What CPG Companies Can Learn From Netflix

When it comes to using data to improve performance and increase revenue, Netflix has proven that they know what they’re doing.

Netflix, one of the first video streaming technology companies, is valued at $164 million – surpassing Disney as the most valued media company in the world. Companies like Netflix have changed the way consumers rate their experiences. Consumers now expect personalized and relevancy.

Netflix collects data from its 151+ million subscribers and implements data analytics models to tailor suggestions, discover individual behaviors, and understand buy patterns.

In other words, Netflix predicts what shows and features will work before ever running it through big data. 

Wouldn’t it be nice if you had that predictive confidence with your trade promotion investments?

You’re already collecting data.

Trade spend analytics tools like trade promotion optimization (TPO) systems can implement routine post-event analysis and predictive logic, enabling CPGs to make more informed decisions about what promotions will work before they ever run. 

“Adding prescriptive capabilities to your trade program is the culmination of the shift away from tactical guesswork and toward strategic management of trade investment.”

 

What can CPG companies learn from Netflix?

Post-Event Analysis is Key 

The first step to an intelligent trade investment approach is post-event analysis. Post-event analysis is the best way to improve financial results.

Post-event analysis (PEA) is an automated process that allows you to quantify the ROI of your promotions. With PEA, CPGs can quickly assess performance at the event level and identify trends that work.  

With PEA you can uncover specific parameters like:

• Event duration
• Volume sold
• Ad executions

Use the insights from PEA and apply the historical data to predict what promotion is going to work in the future. The functionality eliminates much of the risk associated with tactical change because the data shows how the promotional change will help achieve strategic objectives. It’s also a benefit from your retail partners’ perspective. 

Having visibility into detailed information is crucial to Netflix; it allows them to analyze the behavior and interpret how those behaviors correlate to action. In doing so, they create a picture of what effective and ineffective looks like.

Similarly, CPG companies can utilize their promotional data to accurately forecast the performance of a single marketing event or an annual customer promotional plan, so you can align your intelligence with your corporate strategy. 

The Power of Predictive 

Now, you’re ready to use predictive analytics to understand what is going to work and when it’s possible.

What-if scenarios and optimized calendar building apply predictive modeling to quantify future KPIs. CPGs should develop accurate, favorable plans without resorting to the ineffective guess-and-check method you might rely on today. 

According to an article by Retail Touchpoints, “Yesterday’s pricing strategy is not going to work for tomorrow, so you have to constantly reinvent yourself.” You can do this through the prediction capabilities of machine learning.

Beyond Predictive: Prescriptive 

But even with intelligence-driven opportunities afforded by what-if scenario and calendar planning, the uncertainty of recognizing all the possibilities available remains.

By applying prescriptive analytics, you move beyond manually calculating what promotions will work, to a method of advanced constraint-based analytics. Constraint-based TPO functionality runs through every scenario and promotional mix available to tell you what the best options are.

CPG companies should adopt an optimization mindset that takes into account a company’s entire promotional performance history and delivers an optimized plan in a matter of minutes, resulting in a quantified return on the #2 line item trade promotion. 

Intelligence is a Differentiator 

Netflix is a company that is known as being innovative and disruptive;  a company that has successfully thrived in the face of change. Comparatively, the CPG industry is very mature and finds change challenging. CPGs that endorse an analytical approach to trade spend will maximize their promotional investments, gain a marketplace advantage, and be positively disruptive.