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Integrated Data Foundation Improves CPG Analytics: A Spotlight Q&A with Gib Bassett of Teradata

Originally published July 16, 2012

This BeyeNETWORK spotlight features Ron Powell's interview with Gib Bassett, Program Director, Consumer Goods, at Teradata. Ron and Gib talk about the many ways consumer goods (CPG) companies can benefit from an integrated data foundation.

Gib, CPG companies have been hit hard in recent years by the economy, with consumers seeking out less expensive alternatives, such as private labels, and generally being very price sensitive. With sales growth slowing to the low single digits for many, what are some of the ways CPG companies can leverage data and analytics to reverse this trend?

Gib Bassett: I think the key, especially for large global brands, is to focus on innovation in terms of really knowing their consumers and their unmet needs, and then translating this insight into high demand products. Currently, many companies are dancing around that issue, not really talking about innovation as much as committing more money to digital marketing or trade promotion. Many of these companies will create product extensions that don't necessarily increase sales, which is really the targeted outcome of innovation and new product development. Creating new products that meet unmet consumer needs that help grow sales really depends on an integrated data infrastructure.

For many CPG companies, their ERP system has served as the center of the universe for reporting and analytics, but it hasn't kept pace with the marketplace. The problem with that approach is that it is limited to a very small sliver of the available data needed to compete today. A lot of companies know they can get transaction data from retail partners. They know they can get data about their consumer marketing: all the inputs – planning, estimates, and estimated returns – as well as all the outputs – the consumer data that is collected, the permissions, etc. They know they can get all this data, but they have a hard time bringing it in house and having a platform to marry it with all their production data to provide an integrated foundation.

An integrated data infrastructure can help inform research and development with consumer insights. It also provides the sales organization with information about demand for the product according to different retailers. This integrated foundation can also inform the marketing group about shopper marketing strategies that are increasingly being adopted by consumer goods companies. Those strategies are really about the path to purchase as well as the online and offline consumer behavior that influences purchase decisions in the store.

That type of information gives the sales organization additional leverage because so much of trade promotion spend is around price discounting and a pay-to-play environment. By going to retailers with a much stronger case, with consumer insights around what is driving purchases of the product with a focus on value, CPG companies can get away from that pay-to-play environment and actually help the retailer in the process. Value-based programs can drive sales and category growth without cutting into margins.

Typically, product introductions do not meet expectations, often fail and are very expensive. Thus, there is the need to be much more intelligent about how products are created, starting at the very top of the R&D funnel. That requires an integrated data foundation. Moving the lens down into an integrated foundation is really the way to attack that growth issue, and innovation seems to be at the heart of it.

Gib, it sounds like you're saying that CPG executives need to feel more confident that innovation is worth the investment to take advantage of any shift in consumer behavior. What are some ways integrated data and analytics can improve new product development success rates?

Gib Bassett: CPG companies are very siloed organizations. They operate brand and consumer marketing apart from both the sales function that manages the relationships with the retail channels and from production. There is also a wealth of data in cloud applications as well as third-party syndicated data, which is a source for market share and sales data that's more of a proxy as opposed to the specific sales transactions. In most organizations, individual departments have been able to obtain this type of data to inform their roles, but it's all outside the organization. When you marry that external data with internal data, you can actually help these individual functions succeed better. The marketing function isn't just making decisions based on its own data, but also on the demand for the product that comes from retail partners. Then within that sales function, decisions can be made not just based upon retail data but also consumer data from the marketing side. Also with an integrated data foundation, production and R&D can gain considerable insight from consumer demand data as well to understand and take advantage of trends and patterns in product plans.

There's a strong enterprise value proposition – the transformative idea is that those individual silos can benefit tremendously by increasing the accuracy and the speed of their decision making by looking at the holistic view of all the different data sources that are available to inform them, not just those within their particular silo. Collaboration is something that gets talked about a lot in consumer goods about the relationship between the retailer and the manufacturer, but I also think that the individual silos need to collaborate together too. There is a lot of talk about the need to collaborate across these silos, and an integrated data infrastructure helps to facilitate the collaboration that needs to happen between these functions to attack the growth and innovation issue that rolls up to all the different functions. It involves the product development process, producing the product, selling the product to retail channels and then marketing the product. An emerging best practice that we’re seeing is all those areas collaborating with integrated data.

