Retail Shopper Optics – Analytics On-Time, Any-Device

By | January 7, 2014

Collaboration between consumer goods manufacturers and retailers is today more important than ever.  CPG manufacturers struggle with fading brand loyalty from price sensitive consumers who are increasingly switching to private label products. The CPG “customer” (aka Retailer) faces additional challenges including the showrooming phenomenon driven by mobile and risk losing a shopper if a desired product is out-of-stock in store. Retailers also need CPG supplier engagement in creating differentiated in-store experiences.

Market trends render traditional approaches to collaboration ineffective.  It’s no longer sufficient to make decisions based on disparate, historical sales data.  The time is ripe for new thinking. New methods for integrating specific data elements to derive actionable insights that enable brand, product, package decisions. New methods for pulling together syndicated, loyalty, and POS real-time sales information to drive supply chain and customer business planning decisions. New capabilities are making it easier than ever to tackle “big data” opportunities found in shopper interaction information.

Teradata Shopper Optics addresses these and many other CPG marketing, sales and supply chain objectives — cloud based advanced analytics that removes the barriers to higher performance manufacturer and retailer collaboration.

Collaborating for Success

Leaders in the consumer goods and retail industries have differentiated themselves in their respective industries by executing laser-focus consumer connection strategies.  Creating differentiated shopper experiences has come to define retail execution excellence. A variety of decisions – from assortment and inventory planning through pricing and trade promotion – affect shopper purchase outcomes.  What separates those partnerships who make winning decisions are advanced analytics based on integrated and detailed data from sources such as the retailer’s point of sale system, loyalty programs, syndicated sources, and data aggregators.

Traditional methods of data-based retail collaboration require that the consumers of these insights (salespeople, shopper marketers, space planners, category managers, pricing analysts and others) engage their peers in IT (Information Technology) to consider ways of obtaining and “harmonizing” numerous independent data sources.  This can be a considerable challenge given investments in inflexible (or expensive to modify) ERP systems, increasingly scarce IT budgets for new “test” projects, and a generally stodgy, slow, regimented gating processes for reviewing and approving new projects. Marketing in Retail and CPG are finding new and different solutions by engaging with providers of cloud-based, software-as-a-service / insights-as-a-service solutions. These solutions provide fast time to market, flexible data management capabilities, and access to insights anytime, anywhere. They also are subscription-based thus Marketing can fund these services out of their OPEX budgets vs. having to rely on CAPEX from IT. In addition, marketing and consumer engagement initiatives need to be tested, launched, measured, and expanded (or shut down) – quickly. This requires speed to market, flexible analytic solutions that enable business decision-makers to invest or change-course, and the ability to leverage latest and greatest marketing reporting and analytic capabilities.

Integrated Analytics For Consumer Goods

To rapidly bring the benefits of advanced shopper analytics to CPG sales and marketing professionals, Teradata has partnered with Data Ventures and Tibco Spotfire to deliver the cloud-based, Insights-as-a-Service (IaaS) Shopper Optics solution.  With Teradata Shopper Optics, class-leading data management, security, analytics and visualization capabilities, actionable analytics in the cloud offer a “win-win” for manufacturers and retailers alike and a fast-to-market integrated data, business-enabling solution. The Shopper Optics solution enables faster, data-driven decisions across the marketing, category, space, consumer, and product supply space. Here are several examples.

Assortment Optimization:  Price is most often reported as the leading factor in shopper purchase decisions within a category so understanding the effect of price on sales, volume and share is critical to maximizing profitability.  For every SKU (Stock Keeping Unit), this analysis lends insight into price elasticity, potential price-based competitive cannibalization, and category and shopper wallet penetration. As a space planner or category manager,  Teradata Shopper Optics analytics are key to driving product assortment decisions with a retailer. Assortment insights help to enable decisions that limit and/or reduce out-of-stocks, provide visibility into space allocation decisions, measure the effectiveness of new product introductions (real-time sales insights), and power store clustering views. The Shopper Optics solution is highly shopper-centric and is grounded in shopper purchase behavior analytics as well as available loyalty program insights. With Shopper Optics insights, product assortment decisions can be customized by distinct store cluster and geography. In addition, new product “winners” and “losers” can be quickly and accurately identified and overall product availability may be improved.

Bottom line metrics include overall improvement in category sales and profit due to reduction in out-of-stocks, lower inventory carrying and stocking costs through more effective forecasting and planning, and a tailored / differentiated consumer experience due to assortment flexibility.

