Boosting Revenue: The Essentials of Revenue Growth Management in CPG

Written By: Sudeshna Ghosh

Key Takeaways

• Revenue Growth Management (RGM) stands as a critical component for Consumer-Packaged Goods (CPG) companies, leveraging advanced data analytics methodologies to drive sustainable growth amidst the continually evolving landscape of market dynamics.
• Achieving effective commercial excellence necessitates the optimization of operations, resources, and revenue throughout the entire value chain by harnessing advanced analytics capabilities.
• Challenges inherent in RGM implementation encompass the need for swift analytics solutions and transitioning from basic reporting to predictive data insights.
• Quantzig’s Value-Focused Solution Engineering (VFSE) framework exemplifies the transformative potential of RGM, resulting in notable reductions in audit expenses and notable improvements in execution compliance.
• Key strategies such as promotion management, pricing analytics, and data-driven decision-making emerge as pivotal drivers for optimizing revenue streams and fostering enduring competitiveness within the CPG industry landscape.

In today’s fast-paced consumer packaged goods (CPG) industry, where consumer preferences and trends are constantly shifting with the proliferation of digital sales channels and the emergence of numerous brands, CPG Revenue Growth Management (RGM) is your strategic roadmap for sustainable growth. But this strategy is not just about optimizing your business return, its all about predicting ever-changing consumer behaviour, the comprehensive understanding of diverse market dynamics, and the adept tailoring of real-time business strategies to align with shifting demand patterns.

For CPG organizations eager to long-term consistent success, these RGM strategies are no longer optional, it is imperative. But how can RGM revolutionize your existing business strategy? What makes this tool apart as an instrument that transforms industry hurdles into golden opportunities? This comprehensive guide is poised to provide you with the answers you seek and enhance your proficiency in CPG (Consumer Packaged Goods).

The Essence of Effective Commercial Excellence

At the heart of every successful business lies the quest for commercial excellence. It’s about more than just achieving short-term gains; it’s about continuously seeking opportunities to streamline operations, optimize resources, and maximize revenue and profits across the entire value chain. Yet, in an era dominated by data, the key to unlocking commercial excellence lies in harnessing the power of analytics.

Navigating Challenges in Implementation

Despite the undeniable benefits of RGM, its implementation poses unique challenges. One such obstacle is the need for analytics solutions that can swiftly identify risks and opportunities, enabling businesses to take proactive corrective actions. Moreover, given the varying levels of maturity and adoption speeds among companies, analytics solutions must evolve from basic reporting to predictive insights seamlessly.

The Transformative Benefits of RGM

However, the rewards of embracing RGM are profound. By leveraging RGM solutions, companies can navigate the complexities of data, empower decision-makers with advanced analytics capabilities, and gain a holistic perspective of their operations. This enables commercial experts to make informed decisions with precision and agility, driving sustained growth and profitability.

Experience the advantages firsthand by testing a customized complimentary pilot designed to address your specific requirements. Pilot studies are non-committal in nature.

Quantzig’s Best-in-Class RGM Framework: A Case Study

To illustrate the transformative power of RGM, let’s examine a success story from the UK. A client faced the daunting task of manually managing sales execution across 2500 stores—a process fraught with inefficiencies and complexities. In response, Quantzig devised a revolutionary solution—a Sales Execution Lighthouse combined with a Virtual Field Sales Execution (VFSE) framework.

This innovative approach enabled faster intelligence gathering and execution compliance monitoring across different retail channels. The VFSE framework offered tailored solutions to address proactive action recommendations, prioritize cost control, and maximize promotional effectiveness. Simultaneously, the Sales Execution Lighthouse ensured compliance with stock, display, promo, and pricing expectations across retail outlets.

The Quantzig’s Impact: Efficiency, Agility, and Cost Savings

The results were astounding. The solution provided an integrated platform to monitor sales execution and compliance, flagging key risks and opportunities within commercial operations. By streamlining the feedback process and enabling quicker actions, it empowered the client to reduce audit expenses by a remarkable 15%.

In conclusion, the case study exemplifies the transformative potential of Revenue Growth Management. By embracing data-driven solutions and leveraging advanced analytics capabilities, companies can unlock new avenues for growth, enhance operational efficiency, and stay ahead of the curve in today’s competitive landscape.

