In the highly competitive Consumer Product (CP) sector, knowledge is power.
Where warehouse withdrawals and consumer panels were once regarded as sufficient research sources, today's CP manufacturers and retailers demand accurate, quantitative insights to support development of pricing, forecasting and promotion strategies. Although gathering those types of data is relatively easy to do once at a single site, it becomes a highly complex exercise when it involves updated data at multiple retail sites.
Like chemists in a lab, CP marketers and sales teams continually test promotion and price strategies to find just the right go-to-market formulas for the success of their products. Competitive conditions are subject to continuous change and they may vary greatly by season and geography, among other variables. Under these dynamic conditions, marketers need access to a continuous flow of data: historical Point-of-Sale (POS), syndicated data and detailed promotion results from past hits (and misses) in order to support critical decision-making.
Because they are subject to such variable conditions in their distribution channels, CP firms have looked to new technology as a logical answer. Their major chain customers may have hundreds or thousands of stores, each stocked with a varying mix of thousands of items with high turnover and complex interactions. Each location within a chain has a unique set of shopper characteristics and a unique profile when it comes to the performance of an individual consumer product, brand or category. The quantity and variety of data to be tracked may be staggering.
Backroom Magic
Software as a Service (SaaS) solutions alleviate one of the biggest technology headaches -- merging data feeds from disparate sources. Although manufacturers and retailers could do this themselves, they are increasingly choosing not to because of the time and money; in-house expertise required to manage the feeds; and expertise to cleanse and validate the data. For manufacturers, data feeds can be problematic because each of their retail customers may be on different proprietary data feeds; thus, requiring manufacturers to make a significant investment in technical expertise.
The huge data feeds that fuel these analyses are also particularly well suited for SaaS applications because they do away with the need to upgrade hardware systems in order to handle the higher volumes of information. The investment in a SaaS solution becomes even more cost effective when you consider that customers only pay for the services they need for a specific period of time.
With SaaS, consumer demand management applications can be provided specifically for retailers and CP manufacturers that greatly reduce these challenges, and, in many cases, eliminate them. Using a Web-based browser interface, these solutions can be set up and deployed in a matter of months - giving access to employees at multiple sites simultaneously. With the right solution, the system can analyze POS, market and panel data to deliver pricing, and promotion and category insights at the store level.
Granular Targeting, Sophisticated Science
In addition to the convenience, the most effective SaaS solutions are allowing retailers and manufacturers to look at promotions and pricing in an entirely new way. For example, POS data combined with consumer data is helping retailers target assortments to specific demographics. Everyone knows that people in Kansas City have different tastes in clothes and food than people in San Francisco, but without tracking their buying habits retailers find it difficult to optimize the appropriate goods, prices and promotions to deliver to each market.
This "micro marketing" can provide a powerful way of differentiating product offerings within specific economic and geographic areas. However, accurate analysis of huge amounts of data in real-time is not easily replicated -- even with the most sophisticated IT departments. Through SaaS, retailers and manufacturers have access to the most effective methodologies developed by a strong team of statistical scientists who have years of experience and are continually refining their methods.
CP firms recognize that their go-to-market activities benefit from greater targeting and tailoring at the market and store levels. The payoff from such granularity may be significant. Promotions may be targeted at store locations whose shopper profiles most closely match brand objectives, for example, reducing low-yield spending.
Forecasting tools permit more precise promotional pricing and guide merchants in setting stock levels on a local basis, reducing risk of stock outs. Account teams negotiate deals on a factual basis with buyers, confident in their sales and promotion forecasts.
A Fast On-Ramp To Sophisticated Consumer-Centric Merchandising, Sales, And Marketing
SaaS models are becoming more accepted across different areas of IT. In the Consumer Products world, the SaaS model is revolutionizing the industry because of the speed and ease with which it can help manufacturers and retailers gain access to the most sophisticated consumer-demand management technology. With SaaS, retailers and manufacturers can access cutting-edge data modeling methods and decision-support tools that deliver an intimate understanding of consumers, allowing them to develop merchandising strategies where both manufacturers and retailers benefit.
Herbert Klein is senior director of CP Product Marketing for DemandTec www.demandtec.com. DemandTec's Consumer-Centric Merchandising, Sales and Marketing software helps retailers and consumer products manufacturers strategically plan, optimize and execute consumer-centric merchandising, sales and marketing programs, which are based on consumer demand and market intelligence.
