Do you worry about your CPG business making fewer profits with every passing year? Declining margins and increasing competition from D2C brands are alarming stakeholders of leading consumer goods companies.
Are you surprised if we told you that 60% of all promotions don’t deliver additional value to brands? Or if we say that out of all new product launches, only 30% make it to the aisles and stay there profitably? These numbers are derived by analyzing data points collected from the field.
Only through data analytics can companies achieve the required growth and scale profitably. This blog covers everything you need to know about data analytics in the CPG industry.
Using data for Insights Generation
Any data collected from the market through sales or marketing activities helps analyze the company’s performance. Data are like random points on a graph, while analytics are the insights you gain from comprehending that data.
However, the stakeholders need clear KPIs to track performance analysis. For this, we must segment the data obtained from the market needs into three categories, namely:
1. Sales Data
Data collected relevant to sales of a particular SKU at a specific outlet is called Sales Data. It is the most common data type which most companies are already tracking. However, this one only provides a little information if read in association with observational and activity-based data.
2. Observational Data
The observations tracked and collected by your field force agents from retail outlets, stores, collection centers, and distributor points are called observational data. These observations are where the insight lies and help companies identify system gaps that offer potential growth opportunities. These insights could be on out-of-stock products, stock levels, facing discrepancies, and corrections required in the overall retail execution.
3. Activity Data
Activity data refers to the actions taken by the teams on the field. It covers everything from route planning, the efficiency of each route, the productivity of every field force agent, the conversions happening at a territory level, frequent action triggered at stores, and so on. This data is essential because it helps analyze what your company is doing to improve retail execution. The tracking of this data also helps to identify the most impactful actions taken by the agents.
How to convert this data into valuable Insights?
Capturing data is the first step in a vicious cycle that has the power to scale your company to greater profitability. The next is to use this data and run in parallel against each other to create insights, which is nothing but an indication of a problem or a gap in a process that can enhance sales. Planning is the next step in this cycle, allowing users to take data-driven actions on the field.
This cycle aims to provide a 360-degree picture of how the company runs effectively based on these insights. The field teams must constantly improve based on their data to achieve peak performance from past campaigns and current in-store data. This cycle of constant iterations based on data promises maximum results for brands.
How is data and efficiency in the field interrelated?
Tracking the three data types mentioned above would help companies transform their overall response to different issues arising in the field.
Predicting Consumer Behaviour
As a company with access to data, you can generate predictions or forecasts based on the consumer’s past or previous purchase patterns. It would help companies stay prepared for the increased or decreased demands for production and sales.
With available data, you can also help retail stores or distributors stay prepared for the upcoming season. Order size adjustments for retailers can improve in-store strategies while preventing out-of-stock issues, expired products, or excess storage space usage.
Merchandising Compliance at Retailers
Merchandising is complete only when retail stores are ready to adhere to in-shelf compliance guidelines offered by the agents. Ensuring effective retail compliance helps push sales by more than 180%. However, in-store compliance is often executed only to 50% potential, costing brands approximately 25% of their potential retail sales.
By establishing a secondary display line of products, companies can discover the baseline metrics for boosted sales. By playing around with this data, retailers will realize how their on-shelf arrangements hamper sales at a particular location.
Shelf Space Competition
Getting space on the shelves is very competitive for new products launched. Stop depending on shelf space purchases and rely on creative storytelling using your data to invade shelves. Retailers will only understand numbers and metrics when persuading them to stock your products.
We recommended businesses identify quantifiable KPIs and use them to measure and track them as secondary data points. These data points can be incorporated into their growth strategies while being worked upon to improve the team’s performance. Over time, KPIs will provide you with a picture of the achievements and shortcomings of your strategy.
The first thing companies have to ensure is identifying the company objectives before diving deep into defining KPIs. Some of the retail KPIs that companies can use are:
❖ Sales per square foot
This KPI is a direct measure of the productivity of stores, along with assessing store and merchandising layout. This data will help retailers analyze why some SKUs perform better than others. Based on store layout and performance, retailers can always change to improve results.
❖ Gross margins return on investment.
Return on Investments shows companies how much they make for every dollar they spend. This data points to products worth retaining on your inventory while discarding those that don’t add value to your business.
❖ Average transaction value
This metric examines how much money a customer spends at your store every visit. These metrics will help you identify ways to push your customers to buy more than you or upsell.
❖ Customer retention
As we know, acquiring new customers is an expensive affair. To avoid this, it’s easier on the pocket if you can convert a one-time customer into a regular customer. The retention rate as a metric helps you analyze your growth.
❖ Conversion rate
This rate helps you understand parameters that push a browser into a paying customer. It helps analyze underlying factors like time taken for conversion and reasons.
❖ Inventory turnover
It is a solid metric to understand how much inventory gets sold every month or how much gets retained in stores. This metric helps retailers assess the situation and help them modify order quantity accordingly.
These KPIs can help grow your CPG business. Ultimately tracking data is the only way forward to leading an efficient CPG company driven by data-driven goals.
If your organization is on the fence about implementing data analytics for your business, we recommend you check out Ivy Insights. It’s a one-stop destination for tracking, implementing, and analyzing data.
You don’t need data specialists or experts to implement the solution. We come with an auto-setup feature that generates over 50+ reports based on metrics tracked by your organization. Click, slice, and analyze data from these pre-built reports.
Published by April 10, 2023 by Ivy Mobility