Consumer packaged goods (CPG) companies have invested heavily in technology platforms to improve their trade promotion performance but many lack the talent or business processes to capitalize on these investments, a new study from Accenture finds.
According to Accenture’s Perfect Promotion Study, based on interviews with 350 senior executives at large CPG companies, 61 percent believe their technology investments have produced a wealth of data that can help improve their trade promotion performance but they lack the talent needed to put the data to its most effective use and boost the return on their analytics investment. In fact, one in five executives – 21 percent – admit that they trust their intuition more than the available data to make trade promotion-related decisions.
The study also reveals that CPG companies have changed their trade promotion investments since the start of the economic downturn in 2008. According to the study, 71 percent of CPG companies have increased their trade promotion spending in response to the economic downturn – 23 percent by more than one. Many executives participating in the study believe the additional investment has delivered additional value: 27 percent believe their return on investment (ROI) has increased by more than a quarter since the downturn, while 16 percent believe that their ROI has declined.
Slightly more than half – 53 percent – believe their company’s trade promotion performance is good, but could be improved. However, 28 percent believe it to be either “totally ineffective” or in need of significant improvement, and only 19 percent view their trade promotion performance as industry leading.
“The right approach to trade promotions is to blend leading edge technology with outstanding talent and make better use of predictive analytics and greater process integration across the business,” said Ed Stark, a managing director in Accenture’s Consumer Goods & Services practice. “In many cases the heroic efforts of individuals in CPG companies can hide many of the failings of their trade promotion efforts, and the successes that are achieved often occur in spite of, not because of, the tools, talent and processes at their disposal.”
“Our study indicates that most CPG companies are looking at the right areas in order to extract an improved return on their trade promotion investment. This holistic approach is the basis for Accenture Perfect Promotion, designed to help clients increase their trade promotion volume and effectiveness with less investment.”
The volatile marketplace is reflected in the areas where CPG companies believe they can improve the ROI of their trade promotions. Two-thirds of the executives – 65 percent – identify the establishment of more cost effective processes as a key method of improving their trade promotions performance. Additionally, 57 percent say they prefer to contract for outsourced talent in the promotions area rather than hiring talent directly. And, 29 percent – indicate both a need for greater flexibility in terms of resourcing and a difficulty in attracting the right calibre of talent.
According to the survey, most respondents identify predictive analytics as a critical tool for improving trade promotion performance. More than half – 54 percent of respondents – view predictive analytics as important or very important for companies seeking improvements in this area, and 56 percent rated predictive analytics as being very desirable or the most desirable way for their company to improve its trade promotion efforts. However, a significant number – 24 percent – believe predictive analytics has limited importance.
“We have detected a strong feeling that companies are not making the most of the data that their technology investments have generated, and, perhaps more worrisome, a large proportion of our survey respondents do not trust the data,” said Alex Kushnir, a managing director in Accenture’s Consumer Goods & Services practice. “The quality of the data can be impacted by a number of factors; the tools used to capture it, the number of steps in the trade promotion process and the talent used to analyze and leverage it. Companies need to look at the process from end-to-end to be certain of the quality of the data that their teams are using.”
Other key findings from the study included:
The volatile economic climate has encouraged two-thirds – 66 percent – of CPG companies to switch more than one quarter of their trade promotion spend to digital channels, and 20 percent expect to shift more than half of their trade promotion dollars to digital channels during 2013.
28 percent identified closer collaboration with retailers as being crucial to improving their trade promotions initiatives.
43 percent of CPG companies believe that greater integration is required between the business functions involved in the trade promotion process.
66 percent would consider outsourcing all or part of their trade promotion process.
The same proportion – 66 percent – would use outsourced talent to help analyze and help them better understand their data.
55 percent would outsource to help leverage the data they have captured.
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