Emily: Yeah, Rick, I’m calling in from Cincinnati, Ohio, where it is 96 degrees Fahrenheit today, so cannot complain about the heat here, and just moved my whole family here. We were in Chicago for about 10 years, and so we’re six weeks in and just trying to get settled.
Rick: We relocated many times when my kids were small and strangely, I think it can be a great bonding time for the family, even though it can be a bit stressful as well. So hopefully it ends up being a great experience for you all.
Well I am excited to learn from you both today about revenue growth management (RGM). As a longtime sales and marketing leader myself, I’m always interested to hear the latest and greatest.
So for those in our audience that don’t even know what we’re talking about just yet, what is revenue growth management and why is it important for folks to be focused on today?
Teresa: It’s basically a way of looking at the business. I think it has evolved over time, but revenue growth management is about trying to link the strategical with the tactical, and it’s all about really helping organizations to segment their offerings to be able to stay competitive.
Emily: It’s also a large focus for organizations right now as we see shifts in what consumers are looking for when they go to the store and when they look at a shelf. So it’s a way for CPG (consumer packaged goods)/FMCG (fast-moving consumer goods) companies specifically to evolve their portfolio based on what the consumers want while also ultimately increasing their revenue, their profit, and hopefully their market share at the same time.
Rick: When I was involved in this world a little bit, everything was about the consumer going digital and how many times retail locations became a place for consumers to go get their hands on something that they had every intention of buying online, if they could get it cheaper.
I’m curious if that shift has continued to be something that’s top of mind for folks, or is that just kind of built into the way that people think these days and, what are some of the other shifts that are taking place out there?
Teresa: It really depends on the maturity of the country. Of course, if we think about global organizations, markets look very different and consumption occasions and shopping missions are very different. Generally, it’s embedded in the majority of markets. However, it is true that now it’s really about omni-channel and it’s really about giving the same experience.
So, RGM actually helps you tailor and segment your offering both for online and offline. I think for me, that would be the interesting part about the landscape today.
Emily: And some organizations are probably focused on it more than others, Rick. In snacking or in beverage, a lot of the shopping missions there are in the moment or on-the-go. If I’m looking to purchase toilet paper or something in bulk, sometimes that might be driven more online. So, I think it also depends on the product that our consumers are looking for as well.
Teresa: So in terms of other shifts in the last two years, after some inflationary pressure, we have seen some mature organizations really focusing a lot towards a very tactical approach, focusing a lot on pricing and trying to see how their margins are not eroded. But basically the shift that organizations are doing right now, trying to move towards another way of looking at RGM is trying to link this tactical approach with a strategical approach.
So if we were to look at how organizations are moving towards more pack price architecture a bit more strategically or how they are looking at their OBPPC (occasion, brand, pack, price, channel) and how these elements help them link the strategic with the tactical, this is one of the shifts that organizations did in the past, but forgot a little bit, in the last years and are now reinforcing.
So basically when we think about PPA (price pack architecture), basically organizations were focusing on pricing, margin erosion and how to increase prices. However, they were not thinking more strategically in the long term about what is the consumer thinking about what are the consumer needs, the consumer occasions, and the shopping missions that are relevant to take into account when designing your price park architecture – and that involves innovation.
Emily: Pricing is such a short-term reactionary action that a lot of companies are taking when they see inflationary risk or margin erosion for different reasons. Pricing is an easy lever to pull to say, okay, we’ll just increase the price of this pack or this SKU. But you can only increase price so many times before your consumers are saying “Actually, I’m not going to pay that price for a pack of XYZ”.
So by taking a more holistic approach to revenue growth management where you’re looking at the pack types and pack sizes. And going back to where we started this conversation around the consumers and the shoppers and what they’re looking for, we can answer more needs for our consumers and actually offer more packs for them in more channels at the right price. So that’s really shift from this pricing lever only to more holistic RGM.
Teresa: This is exactly the beauty of RGM. It really helps be a bit more strategic, not reactive, but a bit more proactive. And also trying to link a the strategical approach more to a tactical approach.
Rick: Sometimes it’s easy to say things like “combine the strategic with the tactical”, but I feel like it’s one of those things that’s hard for organizations to do. So when you’re out there with the best of the best, what are they focused on to enable those kinds of actions within their teams?
Emily: We work with organizations who are at multiple different levels of maturity in their RGM journey. Some organizations are just trying to level set and get everyone on the same page. So setting the right foundations of: what do we mean by RGM? What is the purpose of RGM at this organization? And what is our role in it depending on where we sit in the business?
