Winning the Analytics Arms Race

As digital channels grow and the forms of available engagement across them, so too does digital data. This exponential growth of digital data is forcing consumer goods organizations to make rapid strides in their data analytics capabilities. While CGs are doing their best to keep pace, many are struggling to keep up with data-driven marketing leaders like Amazon.

Consumer Goods Technology and RIS have been conducting annual surveys the past five years to assess and compare CG and retail companies’ analytic capabilities. While last year the majority (65%) of respondents had annual revenues of $1 billion or more, just 46% of this year’s respondents were that large, and the percentage of sub-$100 million CG companies doubled. With fewer resources and declining revenue, small to medium sized CGs are challenged to compete with larger players that have the budget and resource to fully leverage the power of analytics to understand, serve and influence their customers. These smaller companies have a difficult time funding foundational investments in tools and data management infrastructure and both they and the industry as a whole finds itself lagging behind in analytics data quality, management, tools and team/resource. Without a qualified and coordinated analytics team supported by the right suite of tools, consumer goods business fail to establish the building blocks from which analytics-driven organizations are built.

From 2016 to 2017, attitudes of CGs surveyed by Consumer Goods Technology in regards to where they believe they are in their analytics efforts in comparison to competitors has declined significantly. While in 2016, only 10% felt they were lagging behind their competitors in data quality, this year that number jumped to 27%. Even more startling, is that last year only 18% felt they were lagging behind in data management and this year, that percentage skyrocketed to 39%!

“There’s an element of greater pessimism on their performance across everything that we’re seeing,” says Gaurav Pant, chief insights officer at Incisiv. “They generally feel that they’re not doing as well as they should be.”

CG companies are realizing the deficit, however, and trying to focus their resource and investment in high-return areas like marketing and supply chain with a goal of enhancing understanding of the consumer to improve 1:1 consumer engagement and digital marketing effectiveness.

In the marketing space, CG companies’ growing effort to develop direct consumer relationships through digital channels is reflected in the increasing application of advanced analytics capabilities in areas such as promotions and customer insights, where greater transparency is yielding rich data. Personalized marketing and social media influence are also seeing the use of advanced analytics.

In the supply chain space, while CGs are not heavily investing in advanced analytics for trade promotion, most likely because it is a relatively mature area, CGs companies are ramping up their investment in supply chain and inventory analytics. 41% are using investigative or predictive analytics in category management and nearly as many in inventory management. 14% are using predictive analytics for demand forecasting. While expanding analytics capability is most driven by a desire to better know and engage consumers across digital, right behind that goal is the initiative to improve price performance and trade spend effectiveness.

The race to build closer relationships with consumers is on, and CG companies know analytics is the key to driver of those efforts. Many are working diligently to build their programs, allocating a larger portion of IT budgets, working on data integration, technology tool and management issues while seeking to attract the right talent.

While frustrated at the pace, the CGs that will be be able to push through and move the needle are those that put talent recruiting, culture reshaping and governance before the integration of new new software and suppliers.

“The greatest challenge with the analytics divide is that you don’t see it until it hits you; you know when your competitor has turned on BOPIS, but you don’t know when your competition has turned on their analytics to win share of wallet with your loyal customers till they defect — defense doesn’t always win championships,” writes Gaurav Pant, Principal Analyst at EKN Research.

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