What are some examples of these transformative insights to be gained from integrated data?

Gib Bassett: Because of the growth challenges, a lot of the consumer goods companies today are making strong public claims to commit more dollars to digital marketing and direct consumer relationships, and we believe that's an excellent idea. The issue, though, is that if they scale those investments the same way they've done historically – which is by using agencies and service companies, and keeping that data and all the information that goes with those programs outside the business – they're really doing themselves a disservice. They're actually contributing to the siloed problem. Bringing the data inside makes a ton of sense because when you reconcile it across all the agencies that you work with, all the brands, all the campaigns and all the different channels, your marketing will be infinitely more successful. That’s best practice, of course. But it also helps inform research and development because it enables them to look closely at consumer behavior in ways that panel surveys and other ways of understanding consumers’ needs cannot.

The sales organization, as I mentioned before, outsources a lot of their insights and data to third-party syndicated data providers that create a proxy view of sales and market share information. But if they can bring in all the data that retail partners offer, they can look across all of the different investments they make with retail trading partners, which are significant. They can look across those retailers and understand their investment relative to actual sales.  But again, as I mentioned, most organizations are not prepared to do this. They don’t have a platform to bring in all the different transaction data from all their retail trading partners, not just a select few.

If they do, they can look at consumer behavior data, they can optimize the spend, they can go back to the retail partners and talk about doing much more value-based marketing. They can also look at online and offline marketing investments in the store environment to help drive the path to purchase and get away from the price discounting that really doesn't help enhance the brand's value. At the end of the day, a CPG company's story is about brand. It's about brand affinity and brand awareness relative to things like private labels, which of course are making inroads in consumer goods categories where there has not been a lot innovation.

Innovation is really key today, Gib. Beyond product innovation and introduction, how do the siloed business functions benefit from an integrated view of the business?

Gib Bassett: For brands themselves, the benefits are considerable. So within a particular brand, just bringing in all the consumer marketing data across all the different agencies they work with, all the different campaigns and all the different channels, they can really start to develop more of a one-to-one marketing program based on consumer preferences and permissions. That includes all sorts of different data from email communications, social media and websites. That’s really best practice in other industries. But then looking across those brands is really becoming an interesting approach for a portfolio view of selling and marketing products across brands. The only way to get there though is by having a lot of data around those consumers in a place where predictive analytics and data mining can actually be applied to that data to look for trends and patterns.

It's been shown in research that if you can win a consumer's business at that key inflection point where they make a new choice in a new category that they haven't purchased before, they really stick with you. As the marketer or analyst can uncover that event and preempt that decision with a message that aligns with your brand, you can win the consumer's line of business for a long time, possibly for their lifetime. That’s a key concept that can help fuel growth and sales.

For the sales organization, looking at the detailed data across the retailers can help optimize trade promotion spend. And if you can add consumer insights to that mix, you can get away from pay-to-play and really focus on value-based shopper marketing. That is an emerging and very growth-oriented approach focusing on how to architect the in-store experience and map that back to the consumer outside the store to help influence their path to purchase.

For R&D and production, when you can bring in demand data along with consumer insights, that’s really a great way to uncover unmet consumer needs and develop new products that meet those needs. When you look at this across the business, you can really get into this idea of a demand-driven supply network where you're really looking at producing the products that are demanded and reducing out-of-stock situations, making sure you have adequate on-shelf availability of your products and that you're not disappointing customers. Obviously, doing that has an impact on brand influence.

Those are examples of how CPG companies can use an integrated data foundation to improve all these different functions while also helping them work together and collaborate.

Gib, are there other reasons beyond innovation and improved functional performance that CPG companies should pursue an integrated foundation sooner rather than later?

