cpg analytics - marketelligent
DESCRIPTION
CPG Analytics, By MarketelligentTRANSCRIPT
Application of Decision Sciences
to Solve Business Problems
CPG Industry
New Product Launches & Innovation
Need Gap Analysis It is an approach to identify the unmet needs of consumers, in which respondents are asked to envisage the ideal brand or product, and then to rate various existing brands or products on key attributes. If there are no existing brands measuring up to the ideal, there exists a need gap which could be a potential for a new product. 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?
Nee
ds
Satisfaction
Hig
h
Low
High Low
Hygiene needs
Unmet needs
Satisfied needs
Underdeveloped needs
Has enjoyable flavour
Cleans thoroughly
Provides fresh breath
Whitens teeth
Has anti-cavity action
Has anti-bacterial action
Soothes gum irritation, inflammation and bleeding Relieves
teeth sensitivity
Controls tartar
Strengthens enamel
Product & Concept Testing
PI Believability Uniqueness Value
Disclose technical
formula DEL DEL MNB MB
Sensory ingredients IND DEL IND DEL
Natural ingredients IND DEL IND DEL
Easy to apply IND HYG
DEL = Delight IND = Indifferent TRNF = Turnoff MNB = Must not be MB = Must be HYG = Hygiene
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.
Supply Chain
SKU rationalization exercise is usually supplemented with an impact study to answer questions like: What is the revenue impact associated
and how can it be minimized? What is the inventory carrying impact
and overall savings? Will it result in consumer dissatisfaction? What is the consumer reactivation rate
on rationalized SKUs? Is the product seasonal? What is the time
frame to rationalize the category? What are the substitute products that
the consumer can be offered?
Cu
mu
lati
ve R
even
ue
85%
Top Selling
Cu
mu
lati
ve R
even
ue
SKU in order of decreasing Revenue Contribution
100% 98%
80%
Top Mid Bottom
Recommended for Rationalization
80%
Mid Selling
Cu
mu
lati
ve R
even
ue
SKU Rationalization The objective of SKU rationalization is to reduce the business complexities arising from a burgeoning product portfolio, from managing too many items, product life cycles, consumer preferences, etc., while ensuring consumer 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 volume SKUs, 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).
Pricing: Competitive pricing (comparable to other vendors), 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,
packaging, emergency delivery and technical support.
Partner Strategic Fit Brand Equity Financial Health Ability to operationalize
Final Score Status
Vendor 1 9 8 10 7.4 8.75 Pass
Vendor 3 10 9 8 7.4 9.00 Pass
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
Partner Filtration Methodology & Process Flow
Supply Chain
Vendor Management It enables organizations to control costs, strive towards service excellence and mitigate risks to gain increased value from their vendor by: Minimizing potential business disruption Avoiding deal and delivery failure Improving operational efficiencies, controlling costs and planning of workforce and labor It includes vendor identification, recruitment, monitoring, tracking and evaluating vendors on certain KPIs:
INSOURCE High
Demand Flexibility?
Low
High
OUTSOURCE
Low
Competitive advantage?
Capability of supplier
Process maturity of supplier
Strategic risk with supplier
IMPLEMENT OUTSOURCE
High High Low
Low
Establish norms for product quality, process for transferring knowledge & monitor quality tracking measures
Establish process monitoring measures, plans to continuously improve process and knowledge sharing across teams
Actions Actions
Low
High
Ensure flexibility and penalty clauses are established for product delivery, establish alternate source of activity and divulge as little proprietary information as possible.
