CPG Analytics - Marketelligent


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CPG Analytics - Marketelligent

  1. 1. Application of Decision Sciencesto Solve Business ProblemsCPG Industry
  2. 2. Analyticsfor CPG
  3. 3. New Product Launches & InnovationNeed Gap AnalysisIt is an approach to identify the unmet needs of consumers, in which respondents are asked to envisage theideal brand or product, and then to rate various existing brands or products on key attributes. If there are noexisting brands measuring up to the ideal, there exists a need gap which could be a potential for a newproduct.It provides answers to critical business questions like: What is the consumer’s perception of the brand/product? What are the consumer needs yet to be catered to and are there competitors providing alternatives? Identify new consumer segments and market potential for a new product. What is the brand image in the consumer’s mind? If needed, how is it to be re-branded and re-positioned? Satisfied needs Hygiene needs Cleans thoroughly High Provides fresh breath Whitens teeth Has enjoyable flavour Has anti-cavity action Needs Underdeveloped needs Unmet needs Has anti- bacterial action Controls tartar Soothes gum irritation, inflammation and Relieves bleeding Low teeth Strengthens sensitivity enamel Satisfaction Low High
  4. 4. Product & Concept Testing New Product Launches & Innovation Product & Concept Testing Estimate the market potential of an idea or a concept, before actually developing the product based on consumer response on multiple metrics like: uniqueness, believability, feasibility, price, desirability, advantages, disadvantages, etc. Only successful concepts pass to the next phase, thereby minimizing R&D and marketing costs. Apart from estimating the market potential, it also helps:  Identify critical success factors for a new product/service  Estimate price sensitivity and purchase likelihood  Bundle product/service features  Identify potential consumer segments and assess competition  Understand the purchase process and decision making  Optimize advertising messages and improve promotional offers Statistical techniques (like Conjoint analysis, Discrete choice modeling, KANO analysis) are applied on the consumer responses collected. PI Believability Uniqueness Value Disclose technical DEL DEL MNB MB formula DEL = Delight IND = Indifferent TRNF = Turnoff Sensory ingredients IND DEL IND DEL MNB = Must not be MB = Must be HYG = Hygiene Natural ingredients IND DEL IND DEL Easy to apply IND HYG
  5. 5. Supply ChainSKU RationalizationThe objective of SKU rationalization is to reduce the business complexities arising from a burgeoning productportfolio, from managing too many items, product life cycles, consumer preferences, etc., while ensuringconsumer satisfaction. It is the process of re-looking at the product portfolio and optimizing it.It starts with the parameters that form the basis—identifying and retaining high margin SKUs, high volumeSKUs, SKUs that have a higher shelf life and those which are in tune with consumer preferences.After analyzing the cost drivers for each SKU, the portfolio can be assorted and rejected products can be re-evaluated for further action (merge, sell, milk or kill).SKU rationalization exercise is usuallysupplemented with an impact study toanswer questions like: 100% 98% What is the revenue impact associated 80% Cumulative Revenue and how can it be minimized? What is the inventory carrying impact and overall savings? SKU in order of decreasing Revenue Will it result in consumer dissatisfaction? Top Mid Bottom Contribution What is the consumer reactivation rate Recommended for Rationalization on rationalized SKUs? Top Selling Mid Selling Is the product seasonal? What is the time Cumulative Revenue Cumulative Revenue frame to rationalize the category? 80% 85% What are the substitute products that the consumer can be offered?
