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The Decision Factor offers insightful comments and observations on analytics—from views on new technology approaches and market dynamics to the latest industry trends driving demand for faster, smarter information analysis. This blog contains personal views, thoughts, and opinions from SAP employees, mentors, and friends working in the area of analytics. It’s not endorsed by SAP nor does it constitute an official communication of SAP.


Why Consumer Packaged Goods Companies Love Big Data

If I could sum up success in the consumer packaged goods, or CPG, industry in one word, it would be SPEED—the speed at which the best companies take advantage of the latest consumer trends and defend their market share against the competition.

Quickly changing consumer tastes is just one example. Coffee is good for you, then it’s not, then it is again. Consumers want zero trans-fat foods, no-fat cookies, and no-sugar sweets, and then decide to forget it and go back to the “good stuff.” On top of that, companies operate in a fierce marketplace with the need to monitor and respond to competitive promotions and pricing changes and constantly deliver new product innovations and product line extensions. Few industries exist in such a dynamic environment.

To succeed in any business, you must have a good product. But in consumer packaged goods, it’s absolutely vital you keep a close eye on consumers, the competition, and your own business if you want to stay on top of today’s results and ensure you’re positioned to win the consumers’ business tomorrow, next week, and next month.

Many people are talking about the velocity aspect of Big Data and how it might help businesses, but consumer packaged goods companies are doing it. These early innovators are tapping Big Data and analytics tools to accelerate the speed of their businesses.

The War in the Grocery Store

Big Data—specifically the ability to analyze vast amounts of data instantly—is a key weapon in helping consumer goods companies win the battle for retail shelf space and ultimately customer sales. Accurate sales forecasts from distributors and retailers, as well as actual point-of-sale (POS) data, are critical in determining production volumes and distribution and fine-tuning pricing and promotion strategies.

Consumers can be very price sensitive and switching costs are virtually zero. If there’s incentive for a consumer to switch to another brand—because your price is too high or your product isn’t in stock—the consumer may discover they prefer the other brand and continue to buy it in the future, resulting in lost sales for months if not years.

The better informed a CPG company is with immediate and up-to-date POS information from every retail outlet, the better positioned they are to crank up production to avoid stock-outs or run additional promotions in regions where volumes are dropping. In addition, a company may find itself in that luxurious situation where it can increase prices and/or reallocate production to improve profit margins in areas where customers are placing strong demand on their product and sales are doing well. 

Vision, Powered by Innovation, Reaps the Biggest Rewards

So how can you make these significant shifts in speed? Technology, such as in-memory computing and analytics software, certainly plays an important role. But so does the vision of their executives applying these innovations to the business and prioritizing what business areas will reap the biggest rewards from the investment in these new solutions. .

Furthermore, once you’re in a position to provide the line-of-business organizations throughout your company with these breakthroughs—like instant access to accurate sales data—then business leaders must also empower end users to explore data, synthesize information, and make decisions, such as distribution or production scheduling, that dramatically increase the speed and effectiveness of business. In this way, Big Data can potentially change your company’s technology landscape, its business model, and ultimately its results.