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How advanced analytics is helping decode changing consumer behaviour
Fast-changing consumer preferences and behaviours have led to the emergence of many new CPG brands, challenging the status quo, driving major market shifts and putting significant pressure on market leaders.
Over the past five years, while leading CPG global companies have witnessed annual revenue growth rates of under 1%, disruptors such as Bai Drinks and The Honest Company have grown at more than 200%. Bai for example, has expanded quickly across Europe and the US, launching antioxidant drink ranges featuring new ingredients like coconut and dragon fruit. Both have benefited from using Amazon as a channel to market.
Strategies to adapt
Many market leaders are trying to boost revenue growth and cope with changing consumer preferences by engaging in strategic M&As – such as the acquisitions of Annie’s and Epic by General Mills, Justin’s by Hormel and Sir Kensington’s by Unilever. However, whilst M&As can be a path to success, what we see really adding value are the incremental gains in day to day operations that come from understanding more about how and why consumers are changing.
The means to do this are out there: social media, blogs, online forums, customer queries, CRM systems, and increasingly the Internet of Things (IoT), all provide fertile data sources which can be leveraged to capture changing consumer behaviour and generate product development ideas. Applying advanced analytics, especially machine learning, can deliver intelligence to rethink product development strategy and go-to-market channels.
Social media listening and learning
The internet provides a great source of unfiltered customer conversations around their preferences, experiences and habits. Analysing opinions across major social media platforms, online discussions, consumer reviews, topical blogs and keyword-driven trend analysis, in conjunction with sentiment analysis, provides CPG companies with valuable insights into product ideas and go-to-market strategies. Active listening can detect relevant insight early on (be it positive, neutral or negative), allowing swift action and reaction if needed.
A great example of this was Arby’s, a US-based quick-service fast-food restaurant chain, which noticed customers on social media talking about loving its sauces. By providing this real time customer feedback to product development and the brand marketing team, the “Saucepocalypse” campaign was born, which told stories of the apocalyptic impact on people not having the sauce. The restaurant also responded to social media comments from customers requesting whole sauce bottles for sale and asking that the restaurant offer large sauce dispensers rather than small packets.
Similarly, P&G is using Bayesian analysis to scan the universe of comments by customers on social media. This ‘consumer pulse’ initiative categorises the comments from social media by brand, and shares it with relevant brand teams to improve and develop new product ideas.
Looking externally for ideation and co-creation
Today’s digital world enables CPG companies to engage customers in co-creation of products. Connecting with customers on digital platforms to generate new ideas not only leads to the development of products and services as per user requirements, but also reduces market research costs and increases customer loyalty. Unilever became a high-profile proponent of this approach when it engaged women at My Beauty Café, an online community dedicated to hair care and beauty treatments, to provide suggestions on developing a new hair-care range, TRESemmé Fresh Start Dry Shampoo. Community members were engaged during every step of product development, from initial ideation to commercialisation. The result? In 2016, the product made the top ten list in the US styling market.
And companies should certainly not forget what may now be seen as “old school” technologies: data gathered from customer queries via call centres and CRM data (either directly via customer surveys or more softly via prudent logging of customer sentiments by sales managers) continue to be an important source of information for CPG companies to identify new product ideas.
Plan for data growth from emerging technologies
The impact of emerging technologies, such as the Internet of Things (IoT) on allowing CPG companies to listen to products themselves, and Artificial/Virtual Reality as a new means of customer engagement, has barely started. Non-traditional sources of structured and unstructured data from smart phones, beacons, security devices and RFID tags have the potential to yield incredible consumer insights about every aspect of brands and products.
Agile experimentation key to successful adaptation
Protecting (and increasing) market share requires efficient and accurate insight generation. There is plenty of evidence to suggest companies putting data at the centre of their business decisions are more likely to succeed in today’s competitive markets. However, while most use data to gather and report on business metrics, very few put data-driven innovation at the centre of business decisions. We see many companies still struggling to make use of the vast data landscape at their disposal, in particular, keeping pace with changing consumer engagement journeys.
For some, big technology installations are seen as a holy grail, but technology (or more data) in itself is not the answer. Businesses need an agile approach to test new concepts by analysing available data using the latest and greatest in analytics – especially to capitalise on new data streams, which may not slot easily into legacy technology systems.
Here at The Smart Cube, we do a lot of data experimentation work with our clients. Using principles of agile analytics, we enable efficient testing of new business hypotheses and questions, without disruption to regular operations or major investment in time or cost.
Read more about how The Smart Cube supports leading CPG companies:
Our Procurement and Supply Chain solutions provide actionable market and supplier intelligence to inform optimal sourcing strategies.
Our Revenue Growth Management solution leverages advanced analytics to enable CPG category managers to plan and execute effective growth strategies.
Vaibhav heads up the CPG sector for The Smart Cube, leading a team of close to 100 people. He is responsible for delivering customised research and analytics solutions and decision support to clients, and for developing and implementing the CPG strategy. He loves spending time with his young daughter (who he believes has taught him as much as his 12-years with The Smart Cube!) and enjoys watching cricket, tennis and football.