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The importance of effective Revenue Growth Management (RGM) for CPG brands

While Revenue Growth Management (RGM) isn’t a novel concept and has long been integrated into business strategies, its relevance and scope have undergone significant evolution. Traditionally, RGM primarily concentrated on price optimization. However, the landscape has shifted; RGM now encompasses the consolidation of all commercial planning aspects and route-to-market strategies into a unified approach. This expansion of RGM’s scope underscores its growing significance, highlighting the imperative for businesses to implement effective RGM to maintain a competitive edge. Here’s how:

1. Strategic Oversight in Globalized Operations:

In today’s interconnected business landscape, overseeing the commercial operations of globalized CPG companies across diverse markets and channels is a paramount challenge. Without leveraging data-driven methods, this task becomes exponentially more daunting. Revenue Growth Management (RGM) serves as the cornerstone for strategic oversight, providing a structured framework powered by data analytics. This enables leaders to gain actionable insights, make informed decisions, and drive commercial excellence with precision, ensuring alignment with business objectives amidst the complexities of global operations.

Robust financial forecasting and market volatility management ensure price realization and sustained client success. To complement these efforts, ongoing support and training, and configurability of solutions are essential, enabling seamless integration capabilities to adapt swiftly to evolving market demands and consumer preferences. Through these strategic initiatives, CPG companies can navigate market complexities, drive revenue growth, and strengthen their position in the competitive consumer goods landscape.

2. Continuous Optimization for Commercial Excellence:

Achieving commercial excellence is an ongoing endeavor for CPG brands, necessitating continuous optimization of operations to maximize revenue and profits across the value chain. Commercial excellence teams are tasked with identifying and capitalizing on opportunities to streamline processes, optimize resource allocation, and enhance overall performance. Revenue Growth Management (RGM) offers a comprehensive approach to meet these objectives, facilitating data-driven decision-making and fostering cross-functional collaboration. By embracing RGM, CPG brands can unlock new avenues for growth and maintain a competitive edge in the dynamic marketplace.

3. Maximizing Profit Margins:

Revenue Growth Management (RGM) strategically utilizes advanced analytics to optimize pricing, promotional effectiveness, and trade spending, ensuring that every dollar invested yields the maximum ROI (Return on Investment). CPG revenue growth management entails data-driven insights, product portfolio optimization, and strategic pricing, vital for top CPG companies by revenue. By leveraging data-driven insights, businesses can pinpoint areas for cost reduction, identify accurate pricing strategies, and allocate resources efficiently to enhance profitability. This proactive approach not only boosts profit margins but also strengthens financial sustainability, enabling companies to thrive in competitive markets while maintaining a robust bottom line.

4. Achieving Competitive Advantage:

CPG revenue management optimization in today’s dynamic market landscape requires a multifaceted approach that integrates on-shelf availability solutions, distribution strategy refinement, and a keen understanding of consumer behavior throughout consumer path-to-purchase. By leveraging digital-led decisioning and consumer visibility tools, CPG companies can tailor their strategies to enhance consumer frequency and market responsiveness while fostering collaboration and retailer partnerships. This collaborative approach not only improves on-shelf availability and supports physical retail, but also optimizes online shopping experiences to maximize household penetration rates.

A robust RGM strategy empowers businesses to gain a competitive edge by leveraging insights into consumer behavior and market trends. By understanding consumer preferences and evolving market dynamics, companies can make informed decisions that differentiate their offerings and brand positioning from competitors. This strategic differentiation enables businesses to capitalize on untapped market opportunities, strengthen brand loyalty, and carve out a distinct market position that resonates with target consumers, fostering long-term success and sustainable growth.

Common Pitfalls of revenue growth management in CPG

Traditional CPG Revenue Growth Management (RGM) methodologies, such as TPO (Trade Promotion Optimization), TPM (Trade Promotion Management), and P&L (Profit and Loss) were once relied upon to enhance daily pricing and promotion efficacy within single retail outlets. However, the evolving retail landscape has rendered traditional promotion planning methods obsolete. In today’s omnichannel environment, retailers must adopt more dynamic and adaptable promotion and pricing strategies to remain competitive.

The shortcomings of traditional RGM in the CPG industry are:

1. Lack of Unified Consumer Insights:

Despite the abundance of data from various touchpoints, companies struggle to attain a comprehensive understanding of consumer behavior due to fragmented data sets and siloed functional teams. This hampers their ability to develop cohesive, data-driven strategies.

