New ways to drive sales, profits through analytics

The traditional assumptions that drove sales and profits in retailing and consumer product goods (CPG) are out of step in today’s disrupted marketplace. Gone are the days when tried-and-true anniversary promos and legacy price-taking and merchandising strategies were surefire go-tos. Retailers seek better ways to meet shopper expectations, maintain competitive pricing, drive in-store purchase decisions, and achieve profitable growth.

Revenue Growth Management (RGM) addresses those needs. RGM is a strategic planning and execution approach enabled by analytics. It focuses on execution and leverages all revenue management levers to achieve revenue and profit growth. The vital levers are pricing, promotion effectiveness, trade architecture, mix management, and assortment through an RGM lens.

Compared to the practices of the past, RGM is more collaborative, comprehensive, data-driven, and omnichannel in nature. It builds near-term value and charts a path forward. RGM requires cross-functional collaboration and drives an organizational culture change.

The case for RGM

Retailers should note the demonstrable success CPG companies are having with RGM. A McKinsey analysis found that CPG companies that do RGM well meet consumer expectations better and align pricing strategies across channels, typically leading to a 4%-7% gain in annualized gross margins.

Other research shows that 66% of CPG companies growing both revenue and profit invested in RGM systems, whereas 49% of companies did not grow both revenue and profit (i.e., all other companies), as Deloitte’s 2024 Consumer Products Industry Outlook reports.

While retailers have yet to adopt RGM as holistically as manufacturers, a growing number are exploring RGM tools and tactics in their pursuit of profitable growth.

Starting the journey

With the guidance of an experienced agency partner, deploying RGM can be a manageable, step-by-step journey. Acosta Group works with retailers and manufacturers of all sizes, those that are just launching RGM and those that have an established program and want to improve it, collaborating on a roadmap to profitable growth.

“Often a client will come to us who has just put in a RGM leader,” says Karen Moore, vice president Business Intelligence-RGM, Acosta Group. “They know they want to invest in RGM but are unsure about where to start. That’s where we can be the behind-the-scenes partner, helping them understand what best-in-class looks like, giving them options where they can make their biggest impact first, and showing them how best to interface with their sales organizations and the broader operators within an organization.”

In other cases, a client has a fully developed RGM team, but may not have enough analytic horsepower, people or tools, adds Moore. “So we will do the heavy analytic lifting to help accelerate their efforts. We work hand in hand with a client at whatever level of RGM progress they’re at.”

The first step on the RGM journey is typically an Acosta Group Revenue Growth Management capability assessment. This identifies a company’s opportunities for improvement and areas that need immediate attention. “It shows what a best-in-class organization would look like so the client can gap itself and build a roadmap of what to focus on first, because you'll never address it all at once,” Moore says. “It's going to be a multi-year journey.”

Piling up wins

It is helpful to think of RGM as a matter of accumulating “small wins,” Moore says. “It’s about realistically setting priorities and picking some things to change. You then publicize those small wins across the organization to build momentum and energy.”

For example, a retailer might achieve a small win by collaborating with a brand partner to understand which items allow price taking for better profitability and which items lose volume when prices rise. Another way to win is by shaking up promotion strategy, testing new price points, offers and tactics to find what resonates best with shoppers.

“It’s about being open to testing something different, not just doing the anniversary method you have always used before,” says Moore.

The support of a strong partner smooths the path to RGM success. “Something with a big industry name like Revenue Growth Management can seem daunting,” Moore says. “But we break it down to make it manageable for our clients and help them align to a roadmap forward.”

As profitable growth remains a formidable industry challenge, RGM is surging in the manufacturing sector and attracting a growing number of practitioners in retailing. To know more about how Acosta Group guides retailers on their Revenue Growth Management journey, contact the Acosta Group RGM team at [email protected].