CPGmatters: ConAgra Boosts ROI through Better Measurement, Forecasting

Discussion
Nov 12, 2008

By Al Heller

Through a
special arrangement, presented here for discussion is an excerpt of a current
article from the monthly e-zine, CPGmatters.

ConAgra Foods instituted
best practices in coupon measurement and forecasting four years ago to
improve ROI on this part of its marketing spend, and has since posted strong
increases. Now the maker of Healthy Choice, Hunt’s and Banquet brands wants
the CPG industry to similarly embrace best couponing practices and use
performance benchmarks shared by third-party analytical vendors such as
IRI, Nielsen, PDI, IFX, MMA and Marketing Analytics.

“There’s a knowledge
gap in CPG,” Rick Abens, director of advanced analytics, told CPGmatters.com in
an interview. “If people really appreciated the analytics behind effective
couponing, they could strengthen their brands. Enacting best practices
could increase ROI on coupon spend by 10 percent.

“Most of our modeling
vendors report a 60-70 percent ROI in the short-term, and about 100 percent
over a longer two- to three-year period because of repeat sales. Performance
varies extensively by category and by detail of the promotion (face value,
purchase requirement, season, and time to redeem),” he said. Abens is
also vice president-research for PMA, the Association of Integrated
Marketing.

As companies such as
ConAgra improve their ability to measure and analyze coupon performance,
they also become better predictors of demand. Through this knowledge,
they’re better able to manage logistics, balance sheet and P&L statements.
And with retailers, they can better secure shelf placement of brands and
raise confidence in the effectiveness of their couponing events. “More
strategic data sharing produces synergistic insights,” he said.

Coupon analytics are
most important to brands ranked number two, number three or lower in their
categories, according to Mr. Abens, because “these brands need to use coupons to
help become a more preferred choice of consumers versus the leader. Coupons
also help brands reduce the price gap that exists between them and private
label, and lessen the likelihood they’ll lose any shelf facings to store
brands.”

These disciplines are
also key to brands in
“expandable” categories which people buy infrequently, less than
once a month, but will use more if in their pantry (such as packaged meals
and cereal), he contended.

“Consumers are consolidating
trips to save on gas, and they’re planning more as the economy is tanking.
With more stock-up trips and fewer quick trips today, brands need to get
on the shopping list in the planning phase at home – and that occurs
when they review the weekly freestanding inserts and circulars.

“If you get on the
shopping list with coupons,”
he continued, “you can take the consumer out of the market for an entire
purchase cycle so your brand wins and others lose. Otherwise, your brand
will have to wait another purchase cycle – when the consumer is back
in the market for your category – to compete for a purchase.”

Discussion
Questions: What do you think of the opportunity in establishing shared
performance metrics around coupons? What are the challenges of such data
sharing and analysis?

Please practice The RetailWire Golden Rule when submitting your comments.

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9 Comments on "CPGmatters: ConAgra Boosts ROI through Better Measurement, Forecasting"


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Bill Bittner
Guest
Bill Bittner
13 years 6 months ago
I agree completely with Jonathan’s comments about choosing metrics, but let me say it a little differently…. The challenge with choosing any metrics to be used in retail is that you must not confuse correlation with causality. Just because ConAgra experienced significant sales increases, it does not necessarily mean they were driven by coupon events. It is quite reasonable to suspect that much of the sales increase was the result of general economic conditions and consumers changing their habits to eat more meals at home. These would be the very same people (those adjusting their life styles because of economic conditions) who would likely take advantage of coupons to further reduce costs. So although sales and coupon redemption may have increased, the general economic conditions were also a big factor. This does not mean that retailers and CPG companies should not try to come to consensus on some standard metrics. It does mean that the participants must agree on how each metric should be calculated and that all data providers use the same formula. Everyone… Read more »
Matthew Spahn
Guest
Matthew Spahn
13 years 6 months ago

Shared performance metrics create an industry standard that not only gives CPG companies greater confidence in the ongoing ROI measurement practices but also allows the media that carry coupons a way to position the effectiveness of their channel in a compelling and credible manner.

Len Lewis
Guest
Len Lewis
13 years 6 months ago

I love it when everyone starts talking about metrics, modeling and coupon analytics. Kind of sets my teeth on edge and reminds me why ECR has been such a struggle–everyone forgot about the consumer.

If you want to talk about best practices in such uncertain times as these, try offering coupons that have value, not just 35 cents off if you buy two. That’s not partnering with consumers to help them through an economic rough patch or getting them to put manufacturers at the top of the shopping list.

Gene Hoffman
Guest
Gene Hoffman
13 years 6 months ago

Coupons are many-splendored things upon which millions of dollars are spent. And sophisticated coupon analytics does improve forecasting and ROI for both issuers and retailers. That makes a strong case for coupon issuance and coupon measurement for all CPG companies. Case made.

Still, two questions arise from beyond the horizon: 1) “Are coupons used to increase product movement by discounting to selected buyers only?” and 2)”Do coupons prevent any fairness value there might be across-the-board price reductions that could be made available to all purchasers without a coupon? (What an unusual question in these profit-starved spartan days.) Whatever the answers, coupon marketing is its own religion so why not use its prayer book?

Max Goldberg
Guest
13 years 6 months ago

The opportunity to establish shared performance metrics around coupons is positive. The more manufacturers can learn about consumer behavior, the better consumers will be served. Sharing this data with other manufacturers and retailers will benefit everyone.

Jonathan Marek
Guest
13 years 6 months ago

While the general idea here is excellent, CPG companies need to be very careful to use the right analytical methodologies. In the past, CPG has fallen prey to invalid claims of high ROI driven by biased analysis (e.g., the “20-to-1 return on media spend” numbers quoted by ad agencies) or just poor methodologies. In particular, CPG companies ought to be wary of correlative, epidemiological-type methodologies like “marketing mix models.” In medicine, these have led to horrendous conclusions (e.g., the nurses study and hormone replacement therapy). CPGs should seek out test-and-control methodologies that get at the true causal impact of their programs.

Ron Larson
Guest
13 years 6 months ago

Most coupon evaluations miss the many benefits from coupons. Coupons can do more than just lower price. They can advertise and remind consumers about a product.

Each category has unique features which affect the returns generated from coupon programs. Better to develop stronger methods for planning smarter events and better methodologies for evaluating them (that account for the many benefits from coupons and the unique category features) than to develop a benchmark number for each event to surpass to be judged a success.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
13 years 6 months ago
Is this development contributing to the recent very significant drop in share value at Valassis? Inquiring minds want to know. “There’s a knowledge gap in CPG,” according to Rick Abens. Ya’ think? Can I get a “Du-oh” from Homer Simpson? Yes? I knew that I could. Curiously absent from all of the wonderful data provided is how many coupon users already buy the brand. Talk about a knowledge gap. How about moving coupon users to trial and adoption of a new product or brand? No data on that? What are coupons for, after all? And, if national brand coupons are seen to be predatory towards private label, Mr. Abens, how long do you think they will last? Forgive me for dissing the holy concept of metrics, but coupons are about brand movement, not retail movement. Retailers are all about dollar increases from shoppers, not about shoppers trading dollars within their stores. As a seasoned coupon playah’, I’m skeptical about the hifalutin’ “data” offered about a bidness (coupons) that, by some accounts, is less than 10%… Read more »
John Gaffney
Guest
John Gaffney
13 years 6 months ago

I agree with the comment about the “knowledge gap” in CPG. However, customer intelligence is an extremely important asset. If I spend to get it, I expect to keep it. What I know about the customer is the biggest competitive advantage I can get.

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