The demand for Consumer Goods companies to use data to influence strategy and decision making increases as the pressure to create sustainable growth rises. However, many companies fail to reach their full potential, particularly in the area of trade promotion optimization, due to the manner in which they manage their data. As a result, they miss the opportunity to shift data from a snapshot of the past to modeling actively to predict future outcomes.
Drowning in data
Most companies find their data being pooled into data lakes, or “buckets” according to marketing expert, Elle Morgan in her article “Preparing for Predictive Analytics: Are you Ready?” that is featured on The Next Web. These buckets make it difficult to gain measurable insight that will lead to helpful cross-departmental communication. In trade promotion, data lakes isolate in-store activity from the financial metrics leaving an incomplete picture of performance. Without this, true profitability of a promotion cannot be calculated, and any analysis is limited to a single transaction level. This compartmentalized understanding of the business leads to an unsubstantiated reliance on the previous year’s plans and a resistance to risk – all of which contribute to revenue stagnation.
"Many companies fail to reach their full potential, particularly in the area of trade promotion optimization, due to the manner in which they manage their data."
Morgan states, “The problem with data buckets is that they’re siloed and separated from one another. You can learn and harness more potential from your data when departmental barriers are broken down.”
Coming up for air
So how is this data divide overcome? The answer lies within a willingness to embrace predictive analytics. According to Morgan, “The power of predictive analytics rests in the ability to blend different sets of data together seamlessly.”
In trade promotions, data integration needs to harmonize POS, shipment and spending data to no longer be an obstacle, but a turning point to achieving profitable future plans. When this is included as part of a comprehensive trade promotion optimization solution, organizations will start to rely on the accurate baselines and post-event analytics to model the health of their business. Furthermore, the historical and predictive lift-coefficients that are only available as a result of timely data harmonization will drive scenario and plan development providing quantified KPIs for manufacturer and retail partners. This type of predictive planning is a crucial element in achieving trade promotion optimization because it eliminates the guesswork and minimizes risk during planning.
“The lack of accurate and comprehensive data is one of the most pervasive challenges to employing predictive analytics. The more complete the data is at your disposal, the greater your chance of producing accurate predictions,” says Morgan.
A Breath of Fresh Air
Getting accurate predictions at the event level is the start. Once a company overcomes the hurdle of “dirty” data, they cannot only see how one change to one promotion might affect the outcome, but can begin to address their overall trade promotion strategy. Optimizing strategy includes considering how consumer marketing and competitive events are affecting promotional performance. It means finding not just the best event, but the optimal promotional mix to achieve the company’s objectives. It requires bringing your data insights to your retail partner to have the sometimes challenging conversations about promotion execution, category management and collaborative opportunity.
"Predictive planning is a crucial element in achieving trade promotion optimization
because it eliminates the guesswork and minimizes risk during planning."
As stated in the article, “The best way to predict the future is to create a foundation where prediction is possible.” Utilizing a predictive Trade Promotion Optimization solution will allow you to create a platform for cleansed, accurate data so that you can confidently make important decisions without one hand tied behind your back. Freeing up that other arm means your company can begin to take the necessary steps towards reaching its full potential. Cleansed, harmonized data that is being used in future predictive planning, with quantified results is the sign of a company successfully unlocking all of their possibilities.
What to read next: How does a company optimize promotions when they are drowning in data?