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Using big data to drive retail personalization

BY Michael Johnsen

The challenge for retailers and consumer packaged goods manufacturers these days is how to make a molehill out of a mountain. Big data can seem overbearing to many as they try to ascertain how to mine actionable insights out of those reams of data, all while maintaining the speed to market that today’s retail climate demands.

And those mountains are only getting bigger with each day as more retailers come to market with advanced loyalty card programs that use that data to personalize the offer.

Big business and their consumers generate 2.5 exabytes — or 2.5 billion GB — of data, also growing at a rate of 40% per year. With the proliferation of social media sites, consumers now have a multitude of possible avenues through which to engage a brand — Facebook, Instagram, Pinterest and Twitter — and each of those touchpoints generates individual points of data. "The digital revolution has forever changed the consumer’s path to purchase," Appel said. "Big data is not about building massive databases or other costly technology products," Appel said. "It’s about identifying the five to 10 combinations of existing and new data sources that, when combined [with] sophisticated real-time analytics, drive better decision-making."

Making sense out of big data is becoming a big business in itself.

"Big data technology and services will reach $17 billion by 2015, from [a base of ] just $3 billion in 2010," IRI’s new CEO Andrew Appel told attendees of the company’s 2013 Summitt in Las Vegas in March. "That’s a 40% annual growth rate."

According to IRI, the U.S. CPG and retailing industries potentially could see more than $10 billion in annual value created as a result of improved application of advanced analytics to support brands and channels. "If the top 20 CPG manufacturers were able to work collaboratively with the top 10 U.S. retailers and leverage analytics to tap incremental consumer profit pools, we estimate the impact to be more than $10 billion annually for just a 5% improvement," wrote Robert Holston, EVP and division leader symphony analytics at IRI, in a recent IRI white paper based on IRI’s Analytics 2020 survey of senior CPG and retail executives. "For a typical $5 billion CPG manufacturer, this equates to more than $75 million of incremental annual value created by only driving retail sales improvement 3%."

Making sense out of big data is crucial to "this new normal of driving personalization to target [the consumer]; determining a shopper’s propensity to shop a channel, a banner, a category or brand; and discovering what elements determine selection and de-selection," Holston noted. "Companies leveraging average analytics capabilities are 20% more likely to drive higher return to their shareholders than their non-analytics-oriented peers; those with advanced capabilities are 50% more likely."

"Today’s scale needs to be about understanding what consumers want and leveraging your scale to deliver it better than anyone else," said Ann Mukherjee, chief marketing officer for Frito Lay North America. "That’s the new game in town," she said. It’s about understanding the drivers of choice. "It’s actually taking all the variables together — the who, what, where, why and why not — and understanding when it all competes together, what really drives choice. … If you don’t understand [the] whole picture, your growth efforts will compete with each other."

It’s not just about making molehills out of mountains; it’s about identifying and mining the molehills that will provide the greatest return

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AAP works to boost indies’ market power

BY Jim Frederick

Ownership has its privileges. Consider American Associated Pharmacies. Independent pharmacy owners who join this member-owned, national cooperative gain access to the purchasing, merchandising, distribution, managed-care contracting and back-end business services that help them compete locally on a more equal footing with their chain counterparts.

AAP was born in September 2009 out of the merger of two premier pharmacy buying and store-support organizations. From the combination of Phoenix-based United Drugs and Scottsboro, Ala.-based Associated Pharmacies, or API, emerged a national network of independent drug stores with a common purchasing and distribution platform and increased clout with vendors and managed care plans.

Among the services AAP provides:

  • AAP Elite, a suite of services to help members leverage a common dispensing and discount purchasing system;
  • Scan & Toss, a central order and replenishment system that assures pharmacies beneficial pricing terms from vendors;
  • ClaimGUARD, which focuses on underpaid claims and pharmacy reimbursements from payers on behalf of members; and
  • StaffGUARD, a new program to help pharmacies comply with federal mandates regarding the hiring and workload of federally sanctioned persons.

"We’ll continue to … grow member services," AAP president and CEO Jon Copeland told DSN. "For starters, we are refreshing and expanding our information technology and human resources infrastructure. Additionally, we’re assessing … [a] new specialty pharmacy services offering, and we’re upgrading our marketing services capabilities."

AAP recently added another pharmacist staff position in charge of pharmacy program development. The company also purchased and modernized a second distribution center in Memphis, Tenn., more than doubling its distribution capacity and delivering more efficient and improved service to its Mountain and Pacific time zone members.

EDITOR’S NOTE: In the April 22 issue, AAP was inadvertantly omitted from the DSN Annual PoweRx Top 50 retail pharmacy rankings. DSN has recalculated the top 20 to show AAP’s true rank at No. 9. DSN regrets the error.

FOOTNOTES FOR POWERx PLAYERS TOP 20

  1. Includes only retail pharmacies and specialty pharmacies
  2. Includes pharmacy services segment revenue of $73.4 billion, total retail sales of $63.7 billion
  3. Retail stores
  4. FY2013
  5. Includes 3,158 supercenters, 561 discount stores, 267 supermarkets and 19 small format stores
  6. Excludes the Medicine Shoppe/Medicap stores
  7. Reflecting sale or closing of 25 Genuardi’s supermarkets in eastern United States in fall 2012, closing of additional 21 units in fiscal 2012 and opening of nine new Lifestyle stores
  8. For fiscal 2012, ended Feb. 2, 2013

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T.Eury says:
Jun-07-2013 04:16 pm

Any pharmacy buying group that's helping Independent Pharmacy businesses to grow is a good entity. We need more advocacy for privately owned pharmacies. We need more support for community pharmacies to thrive. In addition to typical buying group advantages I want to challenge all the 12 major buying groups within the country to do more. Independents are under tremendous pressures to succeed and I know the business model of pharmacy buying groups. As a pharmacy buying group president - I want to encourage Jon Copeland & the AAP team to do more for his members. Think creatively, push to uncomfortable limits, and create new wealth for your customers. Our pharmacy buying group PharmacyGPO, Inc., is tiny in comparison to EPIC, AAP, APCI, PBA Health, Lone Star, and several others - but size doesn't matter. It's our common mission that matters. It's time we do more to ensure the survival of Independent Pharmacy businesses. I'm challenging these groups to stretch. Create wealth for your members. We will work to challenge other buying groups to to hopefully help them become even better solutions providers for the ultimate success of Independent Pharmacies throughout the country - to compete better against the national chains and the obstacles of the BIG-PBMs.

T.MCKINNEY BERRY says:
Jun-04-2013 07:27 pm

Congrats AAP!

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Bic lights the way

BY Barbara White-Sax

WHITE PLAINS, N.Y. — Bic is bringing something new to the stationery aisle with its Bic Brite Liner Highlighter Tape, the only highlighter tape on the market, according to the company. Available in yellow and pink, the fluorescent tape adds highlights without bleeding through paper and is erasable. Bic Brite Liner Highlighter Tape is available in a one-pack for less than $3 and in a two-pack for less than $5.

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