Why A Robust Revenue Growth Management System Is Crucial for a CPG Manufacturer in 2022

    The pandemic has changed the way people shop. Companies relying on predictable consumer behaviour are struggling. While commodity-based companies saw a huge growth during the pandemic due to panic buying, many others suffered devastating blows to their supply chains, production, and sales. 

    While some companies saw steady organic growth even during this time, the importance of having strategies in place to drive sustainable, profitable growth has become even more apparent. To tide over this crisis of unpredictability and ensure quick redressal of problems in real time, companies are adapting modern revenue growth management strategies and systems. 

    What role does Revenue Growth Management play in the CPG industry? 

    A CPG company faces a myriad of challenges- changing and evolving consumer demands, ensuring proper product pricing, running sustainable promotions that work, and the shift away from the brick-and-mortar experience. These challenges multiplied during the pandemic with companies grappling with shortages, being forced to reimagine the end-to-end consumer experience, striking the right balance of online and offline distribution channels, and future-proofing their supply chain, growth models and strategies. 

    These modern problems cannot be solved with legacy solutions. New, faster solutions are required that don’t rely on outdated, prebuilt algorithms and rather move with the market and adapt to real-time insights.  

    In fact, a survey by McKinsey showed that 58% of CPG companies identified the need for data, analytics, and a better understanding of changing consumer trends as major challenges to delivering on their growth aspirations.1 

    Gradually, the industry is recognizing that data and advanced analytics driven decisions are the way to go and investment in solutions that analyse and extract meaningful insights from a vast amount of data is essential. 

    Revenue Growth Management is one such solution. 

    “Revenue Growth Management is a discipline of analytics that drives profitable growth through pricing, promotions, assortment and distribution.” 

    Essentially, it is a suite of strategies which help a company: 

    • Maximize organizational revenue with a minimal spend. 
    • Predict consumer behaviour at micro market levels to optimize product, placement, promotions and pricing. 
    • Create a centralized strategy, working closely with brand management, finance, sales & operations. 

    A customized Revenue Growth Management strategy can help CPG companies thrive across various product categories, markets, sales channels and brands, catapult revenue growth and profit margins and help them make strategic and intelligent decisions for the short and long term.  

    By utilizing data and analytics continuously and in real-time, decision-making speeds up, providing opportunities for revenue growth at strategy as well as micro level, enabling organizations to react faster and refine their approach to pricing or promotions, for instance. 

    The Pillars of Revenue Growth Management

    The key pillars of Revenue Growth Management for a CPG Business 

    1. Promotions 

    An important driver for sales in the CPG industry, promotions have gained even more importance during the pandemic, with consumers experimenting with new brands more than ever before and consumer behaviour changing in unprecedented ways. 

    However, CPG companies still struggle to tap into the full potential of promotions, with the insight into the ROI being limited to short-term, in addition to the lack of data, analytics and understanding of changing trends.  

    Armed with such data and insights, however, a company can work with a better insight into even long-term impact of their promotions. With tools that aid companies in devising detailed promotion strategies to drive top line growth, penetrate new consumer segments, and become market leaders, it becomes easier and faster to adapt to dynamic economic conditions and stay on the path to sustainable growth. 

    1. Pricing 

    Pricing drives revenue and revenue growth. Optimal, strategic pricing can be key to a smooth functioning production, healthy scalability and optimized profitability. 

    Traditional pricing strategies failed to take into consideration the ever-changing nature of the CPG industry. The question of “What is the right pricing strategy for my product?” can only be answered with the help of insights into price points, understanding price perception and price responsiveness and simulating complex and dynamic pricing systems. 

    Data and analytics driven Revenue Growth Management helps you sell your product at the right moment, at the right price, through the right distribution channel.  

    1. Assortment and Distribution 

    Understanding purchasing decisions- how customers make decisions about what they buy, where they buy and why they buy is key to assortment planning and strategy.  

    Assortment is key to a successful revenue growth strategy. It can help your company drive sales, minimize lost opportunity, identify under/over performing product segments and meet consumer demand with ease. 

    A deep dive into assortment data and insights can also help your company identify growth opportunities, eliminate the trial-and-error method to focus on reliable insights into category assortment.  

    1. Marketing 

    While marketing isn’t one of the main pillars of Revenue Growth Management, it is a crucial area to focus on to optimize results in conjunction with pricing, assortment and distribution and promotions.  

    AI and data driven solutions can make marketing efforts easier by automating the collection of insights and helping predict patterns and trends. This helps companies create and execute more nuanced, customized and targeted marketing campaigns as well as simulate scenarios to estimate how certain promotions and campaigns will perform. 

    During these unprecedented times, as the world refers to the last two years, CPG companies have a window to rebuild their capabilities and revenue management systems to reflect the new pricing realities ahead. 

    Getting started with analytics-driven Revenue Growth Management 

    Revenue Growth Management can transform CPG businesses by continuously leveraging data and analytics to make better, faster decisions. In fact, Deloitte claims that the right set of analytics that engage price and promotional levers can generate benefits equal to 3-5% of gross profit per year.2  
     

    The last couple of years have seen incredible innovation in the field of AI- and data-driven analytics tools for RGM- a clear sign of rapid technological change, the growing complexity of consumer-decision journeys and the realization that companies must adopt personalized, new-age strategies to adapt to the volatile and ever-changing commerce environment to stay relevant. 

     
    To make the transition from legacy to modern RGM strategies easier and to help leverage data in the most effective way possible, AI/ML-based advanced analytics applications are quickly becoming an integral part of every RGM arsenal in the CPG industry. 

    Such applications can help executives create robust long-term strategic plans and short-term tactical plans, leverage actionable insights, and monitor progress across all five pillars of revenue management- pricing, promotions, assortment, distribution and marketing. 

    The Co.dx CPG Commercial Cockpit 

    Co.dx provides a complete suite of CPG applications that are focused on boosting revenue across the commercial value chain and offer a holistic view of category performance. Through our hybrid approach combining the expertise of our data scientists and our cutting-edge CPG analytics applications, we provide a one-stop solution for all your modern Revenue Growth Management strategy needs. 

    Co.dx’s Suite of Revenue Growth Management Applications

    Growth Planning 

    Leverage forecasts and demand driver analysis to set strategic goals & restructure investments. 

    Assortment & Distribution 

    Optimize product pack mix, plan product range & SKU allocation across retailers with our Range Planner and Assortment Planner. 
     

    Pricing & Promotions 

    Set the right price points with the right design and effectively manage promotional mixes while ensuring return on trade spend with our Price Optimizer, Promo Planner and Promo Effectiveness. 

    Marketing 

    Monitor channels & monetize high impact channels to maximize marketing ROI with our Marketing Mix Wizard, Campaign Manager and Channel Performance features. 

    Eager to see how it works? We recently worked with a leading CPG company to help them unlock a 6.8 Million Dollar revenue opportunity with Co.dx’s Digital Channel Optimizer. 

    Not only did Co.dx help the client efficiently leverage the data from the digital point of sales (PoS), Co.dx’s data connectors also helped this CPG tap into insights across multiple data sources such internal data, syndicated data, and third-party data to derive actionable insights. Based on this data, the Digital Optimizer was able to map an omnichannel consumer path to purchase, analyse various touch points across the consumer journey and create detailed consumer profiles. 
     

    If you’re ready to leverage the power of AI and data for your RGM strategy and would like to learn more about how you can optimize your RGM, get in touch!  

    1 McKinsey & Company 

    2 Magnifying Revenue Growth Management- Deloitte