How to Scale Revenue Growth Management Solutions Across the Enterprise

What’s more? Traditional trade promotion management and optimization solutions just won’t cut it anymore. Increasing complexity calls for a modern, cross-functional strategy, complete with advanced analytics. For CGs, the key to overcoming these challenges lies in implementing a multifaceted revenue growth management (RGM) solution across the enterprise.

Read on to discover a blueprint CGs can follow to successfully deploy and leverage such a solution to get the most out of their investment.

#1. UNDERSTAND THE ‘WHY’ OF ENTERPRISE RGM SOLUTIONS ADOPTION

There are myriad advantages of using a multifaceted RGM solution (see Step #3) that touches the entire enterprise. Results of a study conducted by the Promotion Optimization Institute (POI) for its 2021 POI State of the Industry Report indicate that CGs are experiencing:

• Returns of 2% to 5% on annual trade spending (24%)
• Returns of 6% to 10% on annual trade spending (9%)
• Elimination of poorly performing promotions (44%)
• Improved forecasting (33%)
• Process improvements (51%)
• Improved go-to-market strategies (18%)
• Greater visibility of business opportunities and risks (44%)
• Improved relationships with retail customers (20%)

“Leading CPGs are building on this trend as their promotional capabilities mature. Those companies that have seen the greatest impact from promotions (and from RGM in general) have been investing in analytics and data to drive greater precision as part of a broader RGM strategy … These investments have enabled them to create increasingly sophisticated promotional campaigns that drive both short- and long-term impact,” say McKinsey & Co. analysts Marco Catena, Simon Land, Pieter Reynders and Martino Zizioli.

#2. LAY THE GROUNDWORK

Given the expansive scope and the large number of teams involved, implementing an RGM solution or suite of solutions throughout the organization is a far cry from executing a more limited rollout. Laying the groundwork by following these steps should make for a smoother process.

Get buy-in from the top. RGM solution deployment is a C-level endeavor, necessitating executive buy-in. Winning that buy-in can begin with touting the benefits of enterprise-wide RGM solution. However, it shouldn’t end there.

Rather, the case for launching RGM solutions throughout the organization can be made stronger by emphasizing that such a move is imperative to keeping up with the competition. Statistics bear this out: Nearly half (49%) of companies surveyed in the POI State of the Industry Report said they are advancing practices, diving more deeply (and horizontally) into optimized promotion, pricing and pack growth analysis. Forty-six percent are adding tools or analytical capabilities to support new RGM processes, and 30% are using an “RGM suite” to “manage and drive (overall) efficiency of trade.”

Prioritize objectives for adding to the RGM toolbox. For example, is the company looking primarily at price optimization or at market share? Will this be across all brands or products, or are there different goals for different brands and/or products? What are the greatest challenges the company currently faces — and where is an RGM solution needed most? Having these objectives in hand will help you figure out where to start and how best to proceed.

Get your data ducks in a row. “Common denominator data” used for assumptions, drivers, insights and action plans is the foundation of comprehensive enterprise RGM solutions that produce one version of the truth and real-time insights, according to the POI. As such it must be clean. At present, CGs aren’t heeding the importance of data-cleansing prior to integrating it into enterprise RGM systems. In fact, the POI State of the Industry Report stipulates that “64% of companies have data quality issues with external sources and data anomalies.” Left unfixed, these anomalies can lead to analytic inaccuracies.

The POI also recommends that for best results, any integration of complex, multifaceted RGM tools include the establishment of an “enterprise data ownership” cohort. Members of the cohort should hold responsibility for data management, enterprise analytics and reporting, and executive dashboards. They should also be charged with generating “critical enterprise outputs” for common denominators like pricing, lift coefficients, baselines and incrementals, to name a few.

Investing in accessing and leveraging external data as an adjunct to internal data is another must-do. Leading CGs that have seen the greatest impact from promotions and from enterprise RGM strategies and solutions in general have invested in leveraging household-panel and retailer loyalty card data in addition to point-of-sale and internal financial data, say McKinsey’s Catena, Land, Reynders and Zizioli.  

Appoint a champion or champions. One challenge of “going enterprise” with RGM solutions is that there’s bound to be resistance to change within the ranks. According to McKinsey, resistance can be tempered — and implementation delays eliminated or reduced — when a champion works with teams to explain how the implementation will benefit their lines of business. A multi-disciplinary team — for example, individuals from sales, marketing, etc. — will be even more effective.

Go gradually. Implement the solution for a single brand (or even a SKU, if that appears too disruptive). Give it a week or two, then assess and tweak if necessary. “All-out implementation” is too daunting an approach and doesn’t give CGs time to address minor issues and glitches.