  6. 6. Supply ChainVendor ManagementIt enables organizations to control costs, strive towards service excellence and mitigate risks to gain increasedvalue from their vendor by: Minimizing potential business disruption Avoiding deal and delivery failure Improving operational efficiencies, controlling costs and planning of workforce and laborIt includes vendor identification, recruitment, monitoring, tracking and evaluating vendors on certain KPIs: Pricing: Competitive pricing (comparable to other vendors), Partner Filtration Methodology & Process Flow stability (low variance), accuracy, advance notice of price changes. Quality: Compliance with purchase order, conformity to specifications, reliability (rate of product failures), durability, support, warranty. Delivery: Time, quantity, lead time, Partner Strategic Fit Brand Equity Financial Health Ability to operationalize Final Score Status packaging, emergency delivery and Vendor 1 9 8 10 7.4 8.75 Pass Vendor 3 10 9 8 7.4 9.00 Pass technical support. Vendor 3 10 7 6 7.4 7.50 Pass Vendor 4 10 10 8 10.0 9.50 Underleveraged Vendor 5 9 7 8 7.4 7.75 Pass Vendor 6 2 7 6 8.2 5.50 Risky
  7. 7. Supply ChainSourcing Strategy & Production PlanningStrategic sourcing continuously improves and re-evaluates the purchasing activities of a company. Sourcingoptimization helps evaluate different procurement inputs by considering supply market, specific supply chainconditions, individual supplier conditions and offers alternatives to address the buyer’s sourcing goals.It helps in: Assessing the supply market, the company’s spending and identifying suitable suppliers Optimizing production related sourcing decisions, concerning where to produce or source products, based on a total supply chain cost analysis Selecting a suitable manufacturing site, optimal capacity utilization of plants and product allocation among the different plants and distribution centers Strategic planning for manufacturing and inventory optimization Increasing manufacturing and distribution asset utilization High Competitive advantage? INSOURCE Low High Demand Flexibility? Low OUTSOURCE Capability of High Process maturity of High Strategic risk with Low IMPLEMENT supplier supplier supplier OUTSOURCE Low High Low Actions Actions Actions Ensure flexibility and penalty Establish process monitoring clauses are established for Establish control need based on Establish norms for product measures, plans to product delivery, establish three secondary factors, quality, process for transferring continuously improve process alternate source of activity and develop appropriate knowledge & monitor quality and knowledge sharing across divulge as little proprietary contracting relationship type tracking measures teams information as possible. and negotiate contract
  8. 8. Supply ChainNetwork OptimizationNetwork optimization helps in designing the optimal supply chain network with the lowest total coststructure, given operational constraints. It uses statistical modeling to describe the transport network to befollowed. It helps senior management in making the most efficient use of resources while identifying themost economical routes.It aids in: Reducing transportation overheads and ensuring that the right product reaches the right location on time Improving transportation mode selection, load consolidation and resource utilization Quantifying operational, financial costs of alternative networks and identifying scopes of improvement Ensuring reduced freight costs and increased operating efficiency Streamlining warehouse activities, thereby reducing time to dispatch and optimizing productivity levels Project Area Identified Savings (to date) Transportation 16% Warehouse 12% Supply Chain 3% Total 15%
  9. 9. Supply ChainInventory ManagementOptimal inventory management is an indispensable function to ensure un-interrupted product supply tomeet the changing demand. Stock out analysis helps in: Optimizing inventory and service levels by streamlining ordering processes Minimizing stock out—stock out can lead to loss of sales Handling overstock—overstock leads to increased inventory costs and costs to liquidate excess inventory Maximizing warehouse space utilizationLead time is the time lag between when the order is placed, and the point at which stocks are available. Thebuffer quantity to cover any unplanned excess requirement, taking into account delivery delays, is referred toas safety stock. Providing for safety stock on top of lead time demand, will give the re-order point, which isthe minimal level of stock at