Commercial Analytics for CP July 2014

Analyze consumer data? Transform commercial outcomes? An integrated approach to analytics can accelerate commercial value delivery in the consumer products industry

The consumer products industry is struggling to use commercial analytics and data in ways that deliver full value. EY Practice Leader Rob Holston explains why and suggests how to unlock this performance paradox. To reignite growth, consumer products shopper decides whether to buy a product. points of failure. These are the common companies need granular, integrated Yet we still see firms stuck in the old belief reasons why consumer products companies insights on commercial performance. And that periodic analysis at the 30,000-foot, are not getting their expected return on they need the ability to turn those insights macro level is going to tell them anything investment from commercial analytics into action, fast. Executives know this. useful about this shopper’s behavior — never and data. That’s why the question we hear time and mind how to influence it. again isn’t, “Do we need analytics?” It’s It doesn’t matter how elegant your strategy “Why aren’t our analytics delivering more sounds. If it’s informed by rudimentary The truth is most value and why is our ROI on data so low?” analysis of dated, and incomplete companies in the The truth is most companies in the sector information, its success or otherwise is are failing to get full value from their more a matter of luck than judgment. sector are failing to get data and analytics investments. That’s The most likely outcome of this operating full value from their typically because they are not prioritizing model is failure. And we’ve seen that their investment for today’s challenges happen repeatedly, at great expense, both data and analytics or changing their working practices in in financial terms and in terms of lost ways that would enable them to create market credibility. investments. competitive advantage (see “Three points of So why doesn’t the clear desire to failure” on the right). engage with commercial analytics deliver For example, the big make-or-break better results? We call it the “paradox of decisions in this industry are taken within performance.” Every company has its own arm’s reach of the shelf. It’s here that a challenges, but essentially we see three 2

Three points of failure Not prioritized Not sophisticated Not omni-channel enough enough enough The consumer products industry is Consumers like relevant, personalized Traditional retail channels are continuing relentlessly focused on the challenge offers and trusted experiences. They to consolidate, but the connection points of where and how to find growth. While reward manufacturers and retailers that for activating and engaging consumers executives struggle to unlock that puzzle, provide them: look at the success of are multiplying rapidly. To thrive in this they’ve been busy executing the one Amazon, Walmart or Unilever. But these omni-channel environment, companies strategy they can control — cost-cutting. are noble exceptions. For most companies must have speed and agility. Those are This might keep investors happy in the in the sector, their commercial execution two characteristics that many firms still short term, but is it a way to fuel long-term is just too blunt and generic to move the lack. Their old legacy working practices just growth? In a market that is contracting or performance needle. don’t enable them to deliver the integrated stagnant at best, the answer is probably no. The right combination of technology, data experience consumers want. New data capabilities can unlock additional and analytics can deliver the kind of granular The good news for them is that data and pockets of opportunity. Companies need to view that makes market tactics aimed at insights on how to win with consumers will start investing in them. broad “customer segments” obsolete. One continue to expand exponentially. And such Most companies are striking the wrong company we know grew its sales by 3% after data are increasingly available in near-real balance between what they spend on getting migrating from a channel-based view to time. But current decision-support systems data and what they invest in translating a “perfect store” understanding across its are based on stale, point-of-sale-centric data data into knowledge and action. The scales retail execution. A move to more granular delivered in periodic PowerPoint studies are generally tipped towards the former, at analytics enabled it to tailor its assortment, or monthly updates. In an always-on world, the expense of the latter. By contrast, the pricing and merchandising to local consumer products companies still seem to leaders in this area are those that have conditions and individual stores, thereby operate mostly “unplugged” when it comes got their priorities right. They are building driving growth. Even a small percentage to their decision-support technology. their data science and data management improvement, if sustained, can have a huge skills. They are developing their ability to impact on performance. translate analytics into insights. And they are establishing a culture of analytics. For a handful of these pioneers, new investments in data and analytics are a purposeful part New data capabilities can unlock additional pockets of their growth strategy, elevated beyond market research and insights. of opportunity. Companies need to start investing in them. Consumer Analytics | Point-of-view 3

