Revenue growth management: The next horizon

Over the past decade, many consumer-packaged-goods (CPG) companies have mastered the fundamentals of pricing, promotions, assortment, and trade investment. While that development has allowed CPGs to reliably capture value, the landscape has shifted.

Changing consumer behaviours, advances in data and analytics, channel shifts, and higher expectations from investors have created new challenges. In addition, retailers are getting better at all elements of revenue growth management (RGM). Many have embraced new data and technologies, and in doing so, have leapfrogged over manufacturers in their knowledge of what, how, and why shoppers buy. 

Still, a few leading-edge CPG manufacturers have been able to outperform their competitors and stay ahead of retailers. These manufacturers have pursued at least one of the following three paths toward next-generation RGM capabilities:

Strategic RGM: A longer-term and more integrated approach

Strategic RGM is built on a foundation of deep insights, enabling a CPG company to derive more granular choices about where to play and how to win. The insights come from sophisticated analyses of data from primary and secondary sources, which provide companies with a more complete picture of available opportunities. 

Regarding consumers and shoppers, for instance, strategic RGM calls for an in-depth understanding of “purchase structures”—how a shopper navigates the category, what occasions the product is used for, and how the shopper makes trade-offs. If the specific item isn’t in the store, will the shopper buy a substitute, or will he or she leave the store without buying anything? With these insights, a company can design and execute a full portfolio of both short- and long-term initiatives to drive above-market growth.

Success Factors: The key success factors for strategic RGM include a shared vision and cross-functional ownership across the sales, marketing, supply-chain, and RGM teams, as well as support from top management. There should be a shared set of incentives focused on long-term value creation. This is particularly important for a portfolio of initiatives to drive both short- and long-term impact. In addition, an agile test-and-learn mind-set is needed: all functions should be aligned on the philosophy of bringing innovations to market quickly and refining them based on real-time consumer feedback.

Precision RGM: Commitment to data and advanced analytics

Precision RGM harnesses data and cutting-edge analytical skills to get radically more granular in identifying opportunities and delivering on them precisely.

The increase in data availability (click-stream data, mobile-phone location data, longitudinal purchase history, for example), combined with advancements in analytics such as machine learning, can yield previously inconceivable RGM insights. Companies can now understand shopper-level activities at particular retail outlets, identify microsegments within their consumer base, and zero in on granular profit pools in specific locations and channels. These capabilities can then allow CPGs to deliver tailored, dynamic, and continuous omnichannel RGM activities, such as store-level RGM strategies and promos that target specific microsegments.

Success Factors: Companies require access to rich data sets as well as sufficient talent – not just data scientists and analysts but also “translators” to help business leaders understand the insights.

RGM capability building: Achieving scale

Expanding RGM across the organisation can help translate pockets of excellence into a truly global capability, potentially including rolling out strategic RGM or precision RGM. Getting to this scale is dependent on broad capability building, achieved through levels of certification across RGM practitioners and the broader marketing and sales organisation.

This requires effective central coordination, often through a global “centre of excellence” (CoE). The CoE consists of a group of RGM expert practitioners who own and champion RGM within the company, disseminate best practices, build capabilities, and partner with RGM owners in each market and business unit to support them in building in-market RGM strategies. They help standardise RGM processes, approaches, systems, and tools, resulting in higher speed and consistency of decisions, while the “answers” remain market specific. If done well, the CoE influences local RGM teams through the value it delivers and the pull it creates, rather than requiring direct reporting lines.

Success Factors: Success in RGM capability building at scale depends on top-team commitment, consistent communication, and a well-supported central team to coordinate and drive adoption globally.

Advanced capabilities in pricing, promotions, assortment, and trade investment will only increase in importance as competition intensifies in the CPG industry. Companies should commit to one or more of the three paths toward RGM differentiation today, to position themselves well to become the commercial winners of tomorrow.

The author would like to thank Josef Kouba, Sheldon Lyn, and Pieter Reynders for their contributions to this article

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