which procurement should be triggered. Warehouse stock should never gobelow the re-order point. Re-order point will assist in deciding what would be the best optimal orderquantity and when to place an order. Stock Lot size Reorder point is the minimum level of stock at which procurement should be If the quantity of warehouse stock is less triggered and quantity of warehouse than re-order point, there is shortfall stock should never go below this point Reorder point Safety Stock Lead time : It is the time lag between Release date Availability date Time when the order is placed and the point at Safety stock is the buffer quantity to which the stocks are available; A lead cover any unplanned excess requirement time of 4 days implies that there should taking into account delivery delays Replenishment always be stock for 4 days supply to avoid stock-out scenario lead time
  10. 10. Sales & Channel PlanningSales TrackerConstant monitoring and tracking provides the sales team with accurate information related to marketdynamics, so that they can have an action plan before the next sales cycle starts. Also, it serves as the basefor formulating sales strategies. It: Identifies which products and SKUs are selling the most Analyses market trends and geographic buying patterns Evaluates growth potential for product portfolio (products, regions, markets) Identifies the epicenter for market share loss – Root-cause analysisInteractive visual dashboards on market performance across geographies provide further assistance vs.analyzing large volumes of data. States Salience Zones share Brand 0.2, 65.2 0.2, 68.7 States States 1.0, 33.9 3.0, 50.5 Zones Zone 2.5, 60.0 1.0, 61.9 States YTD States YOY 0.3, 82.7 12.3, 73.3 States MOM 8.3, 76.0 25.6, 61.3 10.9, 84.8 16.8, 79.7 % Salience, %Brand Share 1.0, 66.7 Increase in brand share 4.4, 78.1 6.5, 56.5 Decrease in brand share No change in brand share
  11. 11. Sales & Channel PlanningCompetitor AnalysisMonitoring the performance of the brand versus key competitors on a continuous basis assists in: Detailed understanding of competitors’ portfolio, marketing and sales strategies Studying competitors’ response to any new strategy in place Evaluating the expansion and growth strategy of competitor brands across marketsBased on competitor assessment and their impact on brand’s share, the micro and macro level strategies areoutlined. YTD 2011 Change in competitor brand strategy YTD 2012 20% 25% Competitor brand Market share YTD 2011 Competitor brand Market share YTD 2012 18% Delhi, 243.6 16% 20% Har, 77.0 Delhi, 269.3 14% Har, 76.2 12% 15% Raj, 127.1 10% Competitor Brand share: 4.4% Goa, 238.3 Competitor Brand share : 4.0% Ker, 164.1 Bih, 11.7 8% 10% UP, 64.4 UP, 62.0 6% Goa, 187.7 Oriss, 10.8 Pondi, 24.8 Raj, 36.9 Ker, 75.7 4% 5% Mum, 66.7 TN, 173.5 AP, 213.6 Pondi, 9.6 Mum, 76.5 2% Mah, 41.9 Mah, 40.8 AP, 178.6 Kar, 60.1 Kar, 83.4 Dam, 6.9 Dam, 8.2 0% 0% 0% 5% 10% 15% 20% 25% 0% 5% 10% 15% 20% 25% 30% Industry salience YTD 2011 Industry salience YTD 2012 High industry salience, High industry salience, High competitor brand share Low competitor brand share
  12. 12. Sales & Channel PlanningSales ForecastingA good demand forecast helps improve sales volume, cash flow and hence the profitability, by optimizinginventory and by minimizing out-of-stock. Besides considering historical data, external factors like promotion,seasonality, price changes, macro-economic conditions are also considered for more accurate forecasts. Ithelps create better solutions for: Inventory Control: Optimizing inventory & service levels by streamlining ordering processes Minimizing Out of Stock: Out of stocks equal lost sales which can have a negative impact on sales Improving product freshness & warehouse efficiency: Too much inventory can result in excess “expired inventory” that must be liquidated at or below cost, which is a cash flow drain Maximizing warehouse space utilization: As SKU proliferation continues, forecasting can help maximize the use of warehouse space Capitalizing on peak sales weeks: Accurate forecasting ensures the right product mix to take full advantage of operational capacity and peak market demandsStatistical techniques (like Moving Average, Holt Winters, Regression, ARIMA) are applied on historical data. 5.0 Actual Sales Forecasted Sales Base Line Sales 4.0 Million cases sold 3.0 2.0 1.0 0.0
