The Science and the Art of Revenue Growth Management
Where to start and what to consider
At a time where organic growth is increasingly difficult to attain, how are companies driving their growth agenda?
The simple answer is Revenue Growth Management (RGM).
But establishing RGM successfully in a business is not as simple as it might sound. Here we will look at what RGM is and why it should be a critical element of your business strategy and plan, and then we will share some ideas on how to get started on our RGM journey.
What is Revenue Growth Management (RGM)?
At its most basic RGM is a strategic value creation tool that uses data driven insights to deliver sustainable, profitable growth plans that define Go-To-Market strategies.
RGM covers a range of strategies around assortment, promotional spend, trade management and pricing optimisation and will help highlight your innovation opportunities.
The Case for Strengthening Your Approach to RGM
- In the last few years there has been a diminishing return from organic growth meaning that companies must focus on other growth strategies to drive businesses success
- The increased inflationary pressures on input costs means that while efficiency and productivity remain important, they are not sufficient to drive growth
- Most markets are seeing hyper-competitive conditions which means that differentiated positioning is a critical element to ensure sustainable success
- Macro-economic conditions with the related impact on consumer disposable income means that traditional pricing optimisation processes are no longer sufficient
- Covid19 has driven dramatic and long-term changes in consumer buying behaviour:
- They have a broader consideration set based on their own value matching criteria
- They are shifting to a “local supply” focus and impact
- They are more concerned that ever with health benefits
- Their shopping trips and types have changed: they are embarking on fewer shopping trips, with higher basket values in different channels as evidenced by the acceleration of e-commerce and the relative stability within convenience channels in most markets
While this is by no means an exhaustive list, it is evident that successful companies need to pursuing margin and growth at an accelerated and elevated rate.
How to Approach RGM in your business
Regardless of the status of your RGM development, there are a few elements that you should be considering. These are:
- Analytics & Capabilities
RGM is a data driven process, and successful RGM strategies require the analysis of relevant and accurate data. These analytics capabilities translate insights around consumer, shopper, channel, and competition into actionable and quantifiable insights. Here is where science and art collide, where extensive capability is required to deliver real and relevant insights.
The best place to start is a review of the currently available data to determine relevance and to then be able to identify data gaps that will need to be addressed.
Some of the science you will need to build capabilities around includes: Promotional Mandate Management; Pricing Management; Trade Spent Optimisation; Brand Positioning, and Mix Optimisation
- Determine the drivers of top-line growth
To deliver growth you will need to quantify the drivers of this growth. This will require accurate and aligned value chains to provide clarity around profit pools, and the elements that drive and erode value for your organisation.
This will also determine your investment plans to drive efficiency and maximise your return on investment.
- Align Company Strategy and RGM
The strategic direction of the company should be the cornerstone of your RGM strategies and plans.
RGM does not happen in a vacuum and should be focused on driving the achievement of the business’s strategic goals. If there is a disconnect in terms of the metrics, you need to either adjust your company strategy or your RGM strategies
- Creating a revenue management culture
If successfully deployed, RGM becomes the responsibility of everyone in the company and is the framework around which all decisions are made, from the everyday to the strategic. At a minimum, effective RGM happens at the intersection of finance to manage the cost base, marketing to drive the value base and the operations to drive the execution all contained by the external market.
While you will need a dedicated RGM team driving the programme, the interdependencies should be clearly articulated and understood throughout the organisation to avoid the silo approach that will hinder your RGM efforts. This requires an organisation wide culture of revenue growth management that will be led from top of the company.
There is no longer room for the Brand Manager who says “I don’t do numbers” or the Finance Manager who thinks “that’s marketing’s problem” – those days are long gone, and revenue growth management is everyone’s responsibility.
- Tracking, Measurement, Flexibility & Agility
Vigilant real-time results tracking against your forecasts is critical. In today’s data driven digitally enabled world, there are plenty of ways of tracking results in real-time – you need to find the technology and processes that work for your business.
Your success here will be determined by the flexibility and agility you have to respond to changes in the market and pivot as required.
This is where more of the art of RGM comes into play – knowing when to “stay the course” and when to pivot. This will come with practice and experience as your business becomes more RGM-centric.
Revenue Growth Management will support the continual maximization of your business’ revenue by turning insights into success.
Your roadmap to RGM realisation will depend on how advanced your business is in this space, but one thing is certain, a disciplined approach on revenue growth management is no longer optional for any business that wants to succeed into the future.
With over 70 years business experience we can partner with you to help you make the right decisions for your business. Want to know more about establishing or optimising Revenue Growth Management in your business and how we can help partner with you?. Contact us find out how.