Gib Bassett: Yes. I mentioned previously cloud applications and the ability to outsource, which historically has been the focus of consumer goods companies because they have been focused on production and manufacturing efficiency using their ERP systems and establishing best practices around those operational processes. But the landscape has changed significantly. Retailers have consolidated. They’ve become much smarter about marketing to consumers, and so they hold an upper hand relative to brands. CPG companies used to be able to invest in significant mass media brand marketing, and that was how they could drive demand. But now retailers often control a great deal of that success or failure, and they can hold that power over manufacturers. That pressure to drive sales within that environment makes it very attractive to go out and look for new types of applications, new types of data and new types of services to help improve the business. The issue though as this continues to scale is that if you do that independent of having an integrated data foundation, without a governance plan in place and the ability to pull that data internally and use it within the framework that I've been talking about, I think you get into this cycle where it's going to be very, very hard for these companies to peel that back. The consequence will be that slow sales growth continues and that brands may disappear. Companies will have to consolidate. There is what I would call a vicious silo cycle that could occur where the outsourcing just contributes more and more to the problem. The integrated data foundation can help mitigate that, especially if you have a governance plan in place.

If you have an integrated data foundation that looks at all these different outsourced cloud applications, at all the outsourced data providers and really brings those into the foundation, that integrated data foundation can intelligently inform those external sources or other applications, which I think is interesting. If you’re using an outsourced marketing service for a particular channel, it can be better informed as a result of your integrated data foundation. You can't do that if you don’t have that foundation in place, and I think that's a very good reason to start pursuing it sooner than later.

Gib, obviously speed-to-market and time-to-value are critical for CPG. Are you seeing that the retail time-to-market window is getting shorter and that the companies have to be able to make decisions more quickly?

Gib Bassett: Absolutely, and that's another very good reason to pursue an integrated data foundation. We talk about failing fast and then adapting and changing in real time as it pertains particularly to new product introductions. And again, as I mentioned, new products often fail or fail to meet expectations so the ability to adapt and change in near real-time is a function of having a very up-to-date, accessible integrated data source that incorporates all the different factors that you need to measure and adapt. That cuts across marketing, sales and production. In terms of the shopper marketing that occurs, those programs where the retailer works with the manufacturer to figure out the optimal approach to getting the in-store consumer to your position on the shelf, the ability to adapt that in near real-time is very important. Data and technology allow the retailer and the manufacturer to make adjustments rather than waiting for a program to run its course only to discover that it didn't meet expectations. So, yes, I think that speed and the time-to-market issue is a big one.

We haven't brought up the term "big data." Why not?

Gib Bassett: I've been talking a lot about integrated data. The reason I didn't mention big data wasn't really a conscious choice, but I think that the issue here is that so much about big data focuses on volume, storage, and size, and doesn't tend to focus as much on diversity as well as IT's or the company’s actual preparedness to do things with the data. Big data to a consumer goods organization is potentially something different from what it is to a financial services organization or a retailer. Consumer goods companies have historically been focused more on supply chain and ERP and haven't really embraced the other sources of information and data that are available to them, both through their sales channels as well as from consumers.

Consequently, their preparedness to take in that data, no matter its size, is relatively poor. That really begs for a platform such as Teradata – renowned for its lower total cost of ownership, fewer resources to maintain and implement – to serve as the integrated data foundation. Consumer goods companies are unaccustomed to really embracing outside data sources. In some cases, it may very well be big data. If a CPG company has thousands of retailers and they're getting transaction data on a daily basis from them, and they have dozens or more brands under management, and they're working with hundreds of agencies and campaigns across all different channels on an ongoing basis, and they have websites all over – both mobile as well as traditional – they're getting a lot of data and that could very well be classified as big data from purely a volume standpoint. But in many cases, it's going to be much more about the ability to embrace the integrated data and actually make it usable.

Gib, thank you so much for taking the time to talk with me about how an integrated data foundation can benefit consumer goods companies.
 

  • Ron PowellRon Powell
    Ron is an independent analyst, consultant and editorial expert with extensive knowledge and experience in business intelligence, big data, analytics and data warehousing. Currently president of Powell Interactive Media, which specializes in consulting and podcast services, he is also Executive Producer of The World Transformed Fast Forward series. In 2004, Ron founded the BeyeNETWORK, which was acquired by Tech Target in 2010.  Prior to the founding of the BeyeNETWORK, Ron was cofounder, publisher and editorial director of DM Review (now Information Management). He maintains an expert channel and blog on the BeyeNETWORK and may be contacted by email at rpowell@powellinteractivemedia.com. 

    More articles and Ron's blog can be found in his BeyeNETWORK expert channel.

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