2. Limited Data Visibility:

Relying solely on historical consumer insights provides a narrow view of past behavior, overlooking shifts in consumer behavior and purchasing patterns brought about by modern retail channels. Robust RGM solutions are imperative for harnessing actionable insights in today’s dynamic market landscape.

3. Siloed Customer Planning:

Individual customer account teams often operate in isolation, leading to conflicts and inefficiencies in trade planning. Discrepancies between field and back-office staff utilizing disparate RGM platforms further exacerbate the problem, hindering timely and effective decision-making.

4. Cash Flow Constraints:

Over-reliance on high-growth categories or prioritizing urgent customer segments can result in reduced cash flow and diminished shareholder value, as broader trade planning opportunities are overlooked.

5. Inadequate Business Intelligence:

Traditional BI (Business Intelligence) tools lack the sophistication to identify causal factors behind sales declines in specific categories and Demand Forecasting, limiting their effectiveness in guiding strategic decision-making.

6. Unsustainable Strategies:

While quick-win strategies may yield immediate results and please management, they are often not scalable or sustainable in the long run, leading to short-term gains at the expense of long-term growth.

Addressing these challenges requires a fundamental shift in approach, with CPG companies and retailers reassessing brand preference, product assortment, category consumption, shopper frequency, channel selection, channel coherency, and media engagement. Partnering with a trusted provider of revenue growth solutions can help businesses overcome these shortcomings and mitigate enterprise risk across the RGM (Revenue Growth Management) Spectrum.

Pandemic-induced supply-chain constraints and CPG Companies

Consumer goods companies are grappling with rising raw material costs due to post-COVID-19 supply chain constraints, leading to heightened inflationary pressures. This presents a significant challenge, as input costs represent a substantial portion of their expenditure. Balancing the need to protect revenue and profits in this environment is paramount, but the path forward is fraught with complexity.

Revenue growth management (RGM) emerges as a critical tool in addressing inflation for consumer-packaged goods (CPG) companies. Pricing, a key revenue and profitability lever in the industry, offers flexibility for adaptation. While cost optimization has its merits, adjusting prices proves more effective in safeguarding the bottom line. However, consumer sensitivity to price changes necessitates a delicate approach.

RGM equips business leaders with precision tools to navigate these challenges. By strategically adjusting prices, CPG companies can mitigate inflationary impacts without risking significant revenue loss or market share erosion. In this volatile business landscape, this tool serves as a strategic imperative, offering a data-driven approach to protecting both top-line and bottom-line performance amidst growing uncertainties.

Revenue growth management (RGM) strategies to help CPG companies optimize revenue

Do you know what does RGM stand for? In today’s competitive landscape, revenue growth management (RGM) stands as a cornerstone strategy for consumer-packaged goods (CPG) companies seeking to maximize profitability and navigate evolving market dynamics. As consumer preferences shift, and digital channels proliferate, the imperative to optimize revenue has never been greater. In this context, effective RGM strategies offer a roadmap for CPG companies to adapt, innovate, and thrive. By delving into tailored RGM approaches, organizations can unlock new avenues for revenue enhancement and strategic growth. Let’s explore some key RGM strategies designed to empower CPG companies in optimizing revenue and driving sustainable success.

1. Promotion Management

When executed effectively, promotion strategies hold the potential to drive substantial increases in sales within the CPG sector. However, unlocking their full potential hinges on optimization strategies and comprehensive management.

Let’s explore the fundamental components of effective promotion management:

• Targeted Marketing Campaigns: The consumer-packaged goods (CPG) market comprises a diverse array of consumers, each with unique preferences. Adopting a personalized approach is essential in today’s landscape. Utilizing data analytics and customer-specific marketing opportunities enables the creation of tailored promotions tailored to specific consumer segments, fostering genuine resonance.
• Multi-channel Promotions: Modern consumers engage with brands across various platforms, from social media to email and in-store experiences. Establishing a pervasive brand presence is paramount. Implementing an integrated multi-channel promotion strategy ensures consistent messaging across platforms while adapting content to suit each channel, thereby maximizing brand exposure and facilitating meaningful consumer interactions.
• Performance Tracking: For the dynamic nature of the CPG industry, promotional strategies must remain adaptable. Continuous monitoring of promotional performance is indispensable. By In-depth tracking key metrics, adjustments can be made in real-time, ensuring that promotions are consistently optimized to capitalize on market trends and consumer behavior shifts.