Out-of-Stock Reduction:  Survey every Consumer Goods organization (and most retailers) and without fail, reduction of out-of-stocks (OOS) – or even better, predicting out-of-stock situations – is a near-top priority with supply chain, commercialization, brand, and customer account teams. Elimination and/or reduction of OOS require the right insights at the right time to drive decision-making processes and this is one of the objectives of the Teradata Shopper Optics solution.

Traditional approaches to out-of-stock elimination often fail to meet optimal potential due to a lack of accurate, daily (or near-real-time) demand sensing information available in a format / structure that is actionable. When detailed Point of Sale data received from the retailer (or purchased via IRI or Nielsen) flows directly into the Shopper Optics platform, pre-packaged advanced algorithms generate insights and views that enable identification of OOS trends, highlight operational gaps, and assist in planning for future sales promotion.

The key strategic element that enables the OOS capability is an advanced statistical approach to understanding when, where, and on which products lost sales occur due to inventory stock-outs. Once the business understands which products, locations, times demonstrate regular out-of-stock conditions, action can be taken to remediate. Productive items can be shifted to replace non-productive items tying directly into retailer space and assortment strategy decisions. Unlike many other OOS algorithms that rely heavily on store audit, survey or perpetual inventory data, the Shopper Optics solution utilizes a predictive sales algorithm that relies on detailed POS data from the retailer.

Bottom line metrics include deep dives into OOS conditions spanning the category, geography (store clusters, markets, divisions, stores), and time (year, quarter, month, week, day) metrics, by brand, product, package.

Retail Price Planning:  What is the best item price that drives the highest margin possible for the retailer while representing a price the shopper is willing to pay for the item? How does a CPG supplier collaborate effectively with the retailer on retail pricing? At what point do consumers switch to another brand or to private label? For most CPG manufacturers, retail prices are not dictated to a retailer but instead are “highly recommended” to fit within the CPG commercial leadership pricing guardrails (or negotiated as part of the joint business planning process).

Through the Teradata Shopper Optics solution, business owners may quickly determine the most effective price points based on volume and margin. They may also review forecasted volume and revenue and can begin testing coupon and discount theories that will maximize the revenue opportunity.

Bottom line metrics center squarely on overall category sales and gross profit improvement. The solution provides detailed insight into metrics that enable a structured collaboration with the retailer.

Promotion Decomposition and Analysis:  Trade Promotion spend is widely accepted as CPG manufacturer’s largest expense, yet most executives lack confidence in these investments.  A lack of clarity as to direct and indirect factors’ influence on promotion effectiveness, varying pivot points in the route to market, and inconsistent methods for reporting and measurement harm business confidence in TPM solutions.  Promotional Decomposition examines detailed data at the item, supplier and category levels to identify the promotions, by product, that drive the highest incremental results while avoiding category defeating cannibalization and overstocking due to promotions-based purchasing cycles.

From a brand switching / private label trade perspective, category managers can be far more strategic than their competition if possessing an understanding of the impact trade promotion has on the overall category.  This analysis arms category managers with the insights necessary to provide their customers differentiated category growth strategies while simultaneously understanding how their own brand could be vulnerable to competitive promotions.

The promotion decomposition analysis also enables business users to understand how their programs are working and the health of their overall brand franchise with a retailer.  In addition, the CPG supplier can improve overall sales and productivity by understanding within a short time frame if new products are meeting shopper needs.

Bottom line benefits are that category leaders may employ course correction strategies earlier in the process if needed based on product performance. Also, overall innovation costs may be reduced due to an improvement in the new product introduction process.

Insights Enable Action

As part of this service, Teradata works directly with retailers, 3rd party data providers, and syndicated data partners to obtain, secure and harmonize data.  Teradata will work as much or as little as requested with the CPG technology team to ensure insights are integrated as necessary into legacy analytics and reporting infrastructure.

Teradata Shopper Optics accelerates the time to value for consumer goods sales and marketing professionals to mine insights from often difficult-to-obtain data.  Doing so with advanced analytics designed to support “win-win” collaborative strategies with retail partners makes Shopper Optics a must-have for competitive consumer goods organizations.


Name:  Justin Honaman
Partner, Consumer Goods / Retail National Practice Leader
Teradata Corporation
@jhonaman / @TeradataCPG

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