A New Day for Traditional Brands
Consumer packaged goods manufacturers innovate to influence buying behavior.
Enterprise resource planning and the processes these systems manage have become woven into the fabric of most consumer packaged goods (CPG) manufacturers. But these companies are discovering that a break from tradition can provide a competitive edge. In the past, they relied on brand and category management to differentiate themselves in the marketplace and to support retail sales. But now, the CPG industry is coming to realize that integrated data and analysis can be used to influence buying behavior in ways that simply aren’t possible with traditional approaches.
The Changing Marketplace
Trends such as mobile technology and social media have certainly changed the retail industry, but other, more subtle changes have also made an impact. For example, retailers are shifting their business models to appeal to omni-channel shoppers who can touch the product in a store, but then buy it cheaper online.
To better understand such dynamics and the evolving marketplace, retailers have made significant investments in data and analytic platforms. And although they often share point-of-sale (POS) transactional information with manufacturers, CPG companies struggle to bring it together with their production, marketing and consumer data for an integrated foundation that can:
- Provide timely consumer insights to serve research and development, marketing and sales
- Let sales know about and act on a demand for products by different retailers
- Launch innovative products that establish new categories
- Inform marketing about actionable shopper strategies that influence the path to purchase
- Enable an adaptive pricing strategy to maximize margin and volume
- Help sales track online and offline consumer behavior that influences purchase decisions in the store
Value Over Discounts
Integrated data and analytics can help manufacturers build better relationships with retailers. By going to retailers with consumer insights about what is influencing product purchases, CPG companies can move away from discount and price-based trade promotion. Instead, they can focus on value-based programs that drive sales and category growth without cutting into manufacturers’ profit margins.
Organizations that build consumer databases reap unique benefits. They can use the highly prized data to influence product selection and to launch more relevant and impactful promotions. Although consumers often make buying decisions based on price, taking a data-driven approach to capture and leverage consumer insights for executing shopper-marketing programs helps. The insights enable manufacturers to show retail partners that incentives based on value rather than price actually work.
For instance, strategic applications of “buy one get one free” and limited-time price reductions can affect sales volume and velocity. However, the promotions do little to create brand value in the eyes of consumers—the gold standard upon which the strongest CPG brands are based.
A Shared Approach
To become more value-based, manufacturers can use detailed transaction data from retailers to create strategies that look beyond a store-focused approach. Integrating data from sources such as social media and other channels that are not found in an enterprise resource planning system can enable companies to influence the path to purchase via digital connections and generate new sales.
A portfolio approach to consumer goods sales and marketing has advantages. A product purchase, for example, offers the chance to develop a customer relationship—besides ringing the cash register. This naturally leads to an understanding of shopper behavior that can be potentially leveraged by other brands across the enterprise. However, that’s only possible if data is captured, analyzed and shared among those brands.
Sharing data is a challenge for manufacturers that have been doing business the same way for decades. But making information available across the enterprise is essential to keep brands from disappearing or being viewed as commodities bought solely on price.
New Behavior, New Sales
CPG companies are discovering that leveraging integrated data and analytics—even if it breaks from their traditional way of doing business—can lead to new sales opportunities. It can also provide the competitive boost they need to improve their business.
Most of these organizations struggle with sales and share growth because consumer behavior is hard to change. The key to driving that change is collecting and analyzing data to anticipate a consumer’s needs over time, then pre-empting purchasing decisions with compelling new products, offers or pricing that result in new categories, new sales and loyalty. This approach not only helps establish relationships with consumers, it helps to boost the bottom line.
Gib Bassett is the Global Program Director for Consumer Goods within Manufacturing for Teradata.