  13. 13. Sales & Channel PlanningPricing AnalysisPricing strategies are crafted to meet two key objectives: profit and revenue maximization. It helps inidentifying the best pricing strategy in a dynamic market, in response to the competitive scenario, by: Evaluating the brand’s own price elasticity and competitor brands’ cross price elasticity Identifying price gaps/thresholds which can result in significant share changes for the brand Identifying the right price gap/threshold with respect to the key competitors 35 Identify price threshold 70 Identify optimum price corridor 120 60 30 53.2 60 50 110 25 44.0 50 40 20 40 100 30.4 30 15 30 20.4 19.1 18.3 90 10 20 Optimum price corridor 20 5 10 80 10 0 0 $0.90 $0.99 $1.00 $1.09 $1.10 $1.19 $1.20 $1.29 $1.30 $1.39 $1.40 $1.49 70 0 Wk-10 (09) Wk-13 (09) Wk-16 (09) Wk-19 (09) Wk-22 (09) Wk-25 (09) Wk-28 (09) Wk-31 (09) Wk-34 (09) Wk-37 (09) Wk-40 (09) Wk-43 (09) Wk-46 (09) Wk-49 (09) Wk-52 (09) Wk-12 (10) Wk-15 (10) Wk-18 (10) Wk-21 (10) Wk-24 (10) Wk-27 (10) Wk-30 (10) Wk-33 (10) Wk-36 (10) Wk-39 (10) Wk-42 (10) Wk-45 (10) Wk-48 (10) Wk-51 (10) Wk-11 (11) Wk-14 (11) Wk-17 (11) Wk-20 (11) Wk-23 (11) Wk-26 (11) Wk-29 (11) Wk-32 (11) Wk-35 (11) Wk-38 (11) Wk-41 (11) Wk-44 (11) Wk-47 (11) Wk-50 (11) Wk-1 (09) Wk-4 (09) Wk-7 (09) Wk-3 (10) Wk-6 (10) Wk-9 (10) Wk-2 (11) Wk-5 (11) Wk-8 (11) to to to to to to $0.98 $1.08 $1.18 $1.28 $1.38 $1.48 % ACV Brand A sales rate Price index vs. competition Volume share
  14. 14. Sales & Channel PlanningPromotional EffectivenessPromotions provide great value for brand through both incremental sales and increased brand awareness. Itis a technique of evaluating the extent of success of an activity using past data, by correlating the sales dataand marketing efforts. Main objective is to assess the impact and effectiveness of promotions.Trade promotion optimization (TPO) utilizes advanced econometric modeling techniques to help brandsrefine their promotion strategies, identify the right price and discount point that maximized sales lift and ROI,and eventually help manufacturers enlarge their consumer basket and have a sustained impact on baselinesales.TPO helps companies: Allocate more for promotion sensitive brands and SKUs Collaborate with retailers and restructure their trade programs Design unique programs specific to a retailer/channel instead of following a “one-size fits all” approach Simulator for effective allocation of trade spends
  15. 15. Sales & Channel PlanningReal-time evaluation of promotionsMarketelligent has developed an in-house proprietary tool called PRISM, for continuous monitoring andevaluation of trade and marketing promotions on a real time basis, using the test-control approach.Identifying the control samples for each of the test group takes most of the time/effort. PRISM minimizesthe time required for the same and identifies the control samples on a real time basis, based on historicalsales trends and outlet demographics.PRISM uses sales in test and control outlets, to calculate the lift factor for each or combinations of trademarketing programs. Based on the lift factor, incremental sales and ROI are calculated for each activity. Theeffectiveness of promotions can be compared at different levels – channels, categories, brands and markets. Streaming Sales Data Decomposed Lift (µ) fed weekly or monthly as is µ Display available µ Feature Marketelligent PRISM µ Consumer Promotion Calendar fed into the system µ TPR periodically
  16. 16. Market PerformanceMarket Mix ModelingMarketing budgets as a percentage of sales typically vary between 4-10% for a CPG company. Given the highinvestment, marketers would like to evaluate the returns from each media vehicle and optimize theirinvestments.Market Mix Modeling (MMM) helps brand managers identify the right mix of advertising media, managechannels and allocate marketing spend in a manner that not only provides the required sales lift but alsomaximizes the returns on investment by media vehicles.The model captures the following: Cannibalization, if any, amongst the portfolio of brands Impact of competition media activity Saturation spends for each media vehicle based on diminishing returns Decay impact, if any for each of the media vehicles - also called ad-stock 20 Decomposed sales into base line and incremental 900 14% Evaluate “Efficiency/ROI” from each media vehicle 18 800 12% 16 700 Media spend, ‘000 USD 14 Volume, ‘000 units 600 10% Efficiency 12 500 8% 10 400 8 6% 300 6 4% 4 200 2 100 2% 0 0 May’09 May’10 Mar’09 Mar’10 Nov’09 Nov’10 Aug’09 Aug’10 Dec’09 Dec’10 Feb’09 Apr’09 Sep’09 Oct’09 Feb’10 Apr’10 Sep’10 Oct’10 Jun’09 Jun’10 Jan’09 Jan’10 Jul’09 Jul’10 Total Spends Magazine TV Daily Baseline sales Online incr. sales TV incr. sales Daily incr. sales Online spend TV spend Dailies spend
