Enhancing promotional effectiveness to improve gross profit and market share for a $1.5B Consumer Packaged Goods manufacturer.

SITUATION

A $1.5B Consumer Packaged Goods (CPG) manufacturer faced market share and profitability losses due to competition from small/niche and large global CPG companies.

Despite increasing promotional spending, the company saw minimal volume lift and erosion of gross margins due to a lack of a data-driven framework for promotional investments.

The client struggled to maintain its market share and profitability in a highly competitive market. Over the past few years, the company increased its promotional spending from 15% to 20% of gross revenues.

However, this increased expenditure did not translate into a significant volume lift, and gross margins continued to erode.

ACTION

Partnered with Revology Analytics to build an in-house Promotion Effectiveness and Optimization platform, developing a comprehensive data warehouse and analytics platform for promo ROI analysis and scenario planning.

To address these challenges, the company partnered with Revology Analytics to develop a comprehensive Promotion Effectiveness and Optimization platform. The collaboration followed a structured approach, starting with developing a Pricing & Promotions data warehouse in MS Azure SQL.

This data warehouse integrated internal and external data sources, providing a unified platform for analysis.

OBSTACLES

The company faced challenges in planning price promotions, declining gross profit despite increased promotional investments, and an inability to demonstrate the impact of price investments on retailer category growth.

The CPG manufacturer encountered several obstacles in its efforts to optimize promotional effectiveness. Firstly, sub-optimal planning due to a lack of understanding of various market dynamics made it difficult to strategize price promotions effectively.

This inadequacy led to inefficient use of promotional budgets and missed opportunities to drive incremental sales.

Secondly, the company experienced a decline in gross profit despite increased promotional spending.

RESULTS

The company faced challenges in planning price promotions, declining gross profit despite increased promotional investments, and an inability to demonstrate the impact of price investments on retailer category growth.

Implementing the Promotion Analytics Platform resulted in significant improvements across various metrics. Sales teams were able to engage more effectively with retail buyers, leveraging real-time scenario analyses on price investments. This capability enabled more robust, insights-driven conversations and stronger relationships with retail partners.

Overall gross profit increased by 8%, with a notable 13% increase for anchor brands. This improvement was attributed to the data-driven approach to promotional planning and execution, which optimized promotional budgets and drove incremental sales.