Washington, D.C. (PRWEB) December 08, 2016
Today, Applied Predictive Technologies (APT) released its annual State of Business Experimentation report for CPGs and manufacturers. The report details how leading CPGs are innovating and how they are responding to the new reality of building an omnichannel enterprise. Click here to view the full set of insights.
Greg Ulrich, APT SVP, commented, “The State of Business Experimentation report shows that leading CPGs are innovating more than ever. As they navigate new omnichannel trends, they need to rely on in-market business experiments to reduce the risk of rolling out unprofitable new concepts and ideas.”
Summary of Findings
While optimizing merchandising, pricing, and marketing is still the primary focus for CPGs, leading players are also starting to test innovative strategies such as omnichannel expansion and digital marketing, according to APT’s report. Here are the key trends and how CPGs are reacting.
1. CPGs report that testing reveals an opportunity to refine 40% of new ideas.
CPGs conduct over 40 tests a year on average, with the top quartile of CPGs running over 80 tests during the year to continually have new ideas in their back pockets; in fact, about 40% of their initiatives do not break even, enforcing the need to test each new idea before broad rollout. By trying each initiative in a subset of stores and comparing performance to similar stores without the new initiative, the most successful CPGs are identifying which ideas actually lead to an increase in sales. Further, testing across these areas allows CPGs to understand how initiatives can be tweaked for further success and how they can be targeted to only a subset of the network to maximize the benefit.
2. CPGs are focused on testing marketing initiatives, ranging from traditional in-store marketing to newer areas like mobile.
75% of CPGs tested marketing strategies in 2015, and the two most popular marketing ideas tested were in-store marketing and in-store sampling, tested by 58% and 50% of CPGs respectively. Optimizing in-store marketing and sampling is giving these players an edge as retailers aim to differentiate the in-store shopping experience for consumers. Even though in-store strategies are still the primary focus, CPGs are starting to test a number of omnichannel marketing initiatives, including mobile marketing, online advertising, and social media. We expect CPGs to further expand testing in the omnichannel arena this year as consumers shift purchasing behavior toward these new channels.
3. In-store fixtures and packaging changes are the most popular merchandising tests.
92% of CPGs tested new strategies within products and merchandising in 2015. Within this area, CPGs most frequently tested in-store fixtures (75% of CPGs). Even though ecommerce sales are growing in this industry, the majority of sales still occur in physical stores, necessitating a continued focus on the in-store experience by promoting sales through fixtures and other strategies. Packaging changes were the second most tested merchandising strategy in 2015 (42% of CPGs). As consumers demand options that cater to their on-the-go lifestyles, many food and beverage CPGs in particular are experimenting with new packaging sizes. CPGs are also responding to the consumer demand for clearer food labels that highlight facts like nutritional details.
4. 75% of CPGs are testing price decreases to stay relevant in an increasingly competitive environment.
Pricing was the second most frequently tested area as 83% of CPGs tried new pricing strategies in 2015. 75% of CPGs tried price decreases, and fewer than half of CPGs tested price increases. As shelves are constantly inundated with new products and many retailers are investing heavily in private label brands, it is crucial for CPGs to find the optimal price point for each product. For price decrease tests, they need to consider potential cannibalization to their own value product lines.
5. Testing increases retail partner collaboration and maximizes value.
Close collaboration with retail partners is vital for CPGs to successfully implement their strategies and maximize sales, and there is an opportunity for CPGs to expand testing to more retail partners. Over 50% of CPGs reported running tests in no more than a quarter of their retail partners in 2015. However, some CPGs are leading the charge to partner with the majority of retail partners to run in-market tests, allowing them to maximize the breadth of insights they uncover. Nearly a quarter of CPGs already test in over 75% of their retail partners.
Preview of the Full Report
Testing by Functional Area in 2015 (% of CPGs):
- Products & merchandising: 92%
- Pricing: 83%
- Marketing: 75%
- Retail servicing: 67%
- Supply chain: 58%
Testing within Functional Area (% of CPGs):
Products & merchandising:
- In-store fixtures: 75%
- Packaging changes: 42%
- Price decreases: 75%
- Price increases: 42%
- In-store marketing: 58%
- In-store sampling: 50%
- Timing of servicing: 42%
- Increasing servicing: 33%
- Ordering & forecasting: 33%
- Impact of weather: 25%
To view the full State of Business Experimentation report for manufacturers, please visit: http://download.predictivetechnologies.com/apt-state-of-business-experimentation-manufacturing/.
The State of Business Experimentation is part of a larger set that also includes reports for retail, restaurants, financial services, and more industries. All results are based on self-reported data by a subset of APT’s clients. APT works with 5 of the top 10 CPGs.
APT, a MasterCard Company, is a leading cloud-based analytics software company that enables organizations to rapidly and precisely measure cause-and-effect relationships between business initiatives and outcomes to generate economic value. Our intuitive and proprietary Test & Learn® software utilizes sophisticated algorithms to analyze large amounts of data, enabling business leaders to conduct experiments and allowing them to make optimal decisions and implement business initiatives at scale. APT also offers products that support decision-making for specific business needs including transaction analysis, space planning, promotion design, category management and location selection. APT’s client portfolio features some of the world’s best known brands, including Walmart, Starbucks, Coca-Cola, Victoria’s Secret, American Family, Hilton Worldwide, SUBWAY, TD Bank, T-Mobile, and others. APT has offices in Washington, D.C., San Francisco, London, Bentonville, Taipei, Tokyo, Sydney, and Chicago. Visit http://www.predictivetechnologies.com to learn more.