Where's the Beef?
Estimating ROI from your DSR Investments Just as Clara Pellar infamously chimed "Where's the Beef?" in the iconic 80's commercial for Wendy's, so too do consumer goods manufacturers question "Where's the ROI?" when discussing their DSR investments. For some projects, justification of ROI can be straightforward and well documented. But when it comes to business process improvements, such as, store-level demand sensing through a DSR investment, estimating the ROI can be nebulous, and sometimes, a suspicious exercise to the finance teams that provide the final stamp of approval. During our last meeting in June in NYC, the Downstream Data Share Group discussed where the ROI from a DSR and BI investment could be calculated. The responses were widespread ranging from improving in-stocks to tracking new product introductions to improving trade promotion execution. Each of these areas has produced significant gains for the participants. There was even one study sited where 100% ROI typically occurred within six weeks of implementation. For some participants, that was a little too aggressive of an estimate especially since they were considering larger, enterprise-wide implementations. An assumption was made that the six week ROI estimate was most likely based on implementing one retailer where the costs were scaled accordingly. One overwhelming agreement among the share group was that determining ROI as a prerequisite for the DSR investment was borderline irrelevant. It didnt matter to them what ROI was developed on paper. Shifting to a consumer-driven strategy from shipment-based is really no longer an option but a requirement. They know that in order to meet the ever-changing competitive landscape and maintain tight relationships with retailers, they can no longer stand on the sidelines when trying to manage inventories and drive sell-through at their retail accounts. If they choose to stay in the shipment-based analytics world, their business could be at risk for losing shelf space to faster and more agile competitors in and outside their category. Shelf space is a premium and retailers will give it to the company that can produce or exceed the target margins and revenues. If your category slips, then the shelf allotment will shrink accordingly lending the excess space to other categories and vendors. So where does your company sit in the world of demand sensing? Are you still basing your conversations with your retailers on past shipments or on actual consumer sell-through? Have you been able to answer "Wheres the Beef", i.e. a quantifiable ROI for your DSR investment? Feel free to email me at [email protected] or call me at (616) 889-9660 if you'd like to discuss it further. |
