What are business intelligence (BI) tools?
Broadly speaking, a business intelligence tool is anything that enables you to make data-driven decisions on your growth strategy. In practice this often means data mining teams, tools that run analytics, or data visualization software.
Unfortunately, there’s nothing in this definition that requires business intelligence tools to be easy and affordable. In fact, the opposite is most often true instead. Data mining or analytics projects are usually lengthy, requiring months of work from a team of people that comes with a big price tag. The alternative is begging and borrowing for free data sets from disparate or dubious sources–and then you have to try to patch that all together into actionable insights.
So the issue has become, with all our advancements in technology and all the data we collect, that many companies–especially small companies–simply can’t use business intelligence tools.
This is a shame, because what’s the point of advancing technology if all of us can’t take advantage–whether we have a huge budget or we’re bootstrapped?
What problems can business intelligence (BI) solve?
Across industries, the point of business intelligence is to take the guesswork out of growth. When you have data to drive decisions, you can mitigate the risk inherent to growing a business. Whether you’re a CPG manufacturer, real estate mogul, or dog walker, you have to spend to grow.
Business intelligence, when used correctly, allows you to spend with precision. In the case of CPG manufacturing, for example, you have to spend on, for example, trade promotions. But with business intelligence, you can take your limited budget and allocate resources precisely: Perhaps you can’t afford to run a BOGO deal at all US retailers, but with business intelligence, you could identify a specific retailer in the Southeast market that your target consumer demographic frequents–and spend your money on a BOGO deal there.
What CPG data powers business intelligence?
For a deeper understanding of the way retail data informs CPG business intelligence tools, have a look at Key differences between POS and panel data. For our purposes here, let’s focus on the four “levers” you can pull to try to change your CPG brand’s fortunes:
You’ve gotta have a great product. Business intelligence can help with this, but you have to start with an idea and then dedicate yourself to carrying those values through your business plan. That matters to your consumers, whether you’re selling a luxury product or a tube of toothpaste.
In CPG, this means distribution, and when we measure distribution, we talk about TDP, or total distribution points. In simplified terms, TDP is an aggregated measure of your product’s distribution. It refers to how much of your product is selling everywhere it is sold.
The dark art of pricing strategy doesn’t have to be so dark with business intelligence. It’s tricky because pricing isn’t about just one metric or datapoint to monitor. Instead, your pricing strategy must fluctuate in response to a long list of factors – everything from a change in the supply chain or the entry of a new competitor to the category, to greater economic forces like inflation or recession.
The key metrics to track here are which sales you made under normal circumstances, which sales you made thanks to a promotion, and which sales were made during a promotion, but would have happened anyway.
3 Common CPG manufacturer problems
1. You can’t convince buyers to gain distribution
As they say, “You gotta spend money to make money,” and the world of CPG manufacturers and retailers is no exception. Buyers want you to bring data, case studies, category trends and more to prove you deserve a spot on the shelf or expanded shelf space.
This is a huge obstacle for small CPG manufacturers to overcome. First of all, retail data is expensive or confusing–or both. Second of all, you’re up against category managers who are just looking for a way to say “no” in a space where competition is stiff.
This is where CPG business intelligence can make all the difference. Show where the category is trending, and show how your product is leading the way in “the next big thing”. Tell the retailer who their consumers are–and who their competitors’ consumers are–and how popular your product is with that demographic. Prove that you have a great concept with targeted consumer market research.
2. You lose money on trade promotions
Let’s say you’ve convinced a category manager to give you a spot on the shelf. Now it’s up to you to stay there. Trade promotion spend is fierce. While the big CPG brands have money to burn, your bootstrapped startup probably doesn’t. Don’t spend yourself off the shelf to compete with the big guys. Spend smart to make a targeted impact where you can.
3. You don’t even know where to begin with retail data
You don’t have to be a whiz with CPG business intelligence overnight. Businesses take years to implement a data-driven strategy. A little business intelligence data can go a long way in transforming your fortunes.
Even powering a few key strategic decisions with this data can yield big wins. There’s nothing to lose by trying, but everything to lose by missing the business intelligence boat entirely.
Get deeper insights into consumers and their spending
As a small CPG manufacturer, you’ve got a lot to consider. Aside from your target consumer, you have to figure out what buyers want. As an entrepreneur, you have to be creative, quick and savvy. In the CPG space, you have to keep a close eye on economic conditions, supply chain logistics, and the occasional global pandemic. It’s a lot to be a data analyst on top of all that–so it’s a good thing you don’t have to be.