Details Are in the Data

Fast-moving consumer goods firms continue to struggle to realize ROI and determine the profitability of their retail customers. Leveraging business intelligence is the key to understanding data and unlocking its value. This month, CGT sat down with Russ Hill, Director of Retail, CPG, Distribution and WW Industry Marketing for Business Objects, who taps into more than 27 years of experience in the retail and data warehousing industry to address these issues.

The greatest ROI usually comes from increasing sales rather than slashing costs. What steps should companies take to give sales managers the knowledge needed to positively impact the top line?

There are many dynamics when determining what issues to address to improve ROI. In particular, within the fast-moving consumer goods industry, three areas tend to stand out:
Sales and marketing
Brand management
Trade fund utilization

Due to the interrelated activities of the functional roles involved with each of these areas, it is necessary to evaluate all and to gain insight into the execution or lack thereof to determine what actions to take to enhance ROI. Having access to near real-time information on retail customer profitability, brand performance (be it in distribution by region, district, store, SKU or promotional performance) and how trade fund dollars are being optimized is necessary to determine which area requires immediate attention. As you can see, there is a symbiotic relationship between product, customer and operational efficiency when evaluating performance to take action.

Manufacturers can drive bottom-line growth by understanding which retail customers are most profitable. How can business intelligence enable this process?

Having the capability to understand a retail customer's impact on the business is imperative. Not only from the point of how much you are selling as at total, but also understanding what the overall impact is from the many operational components it takes to service a retail customer in order to find where potential top and bottom line improvements lie. Business intelligence is moving from a static environment to a dynamic reporting process with scorecarding relative to a retail customers performance.

This allows functional roles within a fast-moving consumer goods company to understand deviations from the norm against the year's plan and to address them in a timely manner.

As discussed previously, there is a highly interactive relationship of product (brand), customer and operations (sales and marketing) to consider when evaluating performance against execution.

Issues that are commonly experienced in the sales and marketing environments include:
Loss of distribution and customer turnover. An organization may find that it is losing market space to competitors, or even losing accounts completely, without enough information either to understand why or to reverse the trend.
Lack of insight into sales and marketing operations. If sales are below target, sales and marketing managers may be unable to track marketing campaigns in a timely fashion.
Declining revenue per customer. Customer spend may be declining, and an organization losing marketshare, due to the number of product lines or linear footage being reduced.

Issues common within the area of product or brands -- and impact brand managers -- tend to be:
Lack of visibility into brand assortment mix. Infrequent reviews and a lack of visibility can mean that a brand mix is not being optimized.
Lack of understanding of the local product mix needed by organization/customer. Infrequent reviews of customer segment assortments may result in a product mix that is not tailored to the requirements of a particular customer.
Lack of formal brand review process. If an organization does not have a formal review process, brand assortment information may not be analyzed at key stages.
Concerning issues that are commonly experienced by fast-moving consumer goods manufacturers and distributors:

Loss of market share.
The lack of a holistic view of the performance of key service KPIs, combined with limited post-promotion analysis, may hinder the effectiveness of future promotions, resulting in the loss of market share.
Overspending on trade promotion spend budgets. Poor monitoring and control of these budgets, the lack of analysis of promotion and spend, and too much forward buying can lead to escalating trade spend outlay.
Limited effectiveness of promotions. Poor monitoring of trade promotional spend ROI and event level performance impedes the effectiveness of promotions.

One of the keys to a profitable relationship is the manufacturer's ability to provide intelligent category insights to retail customers. 

How are companies strategically leveraging data analysis to accomplish this goal?

Companies must consider evaluating many aspects of their business. In the past, data in general has been aggregated at such a high level and consolidated viewpoint that the information may mask issues that would normally be overlooked. Disseminating details by retail customer, product/brands and operations, processes can be reviewed more effectively to improve sales and profitability.

Some examples of areas for improvement tend to surround supply chain efficiencies such as load balancing, frequency analysis, reconciliation against damages and fulfillment, sales analysis and marketing compliance, optimization of trade funds against product and brand performance to ascertain retail customer profitability. A key benefit is having information readily available when conducting business reviews with customers.

In your opinion, what percentage of promotions are actually realizing return? 

There are many studies which tend to indicate many answers. What is concerning is a recent industry study indicated that:
53 percent of surveyed retailers and manufacturers reported a measurable increase in 2005.
Trade promotion spend accounts for 54 percent on the average of a CPG manufacturer's marketing budget, up from 16.6 percent in 2000.
Trade promotion represents from 8 percent to 30 percent of gross revenues, the second largest, after cost of goods sold.

What value can consumer goods companies glean from providing managers with accurate information about problems in real-time?

This is where real ROI can be measured by utilizing business intelligence to enable process change.

Many companies can now isolate ineffective practices, determine sub-optimal performing retail customers, be it due to inadequate brand support, operational inefficiencies or alignment to customer base. As basis point improvements are made, the profitability falls directly to the bottom line. Business intelligence is eliminating the "silos" of the business units within companies.

Common metrics are used across these silos to allow business functional roles to collaborate more effectively by truly understanding, measuring and taking action that benefits the company holistically. The details are in the data.