Sales & Marketing Study 2018: Data & Analytics

Going Deeper with the Data

Analytics has become the largest line item on the budgets of chief marketing officers, according to Gartner’s 2017-18 “CMO Spend Study,” which compares allocations across 13 capabilities. And while it already commands about 9% of the total budget, analytics spending is expected to nearly quadruple over the next three years, according to Gartner.

“This significant budgetary commitment is grounded in CMOs’ understanding that analytics is central to delivering [consumer] experience; identifying, understanding and growing [the consumer base]; and measuring and optimizing marketing performance,” the report states.

The emerging mission of consumer goods companies is to create and offer engaging experiences at scale for both the consumer (the end-user) and the customer (still mainly retailers). It’s no longer enough to meet the specific needs of consumer segments; companies must meet and exceed the needs of individual consumers, both in ways they expect and ways they have not yet imagined. The catalyst for fulfilling this mission is, of course, digital.

“Digitalization is a matter of four strategic themes: better, closer engagement and knowledge of consumers and shoppers; a partnership renewal between manufacturers and retailers to mutually grow the category and deliver value to shoppers; automating internal processes to operate faster and more efficiently; and, very often, the opportunity to rein vent business models in which data becomes part of the product,” says Vittorio Cretella, principal at VCAdvisory and former chief information officer of Mars, Inc.

“Analytics is an essential enabler across these four dimensions,” Cretella says. “What used to be operational reporting focused on “What happened” needs to evolve into strategic insight that explains why it happened and what will happen next.”

“Data is the new currency,” said Joher Akolawala, senior vice president and global CIO at Mondelez International, while speaking at the Retail and Consumer Goods Analytics Summit in April. Critical to a brand’s future success is the ability to understand the DNA of its consumers, and the underlying ability to leverage analytics as a business solution rather than a traditional IT project, he explained. Predictive analytics is the future.

Rules of Engagement
Over the next few years, consumer goods companies will emphasize innovation excellence as it relates to the success of new products (and the number that will be required), the ways in which both consumers and customers are engaged (and how that activity will be funded), and the ability of the supply chain to manage new and different engagement models.

Evolving consumer and customer expectations make this strategy mandatory, but implementation success and efficacy will determine profitability and competitive differentiation. Engaging successfully, and repeatedly, with the consumer is now the central imperative. The “old ways” of engaging with consumers, as well as connecting with customers, will no longer suffice. But engaging with the ultimate user, who might have varied experiences and services over the product’s lifecycle, is not a trivial undertaking. There is substantial investment required to achieve that goal, particularly as it relates to data and analytics.

In conjunction with that effort, it must be recognized that CG companies engage with extensive retail networks serving both geographic areas and consumer segments (grocery, drug, club and mass market). These traditional partners, as well as new digital partners like Amazon, will have to be connected.

Retailers, too, now have a greater stake in this game if they want to stay relevant (and in business). CVS Health may once have believed that consumer analytics was an activity “best left to our partners,” according to chief analytics officer Robert Darin, while speaking at RCAS. But the drugstore giant now understands that “analytics is how we’re going to do business,” a competency that must be pervasive throughout the organization — especially since CVS’s ambitious mission is nothing less than reinventing the retail pharmacy experience.

As discussed in last year’s report, there are three key elements to tackling this need to engage consumers and connect with customers:

1. Personalization at Scale:  As already noted, successful engagement with consumers is what will distinguish winners from losers in the digital marketplace. Offering digitally enabled experiences to individual consumers at scale is a significant challenge, and some of the automated practices currently in vogue (retargeting, programmatic buying) fall quite a bit short of true relationship-building personalization.
   Ideally, companies should be delivering personalized products and shopping experiences at the precise time and location that consumers want them — and in an immersive way that meets or even exceeds their expectations. Having the right technologies in place to profitably deliver these capabilities will be key.
2. Advanced Channel Management: Historically, the role of the retailer has been largely defined as making the original sale, working with the national brand on promotions, and being the location for returns. In truth, however, the retailer is often the “face” of the brand in the eyes of consumers. With the growing strategic priority for manufacturers to engage directly with consumers, brand owners need to change how they interact with their retail customers.
3. Omnichannel Promotion: An important factor for both consumer engagement and customer connection is the way brands handle promotions while shifting from analog to digital interaction. Whether it’s consumer promotions like coupons or trade deals such as temporary price reductions, the ability to manage and align activity across channels has become critical. (This concept is discussed in more detail in Trade Promotion Management.)

Adding even greater complexity will be direct-to-consumer commerce, which most CGs are starting to accept as a strategic necessity — if not to actually sell product, then at least to acquire a direct stream of consumer behavior data that can be used to improve future engagement. Here, the ability to move funds across promotional vehicles, engage digitally and get smarter about allocating funds are all key capabilities.

Accelerating Innovation
The ability to offer new products to the marketplace that meet new or unmet consumer needs and, to a lesser degree, the necessity to “beat the fade” by extending or modifying portfolios through new flavors, colors and fragrances, is central to CG success. Implementing a coherent, extended process innovation platform is the first step, but it’s not enough. In a digitally enabled marketplace, sourcing new ideas from all quarters — especially consumers themselves — will be an essential skill, as will be the ability to transparently manage all products through the full lifecycle (see New Product Development).

There are a significant number of competencies required to thrive in a digitally enabled word, but none is more fundamental than analytics. While most CGs recognize the increasing availability of data from myriad sources (much of it coming from downstream), many still worry about having the necessary analytics chops to extract real value — and rightfully so.

When asked in a 2018 IDC survey about modern, digital capabilities with the potential to impact business performance, CG companies cited big data analytics as second highest in overall importance behind only cloud architecture; in three years, they expect it to be most important (see Table 1).