Revenue Analytics

Advanced analytics and solutions can help consumer goods manufacturers and retailers capture— and sustain—higher returns through better pricing, promotions, and assortment.

In recent years, a number of consumer packaged-goods (CPG) companies and retailers have successfully used big data and advanced analytics to enhance revenue management. Sophisticated pricing algorithms, for instance, have helped some companies boost their return on sales (ROS) by several percentage points. However, many companies’ advanced-analytics efforts falter after the first or second year. In our experience, this is often because their analytic tools don’t strike the right balance between ease of use and depth of insight. Sometimes the tools are too difficult to understand, apply, or incorporate into daily work flows—and thus never gain traction with the employees who are meant to use them. In other instances, the tools are easy enough to use but perform only shallow analytics that yield generic insights.

At Integrity Solutions, we offer a proprietary suite of software-enabled, commercial-performance tools and services that combine user-friendly interfaces with advanced-analytic capabilities. It can help retail and consumer-goods companies excel in revenue management in a number of ways—for instance, by gathering competitive intelligence online, facilitating “leakage” analytics, and improving performance management. In this article, we focus on the use of Periscope for three critical activities: setting and managing prices, analyzing promotions, and optimizing assortment.

Better pricing, better outcomes

With the Internet making it easy for consumers to compare prices, pricing excellence is more important than ever, yet many CPG companies and retailers still engage in suboptimal practices. For instance, they fail to monitor competitors’ prices regularly, rely on manual and intuition-based price-setting methodologies, or don’t differentiate prices by region, store, or customer segment.

Assortment optimization

Going beyond the basics many retailers and CPG manufacturers take a simple approach to assortment optimization: they give the most shelf space to top sellers. Leading companies, however, use criteria other than unit sales volume or profits to make assortment decisions. They analyze the effects of changes in the product mix—for example, by quantifying “transferable demand,” defined as the sales volume that would be transferred to other items if a particular item were discontinued. This more nuanced approach helps companies discern which products are redundant from the consumer perspective and which products are truly essential to a category. These insights also allow companies to optimize facings and listings, taking into account space elasticity and shelf size; localize assortments based on the shopper mix and item preferences at each store; and account for the effects of service frequency on out-ofstock rates.