Detection and Analysis of Factors Impacting Product Cannibalization Using a Time Series Cannibalization Modeling Approach – Quantzig’s New Success Story
Engagement Summary Working with a major FMCG retailer based out of the United States, Quantzig was able to rapidly deliver a product cannibalization measurement framework for analyzing the promotions and discounting strategies that impact the sales of existing products. The cannibalization measurement framework not just empowered them to gauge the promotions and the ROI generated […]
Working with a major FMCG retailer based out of the United States, Quantzig was able to rapidly deliver a product cannibalization measurement framework for analyzing the promotions and discounting strategies that impact the sales of existing products.
The cannibalization measurement framework not just empowered them to gauge the promotions and the ROI generated from various product categories but offered a unified view of its impact, thereby offering deeper insights into customer buying patterns and cross product cannibalization. The new framework also improved data capture and offered significant benefits by driving sales and aiding product launch benchmarking.
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The FMCG industry is a competitive one and in the modern retail environment the effective exploitation of data is turning out to be crucial for the success of a product launch. Although FMCG retailers have pioneered the concept of capturing and analyzing data, information from several key areas within the FMCG industry remain unanalyzed as it extends beyond the control and capabilities of FMCG retailers. Another factor that determines success within the FMCG space revolves around analyzing promotions and discounts. As factors such as social media and digitization alter the way consumers spend, FMCG retailers are now looking for ways to drive outcomes by analyzing the impact of their marketing efforts using advanced statistical techniques.
However, the practices known to FMCG retailers lag behind when it comes to identifying information sources that can bring in a huge impact. Also, it has been observed that the next generation of FMCG retailers will be those who can leverage FMCG analytics to bring about a huge impact on their overall business operations.
The Business Challenge
The client – a leading FMCG retailer based out of the United States was facing a sharp decline in sales due to product cannibalization. A detailed analysis of their challenges revealed that they were not categorizing their products accurately neither did they have a robust product cannibalization framework in place. By leveraging FMCG analytics to gauge demand transference within product categories, the FMCG retailer was able to factor in sales cannibalization to reduce out of stock issues and drive ROI from different product portfolios.
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Quantzig adopted a comprehensive three-pronged approach that revolved around devising a robust product cannibalization measurement framework. In the initial stage of this engagement, our FMCG analytics experts focused on breaking down their challenges into three different units each connected with a very thin coordination layer. This framework empowered the client to gauge demand transference and its impact on the overall ROI. The product cannibalization framework also focused on tweaking the sales execution levers such as pricing, promotion planning, and distribution to maximize the ROI generated across the portfolio.
The use of an advanced time series cannibalization modeling approach enabled the FMCG retailer to dive deep into their historic sales data sets to identify recurring patterns and analyze customer buying behavior across categories. Quantzig’s proprietary time-series product cannibalization modeling solutions also helped them gauge bounce-back rates to more accurately model the implications of product launches on the overall marketing efforts.
The devised product cannibalization framework empowered the FMCG retailer to:
- Devise a roadmap to gauge demand transference within product portfolios
- Estimate sales impact results with bounce-back rates
- Design data-driven pricing and promotional strategies to drive sales
- Leverage time-series cannibalization modeling to gauge the real dollar impact of new product launches on the existing products
- Accurately model the short- and long-term implications of new product launches on the generated ROI
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