Data dysfunction a plague on retail, CPG industry

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“Actionable Insights” — is there any bigger cliché in the category management and shopper insights world than those two words? Usually you see these words in the context of a service provider making claims about its unique ability to provide value. “We translate data and reports into actionable insights that help you grow your business.

Kurt Jetta

The sheer ubiquity of the cliché means that these “actionable insights” aren’t actually a differentiator at all. Further, if we look at the last five years of historically weak results in our industry, we could rightly come to the conclusion that any company claiming to provide actionable insights is being downright misleading.
There are only two words in the phrase: actionable and insights. So, if the weak industry results are coming in the midst of all of the “actionable insight-making,” then either nobody is taking action on the insights or maybe the insights aren’t really so insightful after all.

The primary fuel for most of the analytics in our industry is the scanner data produced by Nielsen, IRI and SPINS. We take for granted the vast amount of information we have at our disposal and the granularity of that data. Analysts in other industries would kill to have access to the type of market information that we have so carelessly squandered for the last 25 years.

We squander this precious resource of information by not producing analysis that helps retailers and manufacturers deliver results that are meaningfully better than if the data were not available. Can there be any legitimate claim that the CPG industry would have done any worse than the 1% to 2% growth of recent years without the availability of this data?

While they won’t directly admit it, retailers and data providers have given up hope on ever capitalizing on the potential value of this information. Why else would they enter into all of these self-defeating exclusivity agreements other than a quick play to monetize the data? Manufacturers can no longer see into the major mass market retailers that have one data provider, which makes it difficult to get a unified view of the world. Here’s a list of the arrangements that create barriers to seamless analysis:

• H-E-B data is only available through IRI. Meijer is exclusive to Nielsen.

• Two big dollar store chains are exclusive to Nielsen; IRI clients now have no visibility into this growing channel.

• Kroger recently signed a blockbuster exclusivity agreement with IRI. Nielsen clients can purchase Kroger data through IRI, but pay a premium for the access.

• Walmart private label item-level data is not available to IRI clients. CVS masks their private label data for both suppliers at all levels of geography. Sam’s Club does not allow release of private label items exclusive to them at any level of geography.

• SPINS is the primary provider of natural foods data in the industry. There’s just one problem with that: They are missing Whole Foods data, because that is exclusive to Nielsen.

To make matters worse for manufacturers, data providers and retailers have made it more difficult for third-party providers (such as my company, TABS Analytics, and dozens of others) to get access to the data. These service providers help manufacturers integrate and analyze the data from all of these disparate sources.
Out of frustration with this whole mess, many manufacturers and retailers are turning to their shopper card data as their primary source of information. While there are many shortcomings to this data source, the primary one is that retailer shopper data lacks visibility to sales occurring outside of that retailer.

“Loyalty marketing” is a misleading term, because the vast majority of shoppers purchase an HBC brand only once during a year at a specific retailer. The same is true for food brands in the drug channel and even many in the food channel. Anyone spending more than five minutes with this data would understand that; it seems retailers already do and, therefore, they just view this data source as another manufacturer shakedown opportunity.

I can almost hear anyone who has read this article so far say, “All right, Mr. Cynic, you’re so smart. What would you do to fix it?” I’m glad you asked.

The best way to create respect for the syndicated data is to provide truly actionable insights about what makes money in our industry — insights that the thousands of people and millions of dollars invested in this endeavor seem to have missed. So here are 10 things that I have learned from analyzing syndicated data over the past 25 years:

• Sales from high/low price promotions are entirely incremental to the promoting brand, the category and the retailer.

• Companies can actually make money by spending more on trade promotion, but only if the retailer is willing to work with them on the discount subsidy.

• With many O-T-C categories being an exception, fewer, deeper promotions are better than more frequent, less-deep promotions.

• The sales generated from a larger size of a top-selling item will be about 70% incremental to the brand and about 50% incremental to the category.

• Reducing everyday pricing never works. It usually generates little increase in sales, and much less money is made, due to lower margins. Conversely, everyday price increases almost always pay out.

• Organic products sell way below (50% or more) comparable nonorganic products. Their sales, however, are usually highly incremental to the category.

• Package changes will produce, on average, a 10% reduction in baseline sales; often it’s no effect or a major effect. Sales never grow from this change, however.

• Bonus packs and digital coupons rarely work.

• Displays are the “dirty little secret” of sales guys. Unless you have a high-velocity product, they don’t work, but they jam inventory to help make quota.

• “Buy one, get 50% off” promotions don’t work that well, and they underperform 25%-off sales.

So that’s how you fix a broken and dysfunctional industry: Start providing analytics that actually make money for the people using the information. That takes a vendor bold enough to break the mold and not just parrot all of the ineffective paradigms that have failed to deliver meaningful results so far.

Kurt Jetta is the founder and chief executive officer of TABS Analytics. He can be contacted at [email protected]



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