#3. GET HOLISTIC AND AI-FOCUSED

Pricing optimization has been the focus of traditional tools used for RGM. However, scaling RGM across the enterprise demands something more. Solutions should be holistic, addressing and handling a wide range of functions and areas that includes:

• Brand and customer planning
• Trade promotions and marketing
• Category and assortment management
• Demand planning
• Pricing and pack management
• Omnichannel and dynamic execution
• Finance and supply chain.

Savvy CGs clearly recognize this imperative. Nearly half (47%) of companies queried for the POI 2021 State of the Industry report noted plans to implement “a seamless holistic planning tool that incorporates trade promotion management, trade promotion optimization and post-event analytics.” This is a significant change from 2020, when 33% of companies noted that rolling out such a solution ranked on their list of technology initiatives for the year.

Artificial intelligence (AI) is a “must-have” component of enterprise RGM solutions. Boston Consulting Group found that automating pricing rules can increase revenues by up to 5% in less than nine months. AI enhances RGM by:

• Identifying and eliminating unproductive customer discounts and segments, so CGs can focus on those that are potentially more productive
• Tracking and predicting the impact of price changes, trade spending and adjustments to the marketing mix
• Assessing all channels, markets, internal actions and competitor actions for opportunities
• Pinpointing longer-term performance drivers, such as elements that fuel household penetration by segment
• Creating an understanding of promotion performance at the consumer segment level, including switching between brands and pack sizes

Traditional Medicinals, a manufacturer of teas and other herbal wellness products for which trade spend is the second-largest P&L line, replaced a legacy Excel spreadsheet system with an RGM tool that has AI at its core. The solution helped the CG overcome a lack of time and resources to understand the dynamic market in which it plays. It also addressed the challenge of a lack of information about how favorably (or unfavorably) its SKUs compete against others within the company as well as with comparable products sold by other CGs. Traditional Medicinals struggled with balancing the strong opinions of its sales team and retail customers against budget constraints, which made it difficult to attain its goal of maximizing margins without sacrificing profit share.

The RGM tool uses AI with econometrics for price and promotions optimization. It conducts a promotional grid analysis and review and makes predictions on a per-SKU and per-retailer level, pinpointing those SKUs that will produce a bigger discount volume without negatively impacting margin. Such “scientific” SKU-level insights make it easier to harness elasticities to identify the right price points for products and determine where to focus promotional efforts to gain a competitive edge.

#4 LEVERAGE BEST PRACTICES TO MAXIMIZE YOUR RGM TECHNOLOGY INVESTMENT

Deploying and scaling RGM technologies across the enterprise yields CGs a spate of benefits. However, CGs cannot truly reap the full benefits of enterprise-wide implementation unless they harness best practices for making the most of their investment in these new tools.

As tempting as it might be to leave some legacy systems in place and find workarounds for them, letting go of this idea is a better bet. Doing otherwise can compromise the functionality of the RGM technology stack and in turn, ROI generated by an enterprise-level deployment.

Ensuring that stakeholders are really utilizing the technology is also key. Lack of familiarity with RGM tools may spark team members’ reluctance to abandon paper-based methods, but the technology is only effective if teams have the right skills, reporting capabilities and decision rights.

Avoid a “set it and forget it” approach to the technology. Instead, regularly re-evaluate outcomes by asking the following questions, then adjust accordingly.

• Does the technology really yield full value? If not, what can be done to turn the tide — for example, integrating data from additional sources and making tools available to a wider swath of stakeholders. RGM solutions vendors will typically work with CGs to execute necessary tweaks.
• Is the technology enabling us to sufficiently leverage data and analytics to consistently grow revenue?
• Does the technology continue to allow us to capitalize on RGM capabilities to the same degree in all markets and for all brands? If not, the purpose of scaling the technologies enterprise-wide is defeated, at least partially.
• Do we continue to see a single version of truth across the enterprise?
• Are our capabilities improving faster than our competitors’ capabilities and more quickly than retailers’ capabilities?

Make certain, too, that stakeholders are appropriately trained in how to use the technology (again, partnering with a vendor comes in handy here). Make certain that they have unfettered access to the specific data they need, as well as the authority required to move forward with any decisions it sparks. 

The Bottom Line

CGs must continue to strive to maximize profit margins without sacrificing market share, maintaining a competitive edge while simultaneously filling retailers’ shelves with appropriately promoted, appropriately priced product at the right time. RGM technology, properly deployed throughout the organization and used to formulate decisions that touch every brand, can be instrumental in attaining these objectives.