CPG companies operate in a fast-paced market where investors require that they strike a balance between managing sustainable profit margins and sustaining top-line sales growth. The growing income disparity produces consumer micro markets with specific strategic needs, making revenue growth challenging.
With traditional revenue growth management activities, companies lose their ability to achieve profitable top-line growth and stay competitive in the shifting modern retail landscape.
In the USA, online penetration in CPG increased from 36% in 2019 to 53% in 2020, according to Nielsen IQ research, as consumers opted for online shopping because it was inexpensive, convenient, and safe.
In Western Europe, retail e-commerce sales increased by 26.3% in 2020, with growth anticipated to remain modest as physical retail returns. Throughout the COVID pandemic, leaders in the CPG industry have also had to contend with changes in customer behavior and an increase in brand switching.
According to a recent survey, 40% of consumers have changed brands or how they buy. Before the pandemic, the predictable customer has almost entirely vanished. Furthermore, with increased input costs and ongoing supply chain disruption, simply changing the price and promotion plan is obviously insufficient.
Disadvantages of Traditional Revenue Growth Management in CPG
Earlier, organizations used traditional Trade Promotion Management (TPM) and scenario-based Trade Promotion Optimization (TPO) to increase the effectiveness of promotions and daily prices inside a single retailer.
Planning a promotion has become challenging due to the recent significant changes in the retail environment. Retailers' cross-channel promotions and pricing strategies now need to be more flexible and creative to be successful in the new omnichannel market.
Lack of 360-degree views of data: Depending only on historical customer data is unproductive and gives a skewed view of only past consumer behavior. With the adoption of modern retail channels, there has been a dramatic change in the way customers shop. That is why it is imperative for CPG company to adopt robust revenue growth solutions to transform their operations and become data driven.
Lack of good business intelligence: Business Intelligence (BI) tools designed for visualizations pose some limitations like automatic evaluation of key factors for the decline in sales in specific categories.
Siloed customer planning: Isolated planning by individual customer account teams leads to poor management. The inconsistent use of different revenue growth management platforms by field and back-office workers further hinders trade planning. Some teams still rely on manual processes, which are inefficient in terms of meeting time, accuracy, and productivity. On the other hand, data-driven revenue growth consulting can help CPG teams create effective enterprise-wide customer strategies.
Cash flow reductions: Lower cash flow and shareholder value emerge from a narrow trade strategy that only concentrates on high-growth industries or the most crucial and urgent client segments.
Unsustainable strategical approach: A lot of CPG companies consider quick-win strategies given their significant impact and low effort. While they enable incentives, they are not scalable or long-term sustainable.
Such drawbacks have led retailers and CPG leaders to rethink brand preference, shopper frequency, category consumption, channel choice, and media engagement. Revenue growth solutions can help CPG companies address challenges across the RGM spectrum and reduce risk factors.
CPG Experts at Polestar Solutions provide the right revenue growth management consulting to help organizations capitalize on revenue growth opportunities and establish a competitive advantage.
Driving Impact at Scale: Prioritizing AI and Analytics
In order to drive profitable top-line revenue growth, revenue growth management is an integrated analytics approach that addresses pricing, trade promotion activities, and assortment at the consumer and business levels across all channels.
Today's revenue growth strategies can boost an organization's benefits significantly while capturing value for customers.
The RGM platform aligned with CPG analytics enables CPGs to optimize revenue metrics at the granular level, enhance business reporting with a single version of the truth, eradicate wasteful trade spending, minimize redundancy, improve governance, and unleash hidden value.
Artificial intelligence (AI) has become a key driver to fuel smart decision-making, move with agility in a dynamic business landscape, and unlock new possibilities in revenue growth management. AI is an ideal tool for prescriptive revenue growth management given its ability to sift through massive data volumes, identify behavior patterns, identify shortcomings and opportunities, weigh trade-offs, and make real-time recommendations for the future.
AI enables CPG organizations with the scalable capability to harness the power of data and navigate complexity. They can access customer insights and forecast customer demand based on historical data.
Predictive modelling in AI proves beneficial for organizations to understand customer behavior and goals across retail stores and online channels. It enables suppliers and retailers to streamline operational functions like running hyper-personalized advertising and trade promotion initiatives.
Magnifying Revenue Growth Management with Polestar Solutions
There is no easy feat for CPG firms to maintain top-line revenue growth but adopting an AI-driven RGM platform can help leaders outclass personalized customer table stakes, retain and expand their user base, create a long-term differentiation, and take strategic decisions across pricing, product assortment, etc.
Connect with revenue growth management consulting experts at Polestar Solutions to make the most of your data for fact-based decision-making and attain profitable growth.
