Unlocking Business Value and Boosting ROI through Revenue Growth Management – Part 3
The retail landscape is witnessing a sweeping disarray of changes which has created immense pressure on CPG companies. Firstly, consumers have strayed from the traditional path of purchase, with a rise in e-commerce sales from a mere 4.2% in 2010 to 13.6% in 2021. They now use multiple channels during their purchasing journey and have become more well informed of their purchases. Further, digitization has led to increased price comparison, resulting in waning brand loyalty with 80% of consumers in the US willing to try newer brands online. Secondly, a total of 16% of the market share is held by private-label brands. This proves retailers are increasingly focused on promoting private-label brands, thereby increasing their bargaining power with manufacturers. The retail formats are also changing with newer channels such as e-commerce platforms, which has made it difficult for CPG companies to manage their promotion activities across channels.
While the pressure on CPG companies mounts, there is still untapped potential within the sector to resolve the challenges before them. Revenue Growth Management (RGM) can act as a critical tool to combat these issues. Studies show that a rigorous effort to build and utilize RGM can lead to improvements in EBIT ranging from 2% to 5% of sales, which is an increase of $200 million to $500 million in profits for a $10 billion company. As repeatedly asserted, CPG companies must shed their traditional RGM practices and embrace newer methods to fully utilize the benefits they can reap from RGM. They must move away from ‘black box’ solutions and build solutions that assert transparency with effective process flow in their analytical capabilities.
What are the technical challenges faced by companies and how can an agile RGM solution help?
Build solutions that can be easily integrated
Often, companies struggle to integrate new developments into their existing capabilities and data systems. Drawing from the example in Harnessing Revenue Growth Management to Boost ROI – Part 1, if the Hong Kong HQ uses Power BI as its preferred front end, and Singapore uses QlikView, then the deployed solution must be compatible with both to achieve scalability. In fact, Industry 4.0 demands CPG companies to build solutions that can be integrated into different phases of the company’s digital transformation journey. Otherwise, the company runs the risk of building siloed solutions that are not reusable and will become redundant over time. Therefore, CPG companies must invest in RGM solutions that can,
- Easily be integrated with an array of solution components that seamlessly work with the existing ecosystem
- Deliver long-term sustainability while unlocking deeper and precise insights
- Align value and resources with a strong link between the company’s IT and analytics function
Invest in Future- forward Capabilities
The retail landscape is fiercely competitive, making it imperative for CPG companies to constantly invest in new products and categories to expand market share. In order to invest in the right products and opportunities, CPG companies must identify the right segments that would yield profits. Advanced RGM capabilities empower CPG companies to identify innumerable opportunities across the value chain.
However, the traditional RGM approach only focuses on reviewing and looking back at the data to identify aspects that did not work well in the past. Even solutions that examine historical data typically reveal very little, if any, information on the underlying aspect of ‘why’ and its drivers. Hence, these traditional RGM solutions fail to explain why certain practices worked at times and why the same practices failed to reap the expected outcome. These backward-looking solutions lack the ability to predict future trends and patterns, making them incompetent. To capture the right consumer segment through the right channel at the right time, CPG companies must invest in future-forward planning capabilities that can incorporate eCommerce, modern trade, and so on while garnering deep-dive insights into the retail landscape. To gain a competitive advantage, CPG companies must use RGM to,
- Test potential impact of new strategies and market shifts using dynamic simulation capabilities
- Gain accuracy in forecasts for existing and new products by SKUs and region
- Optimize trade spend promotion and product assortment at store-level
- Understand rapidly changing shopper behavior to keep track of changing consumer purchase journey to safeguard loyalty and market share
Develop user-empathetic designs
One of the crucial aspects that traditional RGM solutions often lack is an interface that is relatable to business users. While the solutions provide information about relevant metrics, it is difficult to translate them into actionable insights. Why? This is simply because traditional RGM applications generate these insights in the form of complex graphs, charts, and tables that can be understood only by an experienced analytics practitioner, and not easily deciphered by a business executive. CPG companies must invest in RGM solutions that present information through simplified data visualization. It should be bolstered with the capability to translate multiple data sets and complex calculations into insights that can be easily understood. Therefore, a simplified, efficient, and well-structured RGM application can help,
- Unearth hidden data patterns and trends to aid strategic decisions
- Enable managers to decipher meaningful information quickly to effectively make decisions
- Measure and optimize effects of promotion campaigns easily
Over the years CPG companies have struggled to grow and increase their revenue. Even though the reasons to adopt an advanced and robust RGM capability are innumerable, only a few companies have leveraged RGM capabilities to fully unlock business value. However, the increased level of competition in the CPG industry has made it imperative for companies to leverage this capability to make data-driven decisions.
A company bolstered by RGM can truly achieve double-digit growth and boost their growth and generate greater ROI to gain a competitive advantage. RGM capabilities can also help CPG companies overcome several hurdles and transform trade decisions to be a result of strategic planning to generate top-line growth and sustain these results. While it is important to leap beyond the organizational hurdles, data integration, and technological challenges, it is also essential to invest in the right analytics products to venture profitably into the analytical journey. When all these components are tied together and strategically implemented, your company will see marked improvements in it will play a key role in boosting revenue margins, sales, promotion, and ROI.
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