Mastering the Art of Category Management —P&L Management
The key aspect in a Category Manager role involves owning & managing the P&L for the assigned business. In this story, we will try to deep dive & understand the same.
Fundamentally, a category manager focuses on achieving the Gross Revenue targets as well as the Net Profit goals. Quintessentially it further involves tracking the Gross Sales, Gross Discounts, Cashback, Cost of Sales, Marketing Spends as well.
Let’s try to understand the same through a quick example explained below :
In the snapshot, we can notice an e-commerce business with a Gross Sales worth 60 Cr, stood at Net Sales worth 54 Cr after cancellation & refunds.
Let’s address the key metrics along with strategies to achieve the business goal.
A) Gross Revenue: Based on seasonality & business goals, Gross Revenue can be improved through better negotiation with the Suppliers & working closely with the Business Development team to acquire key suppliers delivering higher margins. Dynamic Sorting/ Ranking of Products also play a crucial role in defining revenue growth in the category. Bundling/Upselling, focus on Repeat Customers helps to achieve the Revenue targets in a sustained manner.
B) Gross Discounts: It involves scientific segmentation of the customers whose purchasing decision is influenced by discounts/cashback offered on the Product. Consistent experiments to test the customer elasticity can help to optimize the discount & cashback offered. Opting for Wallet Cashback instead of Instant discount is one such approach which can help to curb the Cashback because there is a considerable wallet breakage % & it encourages Repeat purchase. Furthermore, staggered wallet cashback based on various stages of the purchase ( like on delivery or while writing feedback )can fuel re-engagement with the customer along with enhancing gratification quotient.
C) Cost of Sales: Conventionally, it’s an aggregation of B2B agent commission/payouts ( B2b distribution channel ), Operation losses & Payment Gateway Cost. The thumb rule here involves a well-negotiated agent commission/payout %. Also if you have API partners who are displaying your content on their channel/website, one can explore one time fixed cost or monthly cost structure to leverage the content. Monitoring operation losses monthly to identify the key reasons and weeding out problematic & repeat offenders can help to minimize Operational loss.
D) Marketing Spends: It involves both Direct & In-Direct Marketing Spend. Direct Spend includes the total Paid Marketing Spend on various channels such as Google Adwords, Affiliates, etc which resulted in direct & influenced conversions on B2C platform. Paid Channel Optimization is the key KRA of the Marketing team which requires strategic inputs from the Category Manager in order to promote high margins products /supplier on Paid Channels. Indirect Spend involves TV advertisement, Newspaper ads & Social Media promotion which aims to build awareness & strengthen the Product brand.
In addition to the above mentioned metrics, a Category Manager scope can involve optimizing the Direct Salaries & Direct Overheads Cost of the business as well.
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This Story incorporates key inputs shared by Ankit Rastogi-VP @ Cleartrip.