That is something that we’re seeing a lot of organizations do right now, and it’s just getting back to basics. In more mature organizations, what we’re seeing right now is a couple of different things. One is this shift from RGM experts to RGM capability at scale.
What many organizations have done in the past or are currently doing is they have revenue growth management experts sitting in different markets, and those individuals are really responsible overall for the RGM strategy and execution.
And of course they have to bring in the cross functional team. This is – when done well – marketing, sales, insights and analytics, finance, supply chain, etc. What we’re seeing in terms of the shift is instead of having that point person or that expert really leading the charge is how do we embed RGM capabilities throughout our go-to-market teams our finance teams and our supply chain teams so that everyone is marching towards the same effort and really understands. It’s a focus on why we are doing the things that we’re doing to respond to consumer and shopper trends and what our business needs as well.
Teresa: If I were to think about some of the key barriers I have seen for execution in the organizations I have worked with, bringing RGM to life is key. Ensuring not only that RGM has a seat at the table and it’s participating in different discussions, but really that we move towards building our team capabilities at scale, specifically on the execution side. That’s one of the things am seeing. Another thing that we’ve seen lot is not linking RGM to the rest of the business processes. We have seen it still a bit in isolation, like a very separate process from the early negotiations with customers or with business planning.
And the shift that we’re seeing some organizations do right now is really embedding into the business processes. These two things – building RGM bringing it to life and linking it to business processes – have been key in the last year in the work we’ve done with our clients.
Rick: Going from just a few experts to the whole organization aligning around RGM reminds me so much of what I’ve heard in either manufacturing or financial services, or in the tech sector: the concept of customer centricity.
When people talk about being customer obsessed and getting the whole organization in alignment and capable of working in that way, I’m curious how you see those types of initiatives being the same or different than what you’re talking about with RGM.
Emily: Great RGM strategy and execution first and foremost starts with the consumer and the shopper. So when you reference in tech and in manufacturing the “customer” ultimately, that’s the end user. For CPG and FMCG, they think about their consumers. So, who are the people consuming their products and their shoppers are the people actually purchasing the products in stores or online. So great RGM has to start with the insights that are coming from consumer and shopper needs.
It sounds very obvious, but actually a lot of organizations skip that step. They have large, recognizable global brands that have been around in some cases for over a hundred years. And it’s really easy to just rely on those global brands, but again, consumer needs and desires are shifting towards trends such as sustainability and more organic and local products. And some of those global brands have a hard time competing with that. It’s a tension point that they have to balance to really understand how to continue to drive these brands that people know and love, while also really connecting back to the trends that we’re hearing and seeing from consumers so that we don’t get left behind.
Teresa: And one of the key elements of RGM is data, right? So in order to be able to understand what consumers and shoppers are looking for, data is key. And RGM per nature is, data-driven decision making. However, we’re also seeing an important change or an important shift that organizations are going through. Regardless of how mature they are, they haven’t figured out yet how to approach this perfectly, but I think data is also something very, very relevant. If we want to be consumer centric, shopper centric, data is really the key.
Emily: I would go one step further to say insights are really the key. Some organizations we’re finding they don’t have the right data. And some organizations we’re seeing actually have too much data and they don’t know what to do with it. We often describe that as organizations being data rich, but insight poor. So we have to help our go-to-market team, sales, marketing, etc. understand the data and then identify the insights that they can take action on.
Rick: I see, at all levels of commercial organizations, people really, really struggling with what to do with the mountain of information that we get on our customers and consumers, all the way up and down the pipe.
Emily: The other big barrier that we see is organizations not involving their leaders in the RGM strategy and execution. And even not involving their leaders earlier on in answering the question: what is RGM for our organization and what does it help us to do?
We see a lot of different definitions and we see different levers that organizations focus on from an RGM standpoint. And one is not better than the other, but they just have to get really clear on why we are focused on RGM and what it solves for our organization. And then of course the leaders in the market are ultimately the ones who are oftentimes carrying it forward and championing the actions that are needed to be taken to actually see results.
Teresa: Being very clear on what the expectations of those leaders are really could make a difference into really bringing RGM to life.
Emily: Absolutely. You and I have talked about this a lot, but there is a change management aspect of embedding and executing great RGM strategy. So that messaging has to be clear on: why are we doing this and what does it solve for and who’s responsible?
Rick: When you think about that leader alignment, how does that translate into different ways of working?
