How can we think differently about pricing?
How can we invest more effectively with our retail partners?
How can we balance efficiency and expectations?
The answer to these questions may be hidden in your data.
For CPGs, revenue growth management (RGM) focuses on driving organizational growth through pricing and promotion strategy. It ensures a forward-thinking mindset. McKinsey notes that companies who shine in RGM have seen margin expansion of up to 5%.
As food manufacturers mature in their approach to revenue growth management, they tackle arduous questions like “How do we think about pricing?”, “Where are our opportunities for growth?”, and “How can we think differently about investing with our retail partners?”.
When gathering intelligence and mapping out a strategy to answer these questions, CPGs come back to a common obstacle: their data.
The Importance of Clean Data
Data governance is one of the foundational elements for improving trade promotion practices.
Data governance is the management of the availability, usability, integrity and security of data used in an enterprise.
Having a plan for data governance centralizes intelligence and prioritizes accuracy for more informed revenue-focused decision making.
“Take the time to make sure that you have a solid data foundation,” recommends Mike Downey and John Heuer, former CPG and RGM leaders, in the webinar, Raising the Pillars of Revenue Growth Management.
Too often, trade spend data is tracked offline and an account manager is responsible for its updates. Making changes to your data in Excel means that it’s not tied to other tracking or planning processes. For RGM, the goal is to have all of the data in a single intelligence hub in order to determine the best way to invest and optimize across all touch points.
“Clean data enables revenue growth management practices, customer level P&L’s, post event analytics, TPO, AI, holistic enterprise reporting, and executive dashboards for better decisions,” according to the Promotion Optimization Institute’s State of the Industry Report.
To build the case for trade promotion change, we first must unify understanding of our data.
Set a Realistic Goal
The goal: All data in a single intelligence hub.
Fortunately, the adoption of a TPx solution gives companies a partner to build an automated cleansing and harmonization process and the technology to sustain these practices.
The starting point: Bring together shipment, consumption and spending data.
This is critical to achieving the accurate and timely post-event analytics and constraint-based modeling that will guide the strategic decisions about customer investment, pricing strategy, organization reporting, and funding processes. It is also an area that gives many companies pause due to concerns about resource commitment to manual data management. With fully integrated TPM and TPO solutions, the manual data requirements are reduced to monthly POS data updates and all other plan, master, and execution data is automated between systems.
Set the Rules
Even automation without structure is doomed to repeat past mistakes. This is why CPG companies must define the rules as to how they want to organize and manage data. Reactive practices leave too many consumer goods companies susceptible to short-term success but long-term vulnerability. Shifting to an RGM approach is to shift from managing spend to managing revenue.
Think about unifying the understanding of key data definitions and processes across the organization including:
- How do we make it easier for the entire organization to manage price?
- When was the last time we scrubbed our price lists?
- Are we comfortable with our base pricing?
- How is our shipment data organized? By customer? By PPG?
- How do we define start and end dates?
“Companies need to have a diligence about how they organize their data,” stated John Weller, VP, Product Management Retail TPx of Blacksmith Applications. “They need to be able to discuss how they are tying volume, expense, and settlement to an event.”
Establishing data organization is critical to develop the transparency needed to for a successful RGM initiative. Doing so provides the granular insight needed to make better decisions and the high-level picture to build and measure a growth strategy the predicts and drives revenue.
For RGM, data is seen as an asset. Data-centric organizations zero in on insights that to get a fuller understanding of retailers and products. Being data-centric helps convey a full picture of important growth indicators. Data analysis can help you reshape your interactions with customers, market more effectively, and ultimately drive more sales for your company.
Forrester Consulting found that marketers who rely on predictive analytics are 2.9x more likely to report revenue growth at rates higher than the average for their industries. Forrester Consulting also found that manufacturers that choose to use predictive analytics to define new product prices are 67% more likely to attain profitability on the new product line in 6 months or less.
Capgemini says “As we see more advanced data science embedded into TPO systems and the increase in accuracy and trust of the data driving the intelligence, the promise of a more precise and trustworthy outcome from these tools becomes evident. Trade promotion optimization is rapidly becoming a mandate and, soon enough, a standard.”