Vertical Focus: Consumer Packaged Goods

Due to razor thin profit margins, the consumer packaged goods (CPG) industry was one that shied away from heavy investments in technology. But recent developments and an industry-wide shift in attitude have made the sector a hot spot for some vendors offering products that can help improve manufacturer/retailer relationships, gain insight into marketing efforts, and help increase margins. "Many CPG companies spend millions on marketing through the retail channel with very little understanding of what is resonating with the consumer," says Sheryl Kingstone, CRM program manager at the Yankee group. "In most markets, the consumer has a choice of outlets in which to shop, including retail grocery stores [and] mass merchandiser warehouse stores. Gaining better control and insight and closing the loop between the manufacturer, retailer, and customer through better planning, execution, and analysis will be critical areas for CPG technology spending." Chris Selland, president of Reservoir Partners, adds that in addition to marketing software, there has been heavy investment in analytics. "Better marketing technology can help drive demand, and the business intelligence solutions can help gauge just how well a campaign is doing," he says. Selland says that retailers are using campaign management tools from companies like Unica and E.piphany, and are also adding analytics and reporting capabilities from vendors like Cognos and MicroStrategy to gain more insight into customer activity. While many in the CPG industry may be building their own complete system by contracting several vendors, many CRM suite vendors have been creating vertically focused products for the sector, according to Kent Allen, research director with Aberdeen Group. Allen says "buyers want solutions that address vertical-specific business process problems." Some suite providers like Oracle, SAP AG, and Siebel Systems have been actively pursuing the CPG market, adding very focused vertical offerings that seek to provide end-to-end business process management for CPG manufacturers. "For Siebel the CPG market is one of the real growth areas," says Denis Pombriant, vice president and research director in Aberdeen's CRM practice. Allen also says that the CPG industry should be a hot spot over the next several months in terms of integration spending, predicting that by late 2003 the retail/CPG sector will be one of the most active IT--buying industry sectors. Allen says the trend will accelerate convergence among ERP, supply chain, business intelligence, e-commerce, and CRM solutions.