Actions
Establish control need based on three secondary factors, develop appropriate contracting relationship type and negotiate contract
Supply Chain
Sourcing Strategy & Production Planning Strategic sourcing continuously improves and re-evaluates the purchasing activities of a company. Sourcing optimization helps evaluate different procurement inputs by considering supply market, specific supply chain conditions, 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
Project Area Identified Savings (to date)
Transportation 16%
Warehouse 12%
Supply Chain 3%
Total 15%
Supply Chain
Network Optimization Network optimization helps in designing the optimal supply chain network with the lowest total cost structure, given operational constraints. It uses statistical modeling to describe the transport network to be followed. It helps senior management in making the most efficient use of resources while identifying the most 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
Lead time : It is the time lag between when the order is placed and the point at
which the stocks are available; A lead time of 4 days implies that there should
always be stock for 4 days supply to avoid stock-out scenario
Safety stock is the buffer quantity to cover any unplanned excess requirement
taking into account delivery delays
Reorder point is the minimum level of stock at which procurement should be triggered and quantity of warehouse
stock should never go below this point
If the quantity of warehouse stock is less than re-order point, there is shortfall
Stock
Time Release date
Safety Stock
Reorder point
Availability date
Lot size
Replenishment
lead time
Supply Chain
Inventory Management Optimal inventory management is an indispensable function to ensure un-interrupted product supply to meet 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 utilization Lead time is the time lag between when the order is placed, and the point at which stocks are available. The buffer quantity to cover any unplanned excess requirement, taking into account delivery delays, is referred to as safety stock. Providing for safety stock on top of lead time demand, will give the re-order point, which is the minimal level of stock at which procurement should be triggered. Warehouse stock should never go below the re-order point. Re-order point will assist in deciding what would be the best optimal order quantity and when to place an order.
States
States
States
States
Zones
YTD
MOM
Salience
Brand share
YOY
States
Zones
States
Zone
Increase in brand share
Decrease in brand share
No change in brand share
25.6, 61.3
6.5, 56.5 4.4, 78.1
16.8, 79.7
12.3, 73.3 8.3, 76.0
1.0, 66.7
10.9, 84.8
0.3, 82.7
3.0, 50.5
2.5, 60.0
0.2, 65.2
1.0, 33.9
1.0, 61.9
0.2, 68.7
% Salience, %Brand Share
Sales & Channel Planning
Sales Tracker Constant monitoring and tracking provides the sales team with accurate information related to market dynamics, so that they can have an action plan before the next sales cycle starts. Also, it serves as the base for 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 analysis Interactive visual dashboards on market performance across geographies provide further assistance vs. analyzing large volumes of data.
AP, 178.6
Dam, 8.2
Delhi, 269.3
Goa, 187.7
Har, 76.2
Kar, 83.4
Ker, 75.7
Mah, 41.9Mum, 76.5
Pondi, 24.8
Raj, 127.1
UP, 62.0
0%
5%
10%
15%
20%
25%
0% 5% 10% 15% 20% 25% 30%
Co
mp
etit
or
bra
nd
Mar
ket
shar
e YT
D 2
012
Industry salience YTD 2012
Co
mp
etit
or
Bra
nd
sh
are
: 4.
0%
AP, 213.6
Bih, 11.7
Dam, 6.9
Delhi, 243.6
Goa, 238.3
Har, 77.0
Kar, 60.1
Ker, 164.1
Mah, 40.8
Mum, 66.7
Oriss, 10.8
Pondi, 9.6
Raj, 36.9
TN, 173.5
UP, 64.4
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0% 5% 10% 15% 20% 25%
Co
mp
etit
or
bra
nd
Mar
ket
shar
e YT
D 2
011
Industry salience YTD 2011
Co
mp
etit
or
Bra
nd
sh
are
: 4.4
%
YTD 2011 YTD 2012 Change in competitor brand strategy
Sales & Channel Planning
Competitor Analysis Monitoring 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 markets Based on competitor assessment and their impact on brand’s share, the micro and macro level strategies are outlined.
High industry salience, Low competitor brand share
High industry salience, High competitor brand share
0.0
1.0
2.0
3.0
4.0
5.0 Actual Sales Forecasted Sales Base Line Sales
Mill
ion
cas
es s
old
Sales & Channel Planning
Sales Forecasting A good demand forecast helps improve sales volume, cash flow and hence the profitability, by optimizing inventory 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. It helps 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 demands Statistical techniques (like Moving Average, Holt Winters, Regression, ARIMA) are applied on historical data.
