How Will Current Events Affect Your Baselines? Key Takeaways:
- How you can prepare your organization for implications of panic buying
- The importance of correcting data anomalies (whether it’s a weather event, competitor out of stock, or a global pandemic)
- You can get better results with accurate baselines
Webinar Hosts 🎙️
Shelley Fow, Director of Presales, Blacksmith Applications
Book a meeting with Shelley to talk all things baselines and optimization >
Watch the 22-minute webinar recording:
When we rang in the new year (2020), we had no idea of the craziness that would ensue a few months later…
Shelley explains that she’s never experienced anything like this. “I live down in the South. And for us, the biggest event we get is when the weather channel predicts snow! With that, the grocery stores are depleted of bread and the milk.”
Once the mandatory pandemic safety protocols were put into place in March 2020… grocery store shelves were bare. CPG manufacturers stood at the front lines – essential workers – working hard to ensure that the products we use and consumer every day were available.
Before the pandemic, it’s likely your production lines were already at capacity. This situation has put even more pressure on CPGs to keep shelves stocked and retailers happy. In March and April, you most likely saw a surge of sales unlike ever before. The increase in shipments had absolutely nothing to do with promotional activities or increased distribution which are historically the major drivers of short term increased volumes. It was simply driven by the public’s panic buying… Price and promotional activities had no impact. “I’ve been hearing that a lot of retailers have even been canceling any kind of promotional activities for the time being,” Shelley points out.
The bottom line: If it’s on the shelves it’s getting purchased.
How Panic Buying Impacts Your Business
It’ll be a challenge to understand the impact of the pandemic on your business. As you receive syndicated data releases, you’re going to wonder… How do we handle this?
“I always say that base volume is the greatest mystery for CPG manufacturers. It’s one of the most difficult areas for CPGs to gain mutual agreement on and feel comfortable that their numbers are accurate,” Shelley adds.
In a nutshell, base volume is the health of the business. Base volume is what would have been sold if there was no merchandising or promotional activity.
Drivers of base volume typically rely heavily on distribution and regular price but promotional activities, your competition, and consumer activities can factor into the mix. Base volumes are derived from waiting and smoothing the sales and non-promoted stores for the weeks before and after each individual week.
- Does your organization have a handle on what your baseline volumes are?
- Are you looking at the true baseline versus what is considered incremental when you’re looking at your overall volume?
(video time: 5:40)
Blacksmith TPO Baseline
Syndicated and POS baselines are a standard reference for CPGs, but syndicated data baselines can be unreliable.
Syndicated baseline inaccuracies can be caused by:
- Inaccurate feeds from retailers (can take upwards of 13 weeks to correct)
- Raising baselines during promotions
- Data anomalies that show increased non-promoted volume being recorded during specific time periods
- In-store demos with no price decline
- Competitors out of stocks
- Panic buying (pandemic)
- Bad weather such as hurricanes and snowstorms
Inaccurate baselines can result in a negative impact on incremental volume and profit on post-event analysis. All in all, syndicated data providers typically overstate baseline volumes.
Blacksmith’s baselines provide really groundbreaking baseline anomaly correction from within the user interface allowing client the ability to make adjustments on the fly. Whether it’s a competitor’s fulfillment issue, a retail partners promotional execution, or another unplanned activity (such as the pandemic), correcting anomalies that impact base integrity are quickly corrected with a few clicks.
Notice the three week period circled in blue (image below).
Volume increases. There’s no presence of any promotional activities or changes in price. Volume went from approximately 3,200 total cases to almost 8,000 total cases over that period. Base volume increased 10% to 30%. Why? Was there a change in distribution?
Or could a data anomaly have occurred – such as the pandemic – which caused products to fly off the shelves regardless of pricing and no promotional activity?
Notice the increase in volume has caused the baseline volume to reflect higher going forward. You have a situation where you’re not able to accurately analyze your business. When promotional activities occur going forward, you have misleading information as to what was truly incremental.
So how can CPGs correct baseline anomalies without complex and costly solutions?
Viewing the TPO application’s master calendar, approved users can course correct data anomalies so that you see a more accurate assessment of their products. Within Blacksmith TPO, you can see all information pertaining to a historical data for a specific retailer and a product group.
We see a 3-week data anomaly (above) and an increase in base that now extends into the future. To correct this baseline, you should consider the anomalies. Then, it’s as easy as indicating to the system that you want to treat this block of weeks as an anomaly and simply click on the last week of that period.
(video time: 5:40)
Within just a few seconds, you’ve made the change. You see the baselines are smoothed out and normalized to what they would have been had without that surge in volume during this 3-week period. The ability to correct anomaly-driven situations ensures that you are presented with more specific results when you’re looking at the overall health of the business.
Blacksmith’s baselines are smooth. It’s critical to have the ability to correct data anomalies that are going to wreak havoc with your business. Crack the code on your baseline volumes and don’t be forced to rely simply on inaccurate projections.
Question & Answer
(video time: 15:10)
Question: Why aren’t syndicated baselines accurate?
Answer: That is a source of contention for many CPG companies. When I was on the CPG side of things, the company I worked with had IRI data. Several years later, we switched to Nielsen. That was our big eye opener into how different baselines can be across syndicated providers.
Issues come up where data is just not recorded properly. Every time a product scans at the register, that’s what’s being captured and supplied through the syndicated data. Issues happen – retailers don’t get their sample data to the syndicated providers. It takes 13 to 15 weeks for syndicated data providers to fix issues… if they even catch them.
Both syndicated data providers heavily factor baselines rising during promotions. They’re trying to depict the impact of a loyal purchase on a promotion versus a non-loyal purchaser.
I even heard recently that because of all the problems that are going on right now at retail with just being able to keep the store stocked and keeping fewer people in the stores that for syndicated data providers who send out surveyors to go into the stores to capture where there are displays – they’ve been notifying companies that they’re not able to send those individuals out into stores. So you in addition to seeing these big spikes in volume, you guys are probably going to start seeing actually no impact of no record of display activities going on.
So there’s going to be a lot of new things that are going to skew the data that you’re going to be seeing here soon.
(video time: 18:25)
Question: How does Blacksmith TPO baseline eliminate concerns that might arise from syndicated baselines (and maybe from other providers)?
Answer: Blacksmith TPO uses a proprietary, statistical model… but it looks at a broader picture of time. We’re not going in and just analyzing the last 8 weeks, or the last 12 weeks, of incoming data. We give our users the ability to model their baselines over all types of timelines.
Within the tool, a user can select a baseline that’s based on a 4-week algorithm – all the way up to a 52-week algorithm. And that is really effective – especially for CPG companies out there that have very seasonal products, where volumes spike and then come back down to either nonexistent or much lower volume.
The capability where a user can control – on the fly – exactly how to analyze the baselines from a time period is one area that sets Blacksmith apart.
(video time: 20:15)
Question: If CPGs send Blacksmith their data, but they don’t have TPO – could they be supported by services with Blacksmith?
Answer: Yes , Blacksmith provides professional services that enable your organization to gain the insights into their business without having to actually have the staff to go in and do it themselves. When talking with CPG companies, I know that’s the biggest issue right now — the lack of resources and time.
Yes, definitely, we would love to talk with you about how we can provide you with smooth baseline services. Of course, we would need access to your data sources, but we can talk with you more in detail about what that would involve and get specific about what your needs would be.