Categorize, segment, and merchandise products and services by using Dynamics 365 applications
Applies to: Dynamics 365 Commerce, Dynamics 365 Customer Insights, Dynamics 365 Customer Service, Dynamics 365 Customer Service Insights, Dynamics 365 Field Service, Dynamics 365 Marketing, Dynamics 365 Sales, Dynamics 365 Supply Chain Management, Microsoft Supply Chain Center
This article describes how to categorize, segment, and merchandise products and services by using Dynamics 365 applications.
All organizations group and categorize or segment their products into logical grouping for various reasons. Dynamics 365 includes several capabilities that you can consider implementing together at the beginning of a project. The terms categorization, merchandising, and segmentation of products and services are all related concepts. Although all three terms are often used interchangeably, they do have distinct meanings and functions in the system as well. The following list outlines the differences:- Categorization refers to the process for grouping products or services based on shared characteristics.
- Segmentation refers to the process of dividing a market (of typically customers) into smaller groups (or segments) based on shared characteristics or interests.
- Merchandising refers to the process of presenting products or services in an appealing and attractive way to the customers.
It's important for an organization to consider carefully how it categorizes, segments, and merchandises the products and services it offers. During the implementation of a business solution, an organization often already has a way of doing this already. It's important to consider if the current mechanism for categorizing products and services meets all the business requirements, because the implementation of a new technology solution is often a good time to consider making a change. The organization might want to consider questions such as the following list:
How do you drive downstream business processes and automation?
How do you report and analyze your data including operational reporting and financial reporting?
How has your business grown since the original mechanism of categorization, segmentation, or merchandising was developed?
How do you anticipate your business will grow in the future?
The answers to these questions should help inform your process for defining the way you implement a technology solution to support the categorization of products and services. This business process area should always be considered early in a Dynamics 365 implementation project. Also consider the number of changes that might be happening to the data in this area as well. This can make integrations, data migration, and other aspects of your project more complex.
When an organization starts a Dynamics 365 implementation, it's important to carefully consider how you define the product lines in the system. This includes tasks like setting up item groups and product categories in Dynamics 365 Supply Chain Management and product families in Dynamics 365 Sales. The business process areas for categorizing either products or services also include the definition of product policies. We recommend that you group similar items together based on the expected behaviors they need in the system. This includes settings like item model groups, reservations, storage, and tracking dimensions, and more in Dynamics 365 Supply Chain Management.
Also, if your organization offers multiple types of products or services, you should define the rules and configurations for each type of product or service that you offer. For example, in the chemical or food and beverage industry, you might use catch weight items. In some industries, consigned inventory is common and requires more setup, configuration, and considerations. Similarly, the service industry has considerations to make for the services that they offer, including warranties, installation, and so on. Many organizations also charge extra fees or service charges for tangible items that are sold which might require more considerations. Dynamics 356 supports various flexible configurations to support many types of products, services, and extra fees and charges that might be charges to customers or imposed by suppliers.
Once you have a basic definition for organizing products or services, you can categorize and build hierarchical structures and catalogs or assortments for the downstream processes. Dynamics 365 Supply Chain Management and Commerce support multiple flexible hierarchies for procurement, sales, channel management, and more. In Dynamics 365 Sales, you can create hierarchies of products or services with product families. Dynamics 365 Commerce uses assortments to define product mix for a retail channel such as the call center, retail store, or online store. One or more assortments are then combined and assigned to a catalog for each retail channel. This process often uses product attributes that further describe the product. However, attributes can describe categories or retail channels as well, for example.
When you group common or similar items together into categories, you can more easily manage the attributes. Attributes serve an important function in merchandising and for customers to find products that meet their requirements. Attributes can be easily added at any time, but starting with a good baseline for your project to help you meet reporting requirements is critical to downstream analytics. With tools to mass update attribute values, you can easily manage the values at any time and adapt to the changing customer needs and supply chain.
With Dynamics 365 Customer Service, you can create and manage subjects to manage complex hierarchies that can represent products, brands, or types of issues that are reported by your customers, for example. With Dynamics 365 Customer Insights, segments help you organize customers into groups based on their buying habits and one common segment is typically related to the products customers purchase. However, organizations can define many segments based on many different attributes of the products that are purchased.
Stakeholders
Many people across the organization should contribute to the decision-making process and design of the define product catalog and strategy business process area. The following list provides examples of such stakeholders:
Marketing stakeholders: This group of stakeholders might include roles such as the Marketing Manager, CMO, Analyst, Advertising, or Coordinator. The marketing department is responsible for developing and implementing marketing strategies based on the categorization and segmentation of products and services. Therefore, they should be involved in the implementation of the technology solution to ensure that it supports their marketing initiatives.
Sales stakeholders: This group of stakeholders might include roles such as Sales Rep, Account Executive, Business Development Manager, Sales Manger, Sales Director, Sales Engineer, Inside Sales, Key Account Manager, Channel Sales Manager, or the CSO. The sales stakeholders are responsible for selling the products and services. Involve them in the implementation of the technology solution to make sure that it supports their sales efforts.
