Just a few short years ago the consumer goods industry was talking about trade promotions as a major line item that didn't generate much return on investment. However, fast forward to today and measuring promotions has become part of a larger and more cross-functional business function known as revenue growth management.
However, as with any implementation, there are challenges CGs face when they don't invest in the right foundation first, and make sure the C-suite is also on board. CGT recently caught up with Nick Eales, chief product officer of Aforza to discuss this further and find out what CGs can do to set themselves up for revenue growth success.
CGT: What are some of the challenges CGs face when dealing with trade promotion management and optimization solutions (especially when they are legacy systems)? How can revenue growth management help?
The majority of trade promotion management and optimization solutions used by Consumer packaged goods (CPG) companies today are outdated, unsuitable and unsustainable in the changing CG landscape. Rear-view facing, siloed insights fail to close the loop between what is planned at HQ and what is executed in the store.
As shared in a recent article by McKinsey & Company, CPG companies worldwide invest about 20% of their annual revenue into trade promotions. This approach isn’t working; in North America alone, 72% of these promotions lost money.
Economic profit growth has nosedived in recent years, making these unprofitable promotions only one aspect of a far larger problem that CPG companies are currently facing in their overall struggle to find growth. In fact, for the top 30 CPG companies in absolute economic profit growth, margin expansion contributed twice as much as growth to value creation.
The truth is, traditional ways of growing revenue are no longer effective. Population growth is slowing down and there is a stagnation in economic growth. CPG companies can no longer rely on organic growth to raise revenues. Competition is also on the rise with authentic challenger brands taking market share. There’s a lot to contend with.
This is where revenue growth management is critical to survival.
The simple question is, how do you make a profit even with declining volumes? You must either take market share from your competitors or create more value from your existing customer base. This cannot be done with legacy trade promotion management and optimization solutions.
CGT: Why is revenue growth management now being discussed as a C-suite agenda item?
Revenue growth management is now on the radar of the C-suite because it’s hugely strategic and tied directly to the future growth of consumer goods companies. As shared in a recent report from Deloitte, a modern-era revenue management capability can generate benefits of as much as 5% of gross profit, while creating shared value for retailers and consumers.
Revenue growth management also requires support from the C-suite to implement. No longer solely focused on pricing optimization, the approach needs to be multi-domain and capable of bringing all commercial planning and route-to-market initiatives under one roof.
CGT: What role can cloud play in revenue growth management?
The cloud is critical to the success of revenue growth management and putting an end to the siloed, rear-view facing insights that have plagued CG companies in the past.
There is no time for big bang or multi-year legacy projects. You need to be able to rapidly launch, measure and continuously improve, all in real-time. Growth Hacking is the new game.
Photos Photiades, a distributor of brands including Carlsberg, Campari, Moët Hennessy, and Jose Cuervo, is leveraging the Aforza platform to deliver a comprehensive combination of real-time insights that are fed directly to the users whether in the field or HQ; to enable data-driven decisions that directly impact profitability and investment decision making.
The cloud enables this speed, agility and seamless integration across your commercial planning and execution capabilities. The Aforza product works out of the box and can be implemented in weeks. Built on the Salesforce and Google Cloud Platforms, we scale fast and deliver continuous innovation with 3 releases a year.
CGT: What features are “must-haves” for modern revenue growth management platform and strategy?
A modern revenue growth management platform and strategy must start with a solid foundation across your commercial planning and execution systems.
This demands a single source of truth for your customers on an integrated platform that connects your HQ and field teams, in real time. You need to be able to confirm compliance with the plan and take immediate action in the field with on-device offline mobile intelligence. It is also critical to drive a consistent omnichannel approach across modern, traditional and online channels.
Aforza delivers this end-to-end platform through a suite of cloud and mobile apps that connect your trade planning and field sales teams together to solve the problems of unprofitable promotions, declining market share and lack of revenue growth.