What is Revenue Growth Management?
Every business wants to increase revenues. But for consumer packaged goods (CPG) companies there’s a big difference between ramping up sales at all costs, and achieving sustainable, managed revenue growth that benefits the manufacturer, its retail partners, and their consumers.
CPG firms face considerable challenges in achieving sustainable top line growth. Their supply chains are long and complex. A manufacturer will have many individual brands, and these will be offered in a variety of formats and packaging, at different price points. The retail landscape is also incredibly diverse – with a range of consumers buying from convenience stores, supermarkets, and big box retailers, across multiple geographies. That’s a lot to get right.
The current economic climate makes life even more complicated. Manufacturers face rising materials and energy costs as well as supply chain disruption. Those same factors are contributing to rising inflation rippling throughout the economy. Consumers are acutely sensitive about pricing, while retailers are extremely protective of their profit margins.
This is why more and more firms are embracing a modern revenue growth management (RGM) approach. Put simply, RGM is the discipline of driving sustainable revenue growth through the methodical and holistic management of all the functions at the manufacturer’s command, including promotions, pricing, assortment, and trade investment.
In this article we will examine the benefits CPG companies, and their various teams, can reap through effective revenue growth management. We’ll also address the challenges they face in implementing RGM and highlight how an integrated platform approach can overcome these.
The benefits of Revenue Growth Management
As we’ve seen, the retail and consumer environment for CPG firms is complex. But a CPG manufacturer’s own internal landscape is incredibly diverse too. A variety of distinct functions and teams all contribute to revenue growth, from demand forecasters and marketers to sales teams and trade promotions professionals.
Each has a critical role to play, and they are often complementary. But it’s all too easy for different functions to operate as individual silos, working to different objectives, often relying on different data and tooling, and even pulling against each other.
By taking a revenue growth management approach, CPG manufacturers aim to bring different teams’ tactics and strategies together under a comprehensive commercial plan aimed at securing sustainable and profitable growth.
RGM is often conceptualized as spanning five pillars, namely: promotion management; pricing; trade spend; commercial planning; and assortment/mix optimization.
When all these functions are working together in harmony, with a common objective, and a shared version of “the truth”, it becomes easier to plan and review the impact of promotions and other activities. It is then easier to optimize them, and to spot growth opportunities in the short or longer term.
It also makes it easier to fine-tune and coordinate budgets and spending to ensure trade spend and promotions are more efficient and deliver the biggest possible impact.
And it results in improved revenue forecasting and optimization, leading to more sustainable revenue growth both in the short and long term. That doesn’t just mean hitting targets, but meeting them in a predictable way, with different functions – and their spending – operating together to deliver the maximum possible benefit.
What does each team need?
It’s easy to say that different units within a CPG manufacturer have different roles to play when implementing revenue growth management. But what does that that look like in practice? And what might be holding them back from playing their part?
Sales teams want to achieve results, and they want to build the commercial relationships that will help them achieve these. But this is about much more than building a rapport with retail partners. It’s about developing a strategy for growth
, that encompasses trade promotions, pricing optimization, and trade investments.
In the modern market, this needs to data-driven, giving execs access to a wide range of information sources, and delivering rapid actionable insights into pricing and promotion activities. They can then optimize their current programs and develop well-grounded forecasts and innovative plans for the future. To be able to do this reliably, and at speed, they need workflows that give them the approvals they need but doesn’t hold them back.
Marketing events and activations are critical to revenue growth. Creativity and innovation are part of this, but so is building and maintaining the trust of both consumers and retailers.
Marketing teams also need to have workflows that work for them, so they can gain approvals and move quickly, and track activations and campaigns over time. But they must also ensure that their activities are in sync with other teams. A creative campaign might go to waste if there is not sufficient stock in store. A campaign that is out of sync with trade promotion activity can undermine both.
This all requires precise planning, careful budgeting, and efficient procurement. So, again, accurate information is essential.
CPG is a complex and fast-moving business, and for the finance team, just keeping up is not enough. It must keep ahead of things, if the organization is going to implement revenue growth management successfully.
Producing up to date estimates and forecasts and developing analysis of investment and pricing strategy can involve a vast range of data, generated by multiple departments, potentially in different applications and formats. For finance to deliver an accurate picture to senior management, and beyond, it needs to have a grip on everything that is going on, both within the company and out in the market.
Revenue growth management can’t be a guessing game. Demand teams need to be able to create accurate baselines and statistically sound forecasts.
The onset of AI has raised the bar when it comes to modelling data, and can free up forecasters, and their colleagues, to focus on exceptions and outliers. But that assumes demand teams are working with accurate historical and up to the minute data. They must have clear insight into the activities that underpinned results in the past, and which should shape the business in the future. And they must have the right tooling to make the most of the data.
Each team needs different tools to carry out their roles, but they all rely on timely, accurate data. The IT team is central to a CPG organization’s ability to implement revenue growth management.
If tech can deliver a common underlying platform, which easily integrates data from multiple sources, they can break down silos and free individual teams from bespoke spread
How shared software enables Revenue Growth Management?
Revenue growth management holds the promise of predictable, sustainable revenue growth.
However, there are all too obvious barriers to achieving this. Each teams’ contribution and influence on the overall plan, as well as their required data and tooling will be subtly different. Often, they will evolve bespoke spreadsheets to underpin their functions.
Just getting information into legacy tools can be a challenge. Automated data integration might not be possible. Manual processes are time consuming and can mean mistakes.
When data lands in silos or standalone applications it can become stale. Teams might not have the most appropriate tools to analyze it. But worst of all, changes and insights can be locked into individual departments and not shared with the organization at large. This undermines efficiency, and the reliability of forecasts.
But by opting for Visualfabriq’s software, CPG manufacturers can give their key teams the tools and workflows they need, along with the common data to power them, in a single
Demand forecasters and sales teams alike can use cutting edge AI to analyze and model data, producing more accurate forecasts, gauging the impact of trade spend, and unlocking opportunities for innovation or growth. Marketing teams can ensure their activities are aligned with sales teams’ programs and speed up the approval process.
And RGM and finance specialists will benefit from a holistic view of the myriad of activities and programs their organization is running. This is in turn, will ensure that the drive towards sustainable growth is embedded in every fiber of the organization – and that all of these are pulling the same direction.
There’s a cultural aspect to revenue management in the CPG world. Each team needs to understand its role, and its contribution to delivering sustainable growth, as well as the importance of working with their peers and their partners in retail to achieve this.
But this will be far easier if they are all using software that supports the key processes and teams that contribute to revenue growth management. A solution that ensures they are working with and sharing common data, and can deliver insights, instead of questions, wherever you are in the organization.