To make the best decisions, both in life and in business, you need to collect and assess the most relevant information. Depending on how into the weeds you get, you will explore many possible options, weigh pros and cons, walk through a ‘what-if’ scenario or two, and then determine next steps based on the decision you ultimately make.
In making decisions to most effectively shape the consumer path to purchase, CPGs today are beginning to embrace Revenue Growth Management, or RGM. As discussed in a previous blog, RGM integrates decision-making around pricing, assortment, and CPG trade promotion spending across all channels at the consumer and enterprise level to drive profitable revenue growth and trade promotion ROI.
Another recent best practice is that of Integrated Business Planning, which is defined as the continuous alignment and synchronization of all functions of a CPG organization. Could RGM be the cross-functional planning process that takes Integrated Business Planning to the next level? We sure think so – here’s why.
Inside-out trade promotions vs. an outside-in approach
Traditional trade promotions management (TPx) has an inside-out view, looking from a single account or a particular channel out to the consumer being targeted. TPx metrics are primarily aggregated market metrics such as revenue, margin and market share. The inside-out view of TPx often leads to a mindset where trade spend is perceived as an entitlement by both the retailer and the CPG customer account team. And TPx can view trade promotions as highly transactional – as an end in itself – which leaves teams too focused on short-term results that may not be the best for the long-term health of the brand or the CPG.
On the other hand, RGM sees trade activities as just one of many levers to pull in shaping consumer path to purchase. RGM takes an outside-in view from the consumer, across all channels, within each market, and for each shopping occasion. RGM expands traditional trade promotion metrics to take into account vital consumer-centric metrics, including share of wallet, share of stomach, share of time, and ROI. All of this amounts to an inherently strategic planning process. In RGM, long-term priorities inform short-term decisions.
With these differences in mind, it’s easy to see how the goals and motivations of RGM are completely different from TPx, shedding light on RGM’s promise as a way to achieve cross-functional alignment.
Re-engineering the process entirely for cross-functional planning
In addition to having an inside-out view of trade promotions, CPG planning processes have historically been top-down. Even as companies gradually migrate away from top-down thinking toward Integrated Business Planning, the inside-out view persists with each function maintaining its own data silos. Therefore, alignment remains an afterthought. Not ideal.
RGM takes that redundant effort, overlapping processes, and inconsistency of real-time data, and replaces them with a holistic enterprise approach that adopts a shared single version of the truth. That sole source of data serves as the solid foundation for enterprise reporting, baselines, lift coefficients, everyday pricing strategies, go-to-market plans, assortment planning, pricing decisions, and yes, trade promotions. When you start with the right insights, with an outside-in approach to consumer perception of value, you’ll be able to make the most informed decisions. The outside-in approach also forces the organization to map the end-to-end process of planning, executing and measuring results, fostering cross-functional collaboration in the process.
Integrated Business Planning for a CPG organization must be precisely that: integrated. From each retailer account manager across all internal planning teams true integration requires cross-functional alignment. This is made possible through the adoption of RGM.
If you’re ready for a deeper dive, our white paper, “Harnessing AI to Change the Game,” goes into more detail about transforming top-down sales and operations planning into something more strategic and integrated. Additionally, Symphony RetailAI is available to walk you through a demo to see how AI technology enables profitable revenue growth management. We’d love to hear from you.