"Both parties have data and analytical capabilities but reaching single view of truth is the missing outcome."

"Both parties have data and analytical capabilities but reaching single view of truth is the missing outcome."

With growth in FMCG in many western economies hard to come by, manufacturers and retailers need to step up efforts to work together, argues José Carlos González-Hurtado, the president of IRI's international operations.

In a struggling retail environment, a new industry standard for growth is needed.

In a similar way to how the supply chain was redefined 15 years ago, manufacturers and retailers should create a new Efficient Consumer Response (ECR) for what we call Big Data Collaboration in order to work better together.

With slow-to-no growth, especially in western economies, the FMCG retail environment has been a challenging place in which to operate in recent years. What is happening, as a result, is fairly predictable: retailers and manufacturers focus on price in order to drive sales but the subsequent promotion wars erode margins. These efforts are not paying off as retailers and manufacturers might hope because they are focusing on the wrong problem and not on the relatively untapped commercial advantage which they share: knowledge of the consumer.

Retailers own the direct relationship with the consumer and so are in the best position to listen to what is happening in real time, understanding shopper habits through loyalty cards for instance. Meanwhile, manufacturers have an extensive knowledge of brands and categories, having spent years building strategic, analytical and consumer-centric organisations. As a result, they have a much more granular and robust insight into consumer behaviour in their categories than retailers. A real 360-degree view of the customer, also adding knowledge on their media consumption alongside other external factors such as the macro economy, weather and petrol purchasing, can provide the most relevant and accurate information for fast decision-making and actions.

Both parties have data and analytical capabilities but reaching a single view of the truth is the missing outcome. By working together, these sources of information make it possible to personalise the product offer and communications according to the customer in a way that will truly resonate.

The reason this collaboration is not commonplace yet is because there are three significant barriers to overcome. Data ownership is one, with the retailers understandably protective of their valuable data, but manufacturers really needing it to make better decisions. The volume of data and understanding how to mine it is another issue. The third is perhaps more fundamental: differing views of the customer. The manufacturer understands what the customer thinks about their brand and what their preferences are, while the retailer knows what is chosen at the shelf and the shopping mission that the customer is on. It is finding the common ground between these approaches that is essential for manufacturers and retailers to move forward productively.

The benefits of overcoming these obstacles are significant. Allowing one single view of the truth will make the actions needed much simpler to understand. Better strategic planning between manufacturers and retailers would also become possible, along with integrating report structures for the main KPIs to make tracking performance of products and stores quick and very easy to do. 

Big Data Collaboration is articulated around three components: data, analytics (or modelling) and technology that makes it possible to deliver insight on what really matters to the customer.

One retailer that has had success is upmarket UK grocer Marks and Spencer, which has joined forces with IRI to create a platform that integrates a range of data such as sales volumes, sales value and on-shelf availability. It has enabled M&S to instantly look at any KPI for the year to date, and zoom down to any product in a given store or week. This is revolutionary compared to the category-level databases that came before. In a classic example of 'build it and they will come', 80% of M&S manufacturers chose to join the programme and they have all decided to stay for a second year.

Consumers have more control today than they have ever had before. To win the hearts and minds of consumers, manufacturers and retailers need to work much more closely together. By putting the customer at the heart of every decision, there is far more chance of getting the important details right. Collaboration will drive improved sales and value for the future, a winning strategy for everyone involved.