Digging for treasure
August 08, 2016
The big retailers have been exploiting Big Data for years; now the consumer goods sector is catching up, and discovering the value of turning information into insight.
The words ‘consumer goods’ tend to turn up attached to ‘fast-moving’, but these days that adjective applies as much to the environment these companies operate in as it does to the type of products they sell. Digital technology is opening up new ways to market products, and reach customers. Both the agile niche players and the big conglomerates are learning from what the retailers are doing. This isn’t just sharpening up their operations, it’s helping to make them more attractive to potential buyers, who now expect to see greater analysis of product performance, and profitability by channel, customer, and SKU.
We all know what Big Data can do in principle, but how does it apply to consumer goods in particular? In essence, there are two things data analysis can do: first, assess what you’re selling now, which is about profitability; and second, help predict what you should be selling in the future, which is about innovation.
Data analysis can tell you not just what you’re selling, but to whom, when, how, and possibly even why as well. It can pinpoint what attracted consumers to a product in the first place, and track its lifecycle so you can detect when it’s getting tired and manage its decline. And by identifying buying patterns, it allows you to fine-tune your marketing to the end-user and target it much more effectively. It can even help with that Holy Grail of marketing, return on investment. For example, by using real-time data analytics we were able to prove to one of our clients that their investment in TV advertising was indeed resulting in higher sales. Their gut instinct said it was; the numbers proved it.
Other clients have had light-bulb moments of a different kind – in a number of cases we’ve been able to prove that the products they thought were the most profitable were actually earning lower margins. One client was confident their premium range made the most money, but the data told a different story. The key is to collect all the relevant cost data, and that can be complex, especially for companies that manufacture, finish and sell from multiple locations, and sometimes across different markets. You can only establish accurate profit figures in those circumstances if you factor in the costs of moving goods about in the ‘internal supply chain’.
Innovation where it matters
Data analytics of sales, customer behaviour, and channels can help focus R&D and product development resources where they will make the most difference. In a fast-moving environment, it can spot emerging consumer trends, alert you to disruptive new market entrants, and identify changes to competitors’ strategies. And social media analysis can give you an accurate real-time picture of how consumers feel about your brand. Having accurate and detailed data can also redress the balance of power between consumer goods companies and retailers, by providing the proof that their products are selling, and their promotions are working.
And contrary to popular opinion, Big Data needn’t be a big headache, or even a big project. Many companies are collecting data they aren’t using, and often don’t really understand. It’s all about making sure you’ve understood the question you’re trying to answer, and the value you’re trying to unlock. You can then collect the data you need to turn information into knowledge. That’s what leads to smarter decision-making.