53.2
44.0
30.4
20.4 19.1 18.3
0
10
20
30
40
50
60
70
0
5
10
15
20
25
30
35
$0.90 to
$0.98
$0.99 $1.00 to
$1.08
$1.09 $1.10 to
$1.18
$1.19 $1.20 to
$1.28
$1.29 $1.30 to
$1.38
$1.39 $1.40 to
$1.48
$1.49
% ACV Brand A sales rate
Identify price threshold
0
10
20
30
40
50
60
70
80
90
100
110
120
Wk-
1 (
'09
)
Wk-
4 (
'09
)
Wk-
7 (
'09
)
Wk-
10
('0
9)
Wk-
13
('0
9)
Wk-
16
('0
9)
Wk-
19
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Wk-
22
('0
9)
Wk-
25
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Wk-
28
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Wk-
31
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9)
Wk-
34
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9)
Wk-
37
('0
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Wk-
40
('0
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Wk-
43
('0
9)
Wk-
46
('0
9)
Wk-
49
('0
9)
Wk-
52
('0
9)
Wk-
3 (
'10
)
Wk-
6 (
'10
)
Wk-
9 (
'10
)
Wk-
12
('1
0)
Wk-
15
('1
0)
Wk-
18
('1
0)
Wk-
21
('1
0)
Wk-
24
('1
0)
Wk-
27
('1
0)
Wk-
30
('1
0)
Wk-
33
('1
0)
Wk-
36
('1
0)
Wk-
39
('1
0)
Wk-
42
('1
0)
Wk-
45
('1
0)
Wk-
48
('1
0)
Wk-
51
('1
0)
Wk-
2 (
'11
)
Wk-
5 (
'11
)
Wk-
8 (
'11
)
Wk-
11
('1
1)
Wk-
14
('1
1)
Wk-
17
('1
1)
Wk-
20
('1
1)
Wk-
23
('1
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Wk-
26
('1
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Wk-
29
('1
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Wk-
32
('1
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Wk-
35
('1
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Wk-
38
('1
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Wk-
41
('1
1)
Wk-
44
('1
1)
Wk-
47
('1
1)
Wk-
50
('1
1)
Price index vs. competition Volume share
Optimum price corridor
Identify optimum price corridor
Sales & Channel Planning
Pricing Analysis Pricing strategies are crafted to meet two key objectives: profit and revenue maximization. It helps in identifying 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
Simulator for effective allocation of trade spends
Sales & Channel Planning
Promotional Effectiveness Promotions provide great value for brand through both incremental sales and increased brand awareness. It is a technique of evaluating the extent of success of an activity using past data, by correlating the sales data and marketing efforts. Main objective is to assess the impact and effectiveness of promotions. Trade promotion optimization (TPO) utilizes advanced econometric modeling techniques to help brands refine 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 baseline sales. 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
Streaming Sales Data fed weekly or monthly as is available
Promotion Calendar fed into the system periodically
Marketelligent PRISM
µ Display
µ Feature
µ Consumer
µ TPR
Decomposed Lift (µ)
Sales & Channel Planning
Real-time evaluation of promotions Marketelligent has developed an in-house proprietary tool called PRISM, for continuous monitoring and evaluation 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 minimizes the time required for the same and identifies the control samples on a real time basis, based on historical sales trends and outlet demographics. PRISM uses sales in test and control outlets, to calculate the lift factor for each or combinations of trade marketing programs. Based on the lift factor, incremental sales and ROI are calculated for each activity. The effectiveness of promotions can be compared at different levels – channels, categories, brands and markets.
