In our previous blog post, we talked about the challenges faced by Marketing Leaders in leveraging lessons from comparable (and similarly evolving) markets. We also introduced the concept of the “Category Maturity Model”. In today’s post, we’ll discuss this model in detail.
A category evolves across time and economic conditions. It has its own unique evolutionary path. It is imperative for category managers to understand the development path of each of their global / regional markets on a category evolution curve.
When constructing such a curve, it is vital to view these markets in the context of other markets. This can give us additional insight into the future performance of the category in selected markets. The Category Maturity Model is an excellent resource to analyze this information.
To build a Category Maturity Model, we need to follow 3 steps:
- Build a Category Evolution Path
- Identify similarities within markets
- Trace trajectories of markets, based on similar developed markets
Step One: Build a Category Evolution Path
As you’ll recall from the previous post, a Category Maturity Model is used to choose an effective marketing strategy, based on how similar goods performed in similar markets. Category maturity can be defined by form, consumption, or preference; market development can also be quantified in a comparable way. When examining categories, ask yourself:
- Form: Which attribute of the category is going to evolve? Are prices or the grams per pack expected to increase? Within the main category, which subcategory is expected to dominate consumption? Which sub category within my overall category would dominate and when?
- Consumption: Is my category in line with the economic conditions of my market? Is my market’s current GDP per capita (GDPPC) favorable to an increase in my category? What is likely to happen to my category once GDPPC goes beyond a certain point? Will consumption keep increasing? Or will it slow down? What is likely to happen to my Category consumption per capita (CCPC) with increasing GDPPC?
- Preferences: Are my consumers purchasing more than the GDPPC can afford? When this happens, what do the consumers prefer in my category? Which preferences should I target to get them to buy more than my market’s average consumer can afford?
As a result of Step One, we will get certain evolution paths for identified metrics (form, consumption, preferences) which are characteristic of the category. For e.g. for Candy, we might identify that as the consumption evolves, its composition changes from Boiled Sweets to Jellies and Chews OR for chocolate, we might see that people start eating larger block size or more premium variety of chocolate. There might be multiple attributes being exhibited here which are different for certain markets. With these metrics clear, we can move on to Step Two.
Step Two: Identify Similarities Within Markets
In Step Two, we’ll find markets, developed and underdeveloped, that share similar traits. This can be achieved by performing a clustering exercise on these markets.
Let’s use chocolate sales as an example. We might see that, as the chocolates category grows in a market, people start eating a larger amount of their favorite kind of chocolate. Or they might begin buying a more premium brand of chocolate.
During Step Two, we try to identify markets which are exhibiting comparable growth trajectories across time. The goal is to find similarities between developed and underdeveloped markets. To revert to our chocolate scenario, we might look at South Africa, an underdeveloped market, and Belgium, a developed market. Despite the different development status of the markets, they share similar characteristics in pricing. Thus, Belgium and South Africa can be clustered.
We might also have certain markets following a shared developmental path. India and Indonesia, for example, can be clustered together because their current demand for chocolate revolves around sharing it with the family.
Now each of these clusters of markets will have their own evolutionary paths based on pricing, demand, etc. Once we find a comparable market, we can use its growth (or lack thereof) as a reference point for the market we’re considering.
Step 3: Trace the Trajectories
Once we have the clusters composed of developed and developing markets, tracing the trajectory for each market should be relatively straightforward, with the developed market leading the way, giving us useful data in terms of the evolution of the developing markets. You can get an idea of how this works by looking at the chart below, which uses Chocolate as an example.
Once a Category Maturity Model is built, any new market (no matter if it’s a country or a region) can be easily integrated within the developed model, by identifying similarities of the market with the developed clusters.
Other Objectives met
The Category Maturity Model can also help you meet other objectives, including:
- Identifying inflection points in a market’s growth trajectory.
- Growth planning for subcategories (or brands within parent companies) at respective stages of maturity.
Does this resonate with your experience in marketing? Do share your thoughts.