This is the second post in a series of Revenue Growth Management (RGM) best practices from guest contributor and RGM and CPG veteran Mike Downey. Read the first post, Uncover and Maximize Profit: Revenue Growth Management, which identifies the challenges companies face when transitioning to RGM.
The success of a revenue growth management (RGM) program for a CPG company will ultimately be measured in its ability to optimize volume and profit.
Of course, establishing a strong revenue growth capability and getting there are two different things. For many, the tactics used to drive top line growth often conflict with the desire to improve profit margins.
In other words, RGM is not a “better results at any cost” approach; it’s a purposeful, guided, educated approach to better decision making. To achieve sustainable, data-driven development calls for a change in the way we look at the investments that are relied on to generate top line growth.
Trade promotion is a significant expense – typically one of the largest line items on a companies’ P&L. Viewing trade promotion solely as spend means the only way to manage trade outcomes is by increasing or cutting the spend. With this, we see a battle: increase spend to rescue an underperforming plan or cut spend to bolster the bottom line.
In a revenue growth management approach, we manage the outcome by managing the potential for optimal return. This means that we must see our efforts through the lens of profit instead of cost. In doing so, considerations about pricing strategy, trade governance, and incremental spending should be driven by what we know, what we can predict, and what we can measure. A key component in adopting an RGM approach is having the technology solutions to monitor trade spend and to analyze, test, and predict the profitability of our investment.
Follow these 3 small steps to help you build, maintain and eventually reap the benefits of an RGM approach:
1. Get Commitment from the Top
Revenue growth management’s greatest deterrent is change management. Change begins with commitment from the top and the willpower to say no to high impact, low profit programs. It requires complete alignment throughout the organization. Clearly communicating expectations not only shifts the conversation from “change focused” to “results focused,” but also ensures execution is aligned to corporate objectives.
2. Organize Your Data and Take Action
An expected outcome of RGM is better decision making, which stems from better information. You must commit to and invest in the capability to organize, analyze and utilize data in actionable ways. The best way to achieve data organization is to partner with a TPO solution provider that simplifies data complexity so that you can focus on gaining insight and driving results.
3. Start Your RGM Journey
As top line growth continues to slow and trade rates continue to increase, the stakes are too high not to invest in an RGM capability. Keep in mind, establishing a revenue growth management function is a journey that requires a lot of work. Regardless of where you are in your RGM journey, commit to continuous improvement. Even if that means you start by investing in TPM system during year one. In year two, you might focus solely on post event analysis; and during year three, you lead a consumer based process.
RGM is not an approach that asks to reinvent everything your company is doing; it simply gives you the intelligence and foresight to do it better. In the end, the tactics won’t change – a TPR is a TPR, an ad is ad – but your organization will connect the dots between investment, price, tactic, customer, and profit in strategic ways that benefit you and your retail partners.
Mike Downey is a Sales Executive who has spent his career in the consumer packaged goods industry. Leveraging his experience as a Sales leader at Quaker Oats and PepsiCo, combined with his consulting background at McKinsey & Company and Henry Rak, he has developed a keen sense for leading sales organizations and developing successful go to market strategies. In his most recent role with Snyder’s Lance, he held the position of Vice President of Sales Planning and Commercialization leading their Center of Excellence. Mike is a strong sales leader and has a proven track record of getting the most out of his teams and consistently delivering results. John Heuer is a CPG Industry Executive with 31 years of experience in Sales Leadership, Marketing, Trade Marketing,and Customer Relations. He is the Former Chief Customer Officer at Hain Celestial Group & Former VP of Strategic Customer Teams at Kraft-Heinz. John is now the President of Set Sales Consulting, LLC where he focuses on Sales Function Design and effectiveness, Trade Spend Optimization, Customer Marketing, and Senior Level Customer relations.