operate at the desired level. There is little point working hard internally to set up potential “global deals” in a category if actually there are no global suppliers. If markets are largely national, for instance, then national category strategies will usually be the better approach.
  1. Economies of scale must be considered and understood. Bigger isn’t always better, sometimes the economy of scale curve goes in the wrong direction after a certain level of volume (i.e. prices go up if you have "too much" volume). The category strategy must consider this carefully in particular if an aggregation approach is proposed.
  1. Segmentation should also be considered carefully. In some cases, one sub-category might respond well to an aggregation approach whilst others do not. Top-level category definitions are not the right level to determine strategy; taking a global approach to "IT" or "marketing services" does not make much sense.
  1. Resources must be in place to make it happen. Never underestimate the level of effort, tenacity and energy that is needed to bring multiple parties (even from within the same business) together to collaborate on category approaches.

And if category management is of interest, we hope you have completed the Future Purchasing CatMan survey – we’re in the last few days before it will close for analysis. It is the biggest and best such survey in the industry, and participants get a free benchmarking report as well as pre-release access to the findings.

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