Market Performance
Jan
’09
Feb
’09
Mar
’09
Ap
r’0
9
May
’09
Jun
’09
Jul’0
9
Au
g’0
9
Sep
’09
Oct
’09
No
v’0
9
Dec
’09
Jan
’10
Feb
’10
Mar
’10
Ap
r’1
0
May
’10
Jun
’10
Jul’1
0
Au
g’1
0
Sep
’10
Oct
’10
No
v’1
0
Dec
’10
Vo
lum
e, ‘0
00 u
nit
s
Med
ia spen
d, ‘000 U
SD
2%
4%
6%
8%
10%
12%
14%
Total Spends Magazine TV Daily
Evaluate “Efficiency/ROI” from each media vehicle
Effi
cien
cy
0
100
200
300
400
500
600
700
800
900
0
2
4
6
8
10
12
14
16
18
20
Baseline sales Online incr. sales TV incr. sales Daily incr. sales
Online spend TV spend Dailies spend
Decomposed sales into base line and incremental
Market Mix Modeling Marketing budgets as a percentage of sales typically vary between 4-10% for a CPG company. Given the high investment, marketers would like to evaluate the returns from each media vehicle and optimize their investments. Market Mix Modeling (MMM) helps brand managers identify the right mix of advertising media, manage channels and allocate marketing spend in a manner that not only provides the required sales lift but also maximizes 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
Knowledgeable
2%
Quality Conscious
4%
Soft Shiny Hair
4%
Better Color Experience 1%
Natural Ingredients 2%
Pleasant Fragrance 1%
Gray coverage
1%
Value for Money
0.4%
Feel young In charge 15%
Sensuous & Sophisticated 14%
Perfect color
13%
Recommended brand 11%
Brand that keeps its promises 9%
Range of Shades
8%
Makes me feel confident 9%
Intense, long lasting colors 5%
Purchase Intent
Colour pathway Non-damaging pathway Experiential
Emotional response
Rational response
Brand image
Brand attributes
Market Performance
Driver Analysis Every organization needs to understand which product/service attributes have the greatest influence on the consumer’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 the key 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 to identify the critical success factors of a brand which drives sales or revenue.
Identify growth opportunities for niche consumer segments
Define the portfolio strategy for their category by ensuring minimal consumer segment overlap across brands
Based on the above, the marketing team modifies their product/service offering and deploys the desired positioning and marketing communication to reach their consumer base.
Healthy hair
Seekers Natural
enhancers Expressive
Age defiers Young subtle
expressers Young strong
expressers
Original color of hair
without hair colorant
Color of hair with hair colorant (Aspired
Color)
Dark Brown
Medium Brown
Light Brown
Medium Brown
Medium Blonde
Dark Blonde
Light Brown
Dark Brown
Medium Brown
Medium Brown
Dark Blonde
Medium Blonde
Light Brown
Medium Brown
Medium Blonde
Dark Brown
Chestnut
Medium Blonde
Auburn
Dark Brown
Auburn
Auburn
Chestnut
Auburn
Chestnut
Market Performance
Consumer Segmentation Segmentation 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 target different 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
Assessing brand value helps in: Identifying optimal measures to build
strong brand equity Demonstrating the effect of strong
brand equity – in terms of market share, consumer acquisition, brand loyalty and other desirable outcomes
Mapping the brand's equity against that of key competitors
Judgments
Resonance
Feelings
Imagery Performance
Salience
Stages of brand development
4. Relationships = What about you and me?
3. Response= What about you?
2. Meaning= What are you?
1. Identity= Who are you?
Branding objective at each stage
Intense, Active loyalty
Positive, Accessible reactions
Points-of-parity & Difference
Deep, Broad brand awareness
Keller’s Brand Resonance Pyramid
Market Performance
Brand Equity Tracker Brand equity tracker provides a framework for measuring the brand’s performance/health. This can be assessed through consumer perception, which includes both rational and emotional aspects. Main criteria for assessment — brand differentiation, brand relevance, the consumer’s knowledge of the brand and brand image in the consumer’s mind. Brand equity tracker defines the gap between what a brand wants to be and how a brand is actually perceived by consumers, thereby giving a direction for branding strategy. Different components of brand equity are depicted in the image.
New York, USA
Buck Chintamani EVP, Strategic Initiatives & Business development [email protected] +1-978-201-3068
80 Broad Street, 5th Floor New York City, New York 10004
Bangalore, India
Kakul Paul Head CPG [email protected] +91-998-601-3596
#451, 17th Cross, 2nd Floor, HSR Layout, 4th Sector, Bangalore, Karnataka, 560102
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