The Evolving State of Revenue Growth Management

Selling the right product, to the right consumer, at the right price is a critical skill every successful consumer goods company must master. In fact, the industry has become skillfully adept at devising pricing, promotions, assortment, and trade investment strategies that put them in the best position to win. However, as the market continues to evolve thanks to changing consumer habits, supply chain woes, inflation, and increased competition, consumer goods companies must alter their revenue growth management approaches to continue to maximize profits. Read on to discover the current state of RGM across the consumer goods industry, and uncover where your peers are making big tech bets to better position their products in an increasingly crowded and unpredictable marketplace. Today’s hyper-competitive marketplace has savvy CGs taking long, hard looks at their RGM efforts to ensure consumers are satisfied quickly, efficiently, and — most importantly — profitably. We asked consumer goods executives to provide us with one word that best describes the current state of RGM efforts across the industry (Figure 1). The three most popular open-ended responses were evolving, progressing, and basic, highlighting the need to advance RGM capabilities in the face of mounting competitive pressure. While CGs clearly consider the current RGM landscape fundamental at best, how do they rank their own organization’s RGM capabilities? One a scale of 1-10, with 1 being the most basic and 10 being extremely advanced, consumer goods executives ranked their organization’s RGM capabilities with an average score of 6.8. With a mediocre self-ranking of less than 7, CGs place their current efforts on par with what they consider to be the developing RGM efforts of the industry at large. RGM has become the foundation of success as margins become thinner due to supply chain woes, inflation concerns, and heightened competition. To improve their RGM capabilities beyond the basic level, survey respondents report that 19.2% of their total IT budge is allocated to RGM solutions (Figure 3). Effective revenue growth management requires the careful integration of numerous strategies, departments, and technologies throughout a consumer goods organization. Currently 32% of CGs place that responsibility on the finance department, 32% allocate it to sales, 15% to marketing, 8% to operations, and 13% highlight the use of a cross-functional team (Figure 4). Survey takers were asked for their primary RGM goal for the coming year, and nearly a third (32%) point to price optimization (Figure 5). The ability to pinpoint the price the market will bear for a particular product while simultaneously competing on multiple fronts for the hearts, minds, and wallets of fickle consumers is the top RGM priority. Following price optimization, survey respondents named trade promotion administration (22%), financial optimization (22%), and post-event analysis (12%) as key goals for 2022. Further fueling CG executives’ desire to improve their pricing optimization is the fact that more than a third (37%) report that consumer price sensitivity has increased over the past 12 months (Figure 6). That number is poised to increase as inflation reaches levels that haven’t been seen in decades, placing inevitable strain on consumer spending habits. Improving pricing optimization is consumer goods organizations’ top RGM priority, but there's work to be done on internal processes and strategies before that goal can become a reality. CGT asked its readers for their organization’s biggest RGM gaps and challenges, and more than half of respondents (51%) pointed to working in silos as a major roadblock (Figure 7). Interestingly, despite the obvious challenge a disjointed RGM approach presents, just 13% of those surveyed report that a cross-functional team is responsible for its RGM strategy. CGs are faced with a golden opportunity to break down silos and work collaboratively and must put the internal structures in place to facilitate a true cross-functional approach. Joining working in silos among CGs top five RGM challenges are visibility into promotion effectiveness (44%), pinpointing ROI (41%), lack of data (41%), and forecasting inaccuracies (41%). CG executives are faced with a multitude of challenges on the RGM front as they look to optimize their operations to ensure improved profits. But what tools and capabilities do they covet to help them overcome these obstacles? Survey respondents were asked to provide their RGM desires in an open-ended question. Their responses (Figure 8) show a clear need for meaningful data, predictive insight, and a collaborative approach. RGM success requires several systems and solutions working in concert. As a key piece of this research, CGT asked survey takers for their tech and strategic maturity across a host of solutions vital to RGM effectiveness. Luckily for CGs, some of the key elements of RGM victory are long-standing strengths of their organizations. For example, survey takers reported up-to-date technology for retail execution (46%), digital marketing (44%), category management (34%), social media marketing/analytics (34%), and assortment planning/optimization (32%). Currently, CGs are hard at work deploying next-gen tech designed to advance their RGM pursuits. Around a third of consumer good organizations report they are in the midst of upgrades to their price optimization (35%), social media marketing/analytics (32%), digital marketing (30%), and customer relationship management (28%) technology. Over the next year, CGs have upgrades planned for their personalization (27%), category management (27%), price optimization (23%), and trade promotion planning/optimization (22%) systems. When the timeline is extended to 24 months, we see 1 in 10 consumer goods organizations plan to address their personalization, customer relationship management, consumer experience management, direct to consumer, and price optimization capabilities. Methodology This study was conducted in January 2022. The survey was sent to CG executives at both large-scale and SMB manufacturers. Sixty-eight percent of respondents hold director-level titles or higher, with 20% identifying their primary job function at marketing, 19% as insights/analytics, and 17% as IT/technology. The greatest number (46%) of respondent are employed at consumer packaged goods companies, 37% are employed at food producers, 10% at apparel/footwear/accessories, and 7% at beverage corporations. Sixty-one percent of respondents work for consumer goods companies with revenue in excess of $500 million, with a quarter (24%) employed at manufactures with revenue north of $5 billion. Conclusion Consumer goods companies must rethink their RGM approach to compete in today’s hyper-competitive, consumer-focused market. RGM success requires a cross-functional approach empowered by consumer insight and nimble operations capable of maximizing profits. Over the next year, savvy CGs will be laser-focused on improving their price optimization capabilities and will continue to invest in their social media, digital marketing, and customer relationship management resources to ensure they are prepared with the right product, for the right consumer, at the right price. Key Findings One a scale of 1-10, with 1 being the most basic and 10 being extremely advanced, consumer goods executives ranked their organization’s RGM capabilities with an average score of 6.8. 32% of CGs named price optimization as their primarily RGM goal for 2022. More than a third (37%) report that consumer price sensitivity has increased over the past 12 months. 51% of CGs report working in silos as their biggest RGM challenge. But just 13% say that a cross-functional team is responsible for its RGM strategy. While a cross-functional approach is needed, currently 32% of CGs place RGM responsibility on the finance department, 32% allocate it to sales, 15% to marketing, and 8% to operations. CGs are in the midst of major upgrades to their price optimization (35%), social media marketing/analytics (32%), digital marketing (30%), and customer relationship management (28%) solutions.

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