The CPG sector is extremely mature with significant profit challenges on both the retailer and manufacturer side. The days of “Gut Feel” in determining the tactical and strategic deployment of trade funds are long gone. As if the annual inefficient CPG trade spend of over $225 billion dollars was not enough cause for concern, we have added more complexity and potentially more inefficiency, by adding the likes of Shopper Marketing and Digital Brand media to the puzzle. On the surface the advent of the ability to target specific consumers with data sourced from loyalty card programs and electronic communication to deliver a specific brand message or a targeted merchandising offer is intuitive and intriguing, but it will only compound the industry profit erosion if it is not collaboratively managed via Joint Business Planning.
Joint Business planning can only be effective and mutually profitable if the planning partners have access to “One View of the Truth” regarding all of the data necessary to evaluate past strategic merchandising initiatives and accurately plan future deployment of trade, shopper marketing and digital media funds. The October edition of Advertising Age had an article entitled “The New Trade Promotion”. It was describing the evolution of the Digital Media Exchange being deployed at Wal-Mart, Target, Safeway/Albertson’s, ShopRite and Food Lion to name a few. This exchange is utilizing the rich consumer demographic data being mined from loyalty cards, credit cards and direct electronic/mobile communication to develop targeted merchandising and digital media campaigns. With that comes a demand for an incremental investment from the manufacturer to participate. Without an intelligent source of data that would include accurate baselines, accurate historical lift coefficients on conventional price promotions, an overlay of incremental consumer promotions (i.e. FSI’s, Shopper Marketing, and Digital Media messaging), both trading partners will be destined to failure. History has proven that merely spending incremental dollars on the next shiny object will not stem the eroding profit margins in the CPG sector. Both parties need real-time access to all the pertinent data to evaluate past strategic/tactical merchandising initiatives and have the ability to predict and optimize the promotional spending mix for future initiatives. This can’t be accomplished via “Guy Feel” or the spreadsheet from hell.
The good news is in the Era of big data combined with our significant modeling capability, all of the necessary intelligence to accomplish mutually profitable Joint Business Planning is available to us today. Once we have “One View of the Truth” to evaluate past promotion initiatives and accurately predict the optimal return on future investments, we will be on the path to stemming the profit erosion in CPG and maximizing the power of the targeted consumer data we are collecting. Today is a great day to free yourself from the chains of the inaccurate spreadsheet and maximize the power of “Big Data Modeling”.