2. Pricing analytics

Price is a fundamental factor that decides a consumer’s purchase journey. In the CPG sector, determining the optimal price represents a delicate balance between art and science. Now, let’s delve into the essential components that comprise effective pricing analytics:

• Dynamic Pricing: Adaptability is paramount in the ever-evolving landscape of the CPG industry. Dynamic pricing strategies, responsive to fluctuating market conditions, sales and operations planning, competitor actions, and evolving consumer preferences, offer a pathway to capturing maximum value. This fluid approach ensures that pricing remains aligned with market dynamics, fostering competitiveness and maximizing profitability.
• Price Optimization Models: Pricing decisions should be rooted in data-driven insights rather than intuition. Advanced analytics enables the identification of the elusive “golden price point” where profitability intersects with robust sales. Sophisticated price optimization models leverage extensive datasets to delineate optimal pricing structures, striking a delicate balance between maximizing revenue and maintaining consumer appeal. It’s crucial to utilize models with non-source constraint capability for comprehensive analysis beyond point-of-sale data.
• Competitor Analysis: Ignoring competitors’ pricing strategies is a perilous oversight. Regular and thorough competitor pricing analyses are indispensable, providing insights into competitive price elasticity and cross-elasticities. By monitoring competitors’ pricing tactics, CPG brands can identify market gaps, capitalize on differentiation opportunities, and proactively mitigate potential threats, ensuring sustained competitiveness and market relevance.

3. Data Analytics

In the dynamic landscape of today’s market, characterized by continual evolution and changing consumer preferences, data analytics emerges as a fundamental element in crafting effective revenue growth strategies. We understand that data transcends mere numerical figures; it serves as the pulse of the market, a direct conduit to consumers, and the blueprint for future success. Leveraging this data entails transforming raw information into actionable insights, enabling precise customization of offerings to meet consumer needs and preferences.

Now, let’s delve deeper into the pivotal role of data analytics in shaping the revenue landscape:

• Trend Identification: Much like ripples on a pond, emerging trends and buying patterns provide invaluable insights into the future market direction. Through the lens of data analytics, meticulously tracking and analyzing these patterns unveils critical information about consumer preferences. Armed with this intelligence, crafting strategies that resonate with the target audience becomes significantly more attainable.
• Predictive Analytics: While reacting to trends is commendable, the ability to anticipate them sets exceptional strategies apart. Enter predictive analytics, an integral component of cutting-edge strategic CPG revenue management methodologies. These sophisticated models forecast sales trends, empowering proactive adjustments to strategies in anticipation of market shifts.
• Prescriptive Analytics: Representing the intersection of analytics and AI (Artificial Intelligence), prescriptive analytics surpasses predictive capabilities. This advanced system not only predicts outcomes but also prescribes optimal actions. By leveraging prescriptive analytics, businesses can make informed decisions guided by data-driven recommendations, enhancing overall strategy effectiveness.

4. Assortment or mix optimization

Assortment or mix optimization, acknowledging the significance of curating the ideal product mix becomes paramount for revenue growth strategies. The abundance of products offers a plethora of choices for consumers, but for brands, it necessitates a meticulous balance of analysis, foresight, and competitive strategy.

Here are the essential components of this strategy, crafted to enhance both consumer satisfaction and brand profitability:

• Data-driven product selection: In today’s era of information, relying on intuition for product decisions is outdated. Modern brands leverage customer demand data to not only identify trending products but also predict emerging consumer preferences. This approach enables the stocking of a tailored mix of products to achieve sales and profitability objectives.
• Inventory management: Achieving optimal inventory levels is an art. Excessive inventory can lead to heightened holding costs and potential wastage, while inadequate inventory risks missed sales opportunities and dissatisfaction among consumers. Strategic inventory management ensures efficient meeting of consumer demand while minimizing associated expenses, thus impacting Margin/contribution margin.
• Discontinuation strategy: Not all products maintain perpetual popularity. Some may gradually decline in relevance, impacting the overall assortment mix. An effective discontinuation strategy is crucial. It facilitates the identification of underperforming products, their systematic removal from inventory, and proactive replacement with more promising alternatives at retail outlets. Through this approach, brands can reallocate their focus and resources toward more profitable items, thereby optimizing Brand Switching and Consumer Planning, and ultimately Business performance.

