Over the last decade the consumer-packaged-goods (CPG) industry has been facing a huge challenge of finding growth in a market where fierce retail competition and consumer price decreases are putting pressure on the full value chain. As a result, companies had to find efficiency gains as main driver of margin improvements. In this challenging new context CPGs have invested in Revenue Growth Management (RGM) capabilities to find new pockets of revenue growth.
In 2020, the covid pandemic amplified these challenges and triggered a lot of change and uncertainty. But where is change there is opportunity.
1. Pandemic-driven new challenges
On top of the existing trends described above, the pandemic came with a disruption in the global supply-chain, which triggered price inflations & increases in cost of goods sold (COGS).
Moreover, radical change in consumer behavior, shopping habits & channel dynamics entailed a plethora of challenges that are here to stay. Consumer brand loyalty declined, income segments diverged, e-commerce boomed and “at home” needs increased.
2. Three tactical considerations for growth
Given the disrupting shifts described above, the time is now to re-evaluate legacy decisions and structurally rebuild plans. We recommend CPGs to build integrated revenue growth plans (beyond pure pricing tactics), with a focus on three main elements: pricing, trade promotion and assortment.
When tackling pricing, a value-based strategy and differentiated execution is required. Pricing decisions must be based on product & customer segmentations, consumer/shopper insights, market data analyses and P&L scenario simulations. Also, price strategies require a structured global and omnichannel approach. It is insufficient to apply a flat price increase in such a competitive market context.
The reduction in promotional trade spend during COVID-19, is a great opportunity to start from a clean slate and rethink trade promotion for the upcoming years. To optimize trade promotion effectiveness, companies should have a clear view per segment on the short- and long-term impact of trade promotions on post pandemic consumer behavior, and on the return on promotional investments. To win in the growing online channels, dedicated optimization on e.g. personalized promotions should be considered.
The third and last element to focus on is assortment. Ideally, portfolios are steered on a set of metrics, incorporating the strategic relevance, rate of sales, incrementality and true profitability, both from a company & trade perspective. These insights allow for pro-active assortment decisions to offset margin pressure, act upon retail demands for portfolio simplification and better meet shopper needs.
3. Invest in advanced analytical capabilities
With the growing availability of consumer-level data, a much more granular understanding of consumers & shoppers behavior allows to execute the tactical guidelines covered above. Potential sources of consumer & store level data are trade partners, sales-reps, 3th parties and online data sources.
The increased complexity as described above, requires now more than ever before, a fast & user-friendly RGM technology as top priority for effective RGM. Many companies are starting to build analytics infrastructure, with automated data loading & transformations, automated visualizations via self service analytical tools and more integrated predictive price, promo and assortment simulations.
At Rootit, we act as an accelerator to develop analytical RGM solutions for clients. Rootit positions itself as the middle layer between a variety of data sources on the one hand, and the data visualization tools on the other hand. Besides data management (ETL, integration, preparation), the core of Rootit is the leading IP combined with advanced analytics.
About the authors
Bert Vandewiele is co-founder & Partner at Chronion and a solutions partner of Rootit. Bert designed & implemented revenue growth transformations for B2B companies in various industries. As such, he supported multiple commercial teams to realize higher & customer aligned revenue growth.
Vadim Gerasimov is a business analyst at Rootit.
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