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