  17. 17. Market PerformanceDriver AnalysisEvery organization needs to understand which product/service attributes have the greatest influence on theconsumer’s purchase decision. For instance, consumers might rate a personal care product based on its color,scent, functionality, price, discount offer and so on. Driver analysis is a technique widely used to identify thekey consumer needs which translates to purchase behavior. It provides answers to critical questions like: What accounts for consumers’ proclivity to purchase the product? What causes consumers to switch to competitor brands? What is the core consumer segment that should be focused on?Statistical techniques (Correlation, Multivariate Regression, and Structural Equation Modeling) are utilized toidentify the critical success factors of a brand which drives sales or revenue. Purchase Intent Emotional response Rational response Recommended Makes me feel Brand image brand 11% confident 9% Brand attributes Brand that keeps Feel young In its promises 9% charge 15% Experiential Non-damaging pathway Colour pathway Knowledgeable Soft Shiny Hair Sensuous & 2% 4% Sophisticated 14% Better Color Quality Conscious Perfect color Experience 1% 4% 13% Pleasant Natural Value for Money Range of Shades Gray coverage Intense, long Fragrance 1% Ingredients 2% 0.4% 8% 1% lasting colors 5%
  18. 18. Market PerformanceConsumer SegmentationSegmentation identifies homogenous consumer groups based on their needs, preferences, attitudes,demographics, lifestyle measures (activities, interests, opinions and values) and behavior.A mass marketing approach treats the market as a whole, while segmentation enables the business to targetdifferent consumer groups by adapting its product and marketing mix to suit each targeted segment.Segmentation results are leveraged to: Understand how the market is evolving in terms of changing consumer needs/preferences Identify the benefits sought by each consumer segment Improve the competitive position by focusing on the most profitable and sizeable segment Identify growth opportunities for niche consumer segments Define the portfolio strategy for their Healthy hair Natural Expressive Young subtle Young strong category by ensuring minimal consumer Seekers enhancers Age defiers expressers expressers segment overlap across brands Dark Brown Medium Brown Light Brown Medium Brown Light BrownBased on the above, the marketing team Original color Medium Brown Medium Blonde Dark Brown Dark Blonde Medium Brown of hairmodifies their product/service offering and without hairdeploys the desired positioning and colorant Light Brown Dark Blonde Medium Brown Medium Blonde Medium Blondemarketing communication to reach theirconsumer base. Dark Brown Medium Blonde Dark Brown Auburn Auburn Color of hair with hair colorant (Aspired Chestnut Auburn Auburn Chestnut Chestnut Color)
  19. 19. Market PerformanceBrand Equity TrackerBrand equity tracker provides a framework for measuring the brand’s performance/health. This can beassessed through consumer perception, which includes both rational and emotional aspects. Main criteriafor assessment — brand differentiation, brand relevance, the consumer’s knowledge of the brand and brandimage in the consumer’s mind.Brand equity tracker defines the gap between what a brand wants to be and how a brand is actuallyperceived by consumers, thereby giving a direction for branding strategy. Different components of brandequity are depicted in the image.Assessing brand value helps in: Identifying optimal measures to build Keller’s Brand Resonance Pyramid strong brand equity Demonstrating the effect of strong Branding objective at each brand equity – in terms of market share, Stages of brand development stage consumer acquisition, brand loyalty and Resonance other desirable outcomes 4. Relationships = Intense, Active Mapping the brands equity against that What about you and me? loyalty of key competitors Judgments Feelings 3. Response= Positive, Accessible What about you? reactions Performance Imagery 2. Meaning= Points-of-parity What are you? & Difference 1. Identity= Salience Deep, Broad Who are you? brand awareness
  20. 20. Contact Us: New York, USA Bangalore, India 80 Broad Street, 5th Floor #451, 17th Cross, 2nd Floor, New York City, HSR Layout, 4th Sector, New York 10004 Bangalore, Karnataka, 560102 Buck Chintamani Kakul Paul EVP, Strategic Initiatives & Business development Head CPG buck.chintamani@marketelligent.com kakul.paul@marketelligent.com +1-978-201-3068 +91-998-601-3596