How to execute commercial analytics strategies that deliver value Integrate data Scale analysis and and insight insight development To drive market performance, companies must be able to synthesize new data sources, apply advanced analytics and use Firms that use commercial analytics Effective commercial analytics requires those analytics when and where they make effectively can integrate different kinds of continuous insight across the organization. decisions. Yet many struggle with how to data from multiple different sources. Classic A one-off analysis or an ad hoc project can unlock their commercial performance. As a point-of-sale data is fine for reporting be useful, of course. But for real value, result, they cling to historical practices and market share, but its relevance to decision- it’s critical that you create a consistent dated approaches. making is limited and shrinking fast. approach and a capability you can grow. It’s time to move on. Our work with clients Those that buy syndicated data are realizing Leveraging a scale analytics platform has identified five areas that will be essential it might be better to fuel their own or third- wrapped in a solid data governance in helping you transform the way your firm party decision platforms with disaggregated operating model will drive value creation. uses commercial analytics and data. Get data feeds, combining structured and Analytics will continue to be more real-time these five right and you will position your unstructured data at a fraction of the cost. and self-service. An analytics platform firm to compete effectively on analytics Those savings can then be used to build will allow for the industrialization of the today and in the next several years: new execution capabilities, driving data- analytical science while providing the investment ROI. flexibility, speed and cost advantage to We have seen companies integrate direct-to- power commercial decisions at the speed consumer, i.e., eCommerce, data and retail of business. store data along social sentiment insight An important early step is to develop a with various econometric factors to unlock common analytics “language” in your a better demand forecast. Not only did organization. When people are talking about forecasting error get reduced, it also helped a key measure, for example, there needs to shape their channel strategies to be more be clear agreement about what they mean. responsive to dynamic consumer behavior. Without that clarity, it becomes harder to drive adoption or to hold people accountable. We’ve seen one company that had six The human side of analytics different methodologies for calculating A recent EY and Forbes Insights survey approach to data and analytics. price elasticity and developing a price found that one-third of executives Example: How might the organization’s architecture — each created by a division worldwide — from a range of industries — culture need to change? or region working in isolation. were trying to build a strong analytics • Micro issues — the individual human In today’s global consumer products culture. But, just as many said, their behavioral dynamics to consider when company, delivering a scale analytics managers and staff felt threatened designing the application of analytics capability that has a consistent methodology by analytics. Example: Do the “consumers” of and a common language unites and raises This suggests that many organizations analytics feel sufficiently empowered the capability of the organization, while still are neglecting the “softer” capabilities to act and are their incentives aligned maintaining local decision-making. needed to use analytics effectively, appropriately? notably those relating to behavior. Almost all automated processes require We separate this challenge into two a human to make a business decision broad areas: or change a business process, as a • Macro issues — the higher-level result of analytics. An organization that organizational and leadership works to remove behavioral barriers is requirements to address when more likely to achieve full value from its conceptualizing the organization’s analytics investments. 4

Create insights Translate insight Build analytics while you sleep into action for consumption Firms must be able to spot changes in Firms too often underinvest in the skills they It’s often in the gap between insight and market sentiment and consumer behavior, need to move from insights to real-world action that the battle for consumer spends real-time — and even predict them before commercial decisions. One way to fix this is is won or lost. Decision-makers must be able they happen. Then they can make rapid to build central commercial analytics teams to access analytics-driven insights whenever changes to pricing or media activity, around common business issues — such and wherever they need them. Increasingly, for example. as managing revenue growth or making that won’t be when they’re sitting in front of Effective commercial analytics will generate marketing more productive. a workstation. insights that inform long-term strategy. You can then invest in training and Understand what questions commercial But firms that only “call up the data” for a knowledge management to support and analytics can answer, how those insights fit monthly or quarterly management meeting develop these teams. That will give you a into your business processes and who needs will struggle to get real value from their core commercial analytics capability — one access to them. Then invest in commercial commercial analytics. Invest in commercial that combines data expertise with a detailed analytics that deliver the right insights to analytics that are “always on” — always awareness of all the decision points that lead the right people in the way that works best looking for and flagging opportunities for to winning propositions “at the physical and for them — from mobile phones and tablets, immediate action. virtual shelf.” to wearable devices. For most companies, there’s more value in “democratizing” core analytics, so the widest number of people can access them and use them to make decisions than there is in developing next-generation analytics approaches. If your insights are locked in a Integrate data PowerPoint deck, you’ll struggle to move Build analytics for and insight with the pace today’s environment demands. consumption Transforming Case study commercial A leading global consumer products company was wrestling with monetizing the value of data and outcomes analytics across their organization. The company with analytics historically has relied on commercial analytics on pricing and trade ROI to be created by their marketing research function leveraging multiple global data Translate insight Scale analysis and and analytics providers. The insight was frequently into action insight development helpful, but the speed at which these insights were returned missed critical decision windows and didn’t allow for the current learning to be incorporated into analysis. Sales and commercial executives frequently had to defend decisions with dated analysis and the organization was losing creditability in its Create insights interactions with its customers. The client created an while you sleep analytics center of excellence and invested in scale technology along with new visualization tools to allow for the continuous creation of the analytics. They powered their sales organization with self-service analytics tools and training to change the commercial performance of their organization. Consumer Analytics | Point-of-view 5

How EY can help you deliver We have a range of capabilities, proprietary technology assets and an advanced More information partner ecosystem that can help transform our clients’ ability to create, consume To learn more about EY’s Commercial and scale commercial analytics in ways Analytics and how we can help you that will unlock growth and improve their move forward, contact: business performance. Rob Holston These capabilities address core client issues + 1 305 415 1544 in revenue growth management, marketing [email protected] productivity and retail collaboration. We collaborate with our clients to create high- impact outcomes — be it through advisory Rob Holston engagements or leveraging our Commercial leads the Analytics business platform to create speed, Advanced scale and efficiency. Analytics practice in the Americas and the global Consumer Products Commercial Analytics practice at EY. Rob’s experience and background spans multiple industries and global markets, all while centered on unlocking innovative growth opportunities through the unique combination of strategy, data, analytics and technology solutions. 6

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