• Written by Muhammed Abdulla NC, CEO

A category manager checks the sales data for a new product launch, trying to understand whether the promotional campaign has paid off, but the complexity of the fast-moving consumer goods (FMCG) market makes it difficult to isolate the impact of the intervention.

Challenges in FMCG measurement

The FMCG market is characterised by high volume, short shelf life, and promotion-driven demand, which creates a number of challenges for measuring the return on investment (ROI) of an intervention. One of the main issues is promotional distortion in historical data, which can make it difficult to establish a baseline for comparison. Additionally, the short shelf life of many FMCG products means that any write-offs or stockouts can have a significant impact on sales data, further complicating the measurement of ROI.

Distributor visibility is another challenge in the FMCG market, as the category manager may not have direct access to data on sales through different distribution channels. This lack of visibility can make it difficult to understand the true impact of an intervention, and may lead to incorrect conclusions about its effectiveness.

Leading measures for observation

Despite the challenges, there are some leading measures that can be observed to help understand the impact of an intervention in the FMCG market. These include changes in inventory levels, shifts in distribution patterns, and alterations in consumer purchasing behaviour. By monitoring these measures, the category manager can gain insights into the potential impact of the intervention, even if the overall sales data is distorted by promotional activity or other factors.

For example, a shift supervisor checks the maintenance log and notices that the new packaging equipment has reduced downtime by a significant amount, which could have a positive impact on overall sales. This kind of observation can provide valuable insights into the potential ROI of the intervention, and help the category manager to make more informed decisions.

Aggregate outcome metrics

Aggregate outcome metrics, such as total sales or revenue, are often used to measure the success of an intervention, but these metrics can be misleading in the FMCG market. They can be influenced by a wide range of factors, including changes in consumer behaviour, shifts in market trends, and fluctuations in the economy. As a result, it can be difficult to determine whether any changes in these metrics are due to the intervention, or if they are the result of other factors.

Most people get wrong the idea that aggregate outcome metrics are a reliable way to measure ROI, and they are wrong because these metrics are often subject to a wide range of influences that are outside of the control of the category manager. A more nuanced approach is needed to understand the true impact of an intervention in the FMCG market.

Baselining before rollout

One way to address the challenges of measuring ROI in the FMCG market is to establish a baseline before the rollout of the intervention. This involves collecting data on the current state of the market, including sales trends, consumer behaviour, and distribution patterns. By establishing a clear baseline, the category manager can then compare the data after the intervention to determine its true impact.

This approach is more effective than trying to reconstruct the baseline after the intervention has been implemented, as it allows for a more accurate comparison of the data. The category manager can use tools like AsscherAi to help establish the baseline and track the impact of the intervention over time.

Limitations and alternatives

While the approaches outlined above can be effective for measuring ROI in the FMCG market, they are not suitable for all situations. In some cases, the complexity of the market or the limited availability of data may make it difficult to establish a reliable baseline or track the impact of the intervention. In these situations, alternative approaches may be needed, such as working with a consultant or using alternative data sources.

If you are struggling to measure the ROI of an intervention in the FMCG market, you may want to consider reaching out to our team for support, via our contact page. We can help you to develop a tailored approach to measuring ROI, and provide guidance on how to use tools like AsscherAi to get the insights you need.