How CPG Retailers Are Missing Out on Profit — and How to Fix It

CPGAccording to Bonin Bough, Mondelez’s outgoing chief media and e-commerce officer, the consumer packaged goods (CPG) industry will continue to struggle until it finds a solution for its dearth of data. In a recent article in Campaign, Bough claims that this is traditional CPG retailers’ biggest challenge — gathering and implementing first-party customer data in the same way new manufacturers are and losing out on capital in the process.

But is data really essential to the survival of traditional CPG retailers? The short answer is “yes.” Data provides knowledge about your customers, and as the old adage goes, knowledge is power. It can deliver insights into customers’ preferences, purchasing habits, and opinions on which products are popular with whom and why. Once companies are able to cultivate this kind of information, they’re all the more able to make data-driven business decisions that ultimately raise the company’s bottom line.

New Competitors Are Turning Heads in the CPG Market

Subscription-based companies, such as Birchbox, Graze, Glossy Box, Hello Fresh and FabFitFun, are a relatively new kind of competitor in the CPG market that have been successful with this kind of approach. These companies have so much data they are able to forecast the popularity of certain products and make new product recommendations based on individual subscribers’ profiles and preferences. This, in turn, makes for happier customers and a stronger business.

Let’s take a deeper look at a newer “data-rich” competitor for comparison. Birchbox, a personalized beauty product subscription service, claims over 1 million subscribers. The company collects information on subscribers’ hair type, skin type, style likes and dislikes — all to ensure a personalization for consumers and brand partners to provide the greatest customer satisfaction and value possible, given the data. The company employs a team of data scientists specifically focused on personalization and making sure customers reap the most value possible from their purchases.

That said, if customers don’t like the product sent to them, it could be an expensive error. As a precaution to prevent these mistakes, data science is fused with customer involvement; meaning, consumers are allowed to choose one product per month to be included in their Birchbox. Every touchpoint with the customer — whether it’s online, in the app, via social media or in brick-and-mortar stores — is personalized and interconnected and feeds into a recommendation algorithm as a way to tailor individual experiences and safeguard customer engagement and conversion.

However, Birchbox isn’t the only company that has access to this data. The company also provides data to the brand partners whose products they ship, allowing brands to make data-driven decisions surrounding what products are working, which colors are popular and which prices are resonating with their target audiences. This not only grows Birchbox’s business, but it also pads brands’ pockets, as well. Harvey Prince, a custom perfume company, has seen profits increase by 400 percent since its initial shipment with Birchbox in 2010.

The Future Outlook of Analytics in the CPG Industry

That said, the results of a recent survey suggest the tide is changing regarding traditional CPG companies’ attitudes toward data and analytics. The report, by KPMG and The Consumer Goods Forum, surveyed 400 senior consumer executives at large consumer and retail brands and found that consumer businesses are moving into an “omni business model,” which relies heavily on data and analytics and seamlessly integrates digital across all units of business. Another one of the survey’s most telling data points centers around companies currently using big data analytics, as well as companies’ future plans to implement data and analytics if they haven’t already done so. According to the report, 30 percent of consumer companies employ data analytics, and that number is expected to double during the next couple of years. At this point, data is often siloed instead of streamlined from multiple different sources, such as CRM, social media, transactional data, etc. Ultimately, the use of analytics needs to be strategic and integrated for companies to realize the full value of their data.

Despite the wealth of data created, it’s becoming more apparent that more technology is needed to gather insights and empower CPG retailers with the information they need to make smarter decisions, but the market is beginning to make the shift. Unilever’s acquisition of Dollar Shave Club opens up a new data frontier for the company, as such granular data was recently unavailable from supermarket partners. It seems Bough’s forecast for the industry is coming to fruition; data looks to be the future of the CPG industry, which will ensure a stronger business and happier customers, moving forward.


Lucy Wimmer is global corporate communications director at DataSift. Reach her at  lucy.wimmer@datasift.com.


Publish date: December 5, 2016 https://dev.adweek.com/performance-marketing/cpg-retailers-missing-profit-fix/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT
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