Driving CPG revenue growth management through a differentiated approach

Amidst ongoing uncertainties, consumer packaged goods (CPG) companies are transitioning from merely fulfilling demand to prioritizing margin expansion and growth in the current landscape. Many have responded to inflationary pressures by announcing mid- to high-single-digit price increases for 2021. However, successful firms approach pricing strategically, viewing it as a multiyear journey rather than a short-term fix. They utilize revenue growth management (RGM) levers judiciously, focusing on pricing, trade, and promotion investments, and assortment adjustments to achieve their pricing objectives.

Regarding pricing, CPGs recognize the importance of setting a long-term strategy rather than hastily reacting to input-cost inflation. A nuanced approach is crucial, considering factors such as volume, profit impact simulations, and net elasticities. With the United States experiencing a K-shaped recovery, it’s imperative to evaluate pricing decisions’ implications across income segments and price tiers. Furthermore, adapting to the evolving online purchasing landscape and increasing transparency is essential for effective pricing actions.

In terms of trade and promotion investments, CPG companies are recalibrating strategies following the promotional reductions of 2020. This entails understanding the impact of changing consumer behaviors during promotions and evaluating short- and long-term promo impacts. Regions like Europe may shift reductions to other conditional trade terms, while the United States may see a rise in pay-for-performance structures. In emerging markets, digital B2B marketplaces are gaining traction, necessitating innovative trade-investment approaches.

Assortment optimization is equally critical, with CPGs aiming to streamline product offerings while maintaining consumer appeal. They prioritize “good complexity” by introducing innovations and SKUs that offer genuine incrementality. Moreover, identifying and capitalizing on micropockets of consumer growth requires a sophisticated understanding of market dynamics and consumer behavior.

Implementing these measures relies on robust RGM analytics. The disruptions of 2020 have complicated data analysis, necessitating adaptations in data-and-analytics approaches. This includes leveraging sentiment surveys for timely insights, partitioning datasets to isolate temporary effects, and increasing data-set update frequency to monitor changes effectively.

In a nutshell, navigating the complexities of the current market landscape requires CPG companies to embrace strategic pricing, trade, and assortment adjustments informed by comprehensive RGM analytics. By adopting a proactive and adaptive approach, CPGs can effectively address inflationary pressures, capitalize on emerging opportunities, and drive sustained growth and profitability.

Common KPIs used in CPG Revenue Growth Management

Assessing the efficacy of revenue growth management strategies is essential for businesses striving for sustained success amidst evolving market dynamics. To gauge organizational performance in this realm, tracking KPIs (Key Performance Indicators) is imperative:

Scaling growth by adopting AI and Analytics with prescriptive CPG Revenue Growth Management

Scaling growth through the adoption of Artificial Intelligence (AI) and Analytics with prescriptive Revenue Growth Management (RGM) in the Consumer-Packaged Goods (CPG) industry is a strategic imperative. RGM encompasses a comprehensive analytics approach, encompassing pricing, trade promotion analytics, and assortment optimization at both consumer and enterprise levels, spanning all channels. Today, advanced revenue growth solutions offer significant enterprise benefits, yielding a 3-5% increase in gross profit while simultaneously enhancing consumer value.

A robust RGM platform empowers CPG companies to achieve the following results:

• Streamline trade spend allocation, eliminating inefficiencies.
• Optimize trade and revenue metrics with precision at a granular level.
• Drive operational efficiency by reducing redundancies, enhancing governance, and uncovering hidden value.
• Foster long-term competitive differentiation through process re-engineering.
• Enhance enterprise reporting by establishing a single version of truth as the foundation.

Conclusion

In conclusion, Revenue Growth Management (RGM) stands as a pivotal strategy in the Consumer-Packaged Goods (CPG) companies, offering a pathway to sustainable growth and profitability in an increasingly competitive landscape. By leveraging advanced analytics, AI, and prescriptive techniques, RGM empowers CPG firms to optimize pricing strategy, trade promotions, and assortment strategies across diverse channels and consumer segments.

The implementation of effective RGM practices enables companies to eliminate wasteful expenditures, enhance operational efficiency, and uncover untapped revenue opportunities. Moreover, RGM fosters agility and responsiveness, allowing CPG organizations to adapt swiftly to changing market dynamics and consumer preferences. As such, embracing RGM not only drives top-line growth but also fortifies the resilience and long-term viability of CPG businesses in a dynamic marketplace, positioning them for sustained success amidst evolving industry trends and challenges.