Emily: It goes back to where we started this conversation and the major shift that we’re seeing in RGM from this short-term reactionary pricing action to being more holistic in nature. Also, embedding RGM with core business processes and ways of working. And we can’t effectively do that unless we have everyone aligned to the RGM approach and again, the problem that it solves for our organization and each person’s role in it.
There’s also a large component of cross-functional alignment and working together to execute great RGM strategy. And that’s really hard to do when organizations don’t have alignment around what it is and why it’s used. So that alignment amongst cross functional leaders is critical to being able to really see the benefits of RGM.
One way we help organizations to do this is to actually envision what it might look like through the use of a simulation, for example. So, it’s hard to really see that holistic and cross-functional RGM strategy in action unless we experience it. And so we put them in situations where they have to practice and experience what that looks like – the barriers or challenges that they will face– and really understand their role in carrying it forward.
Teresa: Simulations are always great to really try to see how everything works together and to embed certain ways of working. But specifically thinking about RGM, I think it makes a lot of sense because it helps really connect the dots.
RGM multi-lever and multi-phase. There so many elements playing a role in RGM that being able to help even RGM experts connect the dots of the different levers of how mix is impacting PPA, or how PPA is impacting trade terms and conditions.
Emily: Think it’s a great point, Teresa. And back to the example we keep using around pricing is that simulation also allows us to see timing horizons. So we can see how increasing pricing time and time again might play out in the market. And we will eventually realize in the simulated environment that we have to do something else. We have to take this holistic approach to really capture the market share that we’re looking for.
Rick: And I would think that might be challenging as you think about that, even within the same organization because markets around the world are operating at different levels of maturity and even a brand from one market to the next may be operating at different levels of maturity.
Teresa: For global organizations, that’s actually a key point. There’s a lot of effort from a global, or a central perspective to try to create frameworks and tools and elements for the different countries or different business units to use. And again, we are seeing a lot of barriers there to extract value locally. You have to take this into account from the beginning when you’re designing your RGM strategies and deciding on your investments. If I were to think on how to do that or what things we’re seeing that the best organizations are doing there are two. One is really focusing more on the people rather than on the processes. So really trying to work on how to elevate capabilities from a people perspective, rather than from a process tool perspective.
Then the second is really take that into account when designing all your initiatives to balance the global versus the local execution. Some organizations fail in that process
Emily: And many organizations have to balance the global frameworks and global standards with local execution and the local maturity. We’ve talked about that a couple of times too: each market is typically at a different maturity level with RGM based on the dynamics of their consumers and their shoppers and oftentimes just the size of their market.
One thing that we’re seeing global teams do is setting those foundations and those frameworks that can be leveraged and used globally, while also doing a diagnostic or an assessment of where the organization is as a whole and where different markets are in their RGM journey. Because then they can offer support to those markets directly or really help to execute the right RGM strategy and approach based on what would work best for that market.
Diagnostic upfront can be really helpful to understanding your roadmap and your desired state for RGM. And then where your organization is and where each of your markets are.
Rick: So you, both get to work with some of the top global brands. What are you seeing the best of the best doing?
Teresa: Two things. The first one is organizations are really moving towards customer-centric RGM. Thinking about opportunity pool identification, how they are calculating their size of price, and their customers. They are thinking about the channels, the retailers, and they’re embedding this customer-centric approach into their RGM initiatives from the beginning.
The second is how they are using and investing in AI to really move from data-driven to predictive analytics. These two are the elements we’re seeing that are differentiating key players in the industry.
Rick: For those out there that may not be able to drive radical change in their organizations on their own, what is your best advice to help them influence their organization more towards this RGM mindset?
Emily: Have some of those alignment conversations around where are we now and where do we want to be from an RGM perspective? And also paint the picture of the risks and opportunities two to three years out if we don’t embrace an RGM approach holistically and at scale. Many organizations fall into short-term reactionary levers versus really seeing what this could be if we do it right. So have those alignment conversations – it really paint the picture of what that future could look like.
Rick: Thank you both for joining us today. Your, depth of knowledge in this area is, very impressive. So, really appreciate you sharing your insights and I look forward to our next conversation as you continue to learn more.
Emily: Thanks so much Rick.
Teresa: Thank you so much, Rick.
Rick: Thanks for joining me today. It’s always a pleasure to bring to you our Fearless Thinkers. If you’d like to stay up to date, please subscribe. Bios for our guest and links to relevant content are always listed in the show notes. If you’d like to get in touch, please visit us at BTS.com, and thanks so much for listening!