Customer service stakeholders: This group of stakeholders might include roles such as Rep, Manager, Supervisor, Director. These stakeholders are responsible for providing support to customers. Involve them in the implementation project to make sure that the final solution meets the needs of the customers.
Finance stakeholders: This group of stakeholders might include roles such as Controller, Director, CFO. The finance stakeholders are responsible for budgeting and financial reporting, and they should be involved in the implementation of the technology solution to ensure that it aligns with the organization's financial objectives.
Executive Management stakeholders: Executive management should be involved in the implementation of the technology solution to ensure that it aligns with the organization's overall strategy and objectives and to provide support and resources for the implementation.
Define product catalog and strategy process flow
The following diagram illustrates the define product catalog and strategy business process area. Each solid gray rectangle on the diagram represents an end-to-end business process. The solid blue rectangle represents the business process area. The diagram shows the subprocesses for the business process area. The arrows on the diagram show the flow of the business process in an organization. If a subprocess can lead to more than one other subprocess, the parallel subprocesses are shown as branches.
Start
A parallel process that isn't shown connects to an upstream business process area for Introduce new products. This box connects to 4.b.i. Assign product attributes.
Design to retire end-to-end process
Define product catalog and strategy business process area
Define product policies
Define product types
Define product lines
Organize products
A parallel branch connects to Introduce new products, which has parallel branches to each of the following end-to-end scenarios:
- Order to cash
- Plan to produce
- Source to pay
- Inventory to deliver
Each of these downstream end-to-end processes connects to Record to report, which connects to End.
Determine product mix for a retail channel
Is update required?
- Yes leads to Maintain product catalog.
- No leads to End.
Determine product attributes
Assign product attributes
Is update required?
- Yes leads to Maintain product attributes.
- No leads to End.
Define product catalog and strategy benefits
There are many key benefits that can be used to monitor and measure the success of implementing technology to support the define product catalog and strategy business process area. The following sections outline the key benefits that an organization might monitor and measure for define product catalog and strategy.
Streamlined categorization
Dynamics 365 Supply Chain Management provides tools for categorizing products and services based on shared characteristics such as attributes, categories, and subcategories. This makes it easier to manage and organize products and to create targeted marketing strategies. When you also use other Dynamics 365 applications the product details can be synchronized using Dual Write maps to other tables and entities to support the business needs in many other applications automatically.
Improved customer insights
When you use Dynamics 365 to categorize your products or services, your organization can gain insights into the needs and preferences of your customers. You can use this information to tailor your offerings to meet the specific needs of different customer groups. For example, in Dynamics 365 Customer Insights, you can create a dynamic segment to automatically update when customers purchase a certain type of item, and then promote a similar item using a customer journey. With this approach, you can create more targeted marketing strategies that ultimately make your marketing campaigns more effective and improve the return on investment of your campaign.
Optimize product development
When it understands the needs and preferences of different customer groups, an organization can develop products and services that are more likely to be successful in the marketplace. This can help to minimize the risk of product failures and reduce development costs. Dynamics 365 Supply Chain Management and Commerce includes flexible product categorization and attributes to support unique industry and localization requirements. When you combine this data with Power BI, you can easily analyze the data to determine which customers and products are performing better. Similar functionality is available with Dynamics 365 Sales to create product families and analyze the sales data by using Power BI.
Increase customer loyalty
When an organization can tailor its offerings to meet the needs of different customer groups, it can increase customer satisfaction and loyalty. One result can be higher retention rates and increased customer lifetime value. Dynamics 365 Commerce includes a loyalty program that enables you to track sales across every channel, and Dynamics 365 Customer Insights enables you to pull sales data from many different sources for analysis.
Optimize customer experiences
When you use subjects in Dynamics 365 Customer Service to manage cases, you can model them after categories of products and services to help categorize and analyze cases by the subjects of cases that are created and worked on. When you use automated routing with cases, this can also improve the customer experience to ensure that the right person is assigned to the ticket to help resolve the issue. This can be especially true in organization or industries where the product mix is diverse. In cases where the product mix isn't diverse, the subject can still be helpful in analyzing trends within a given product line, for example to determine if more training or quality issues exist.
Next steps
If you want to implement Dynamics 365 solutions to help with your define product catalog and strategy business processes, you can use the following resources and steps to learn more. (Links are added, when the articles are ready.)
Define product catalog and strategy (the article that you're currently reading)
Related information
You can use the following resources to learn more about the define product catalog and strategy business process area in Dynamics 365.
Find definitions of terminology that is used in content for define product catalog and strategy in the Glossary of terms in Dynamics 365 business processes. For example, this glossary includes the following terms:
Contributors
This article is maintained by Microsoft. It was originally written by the following contributors.
Principal author:
- Rachel Profitt | Microsoft FastTrack Solution Architect
Other Contributors:
- Michael Herold | Microsoft Dynamics Principal Consultant