Revenue Growth Management in the New E-Commerce-led Phygital World
3AI October 24, 2021
Author: Imran Saeed, Vice President and Global Head CPG, Course5 Intelligence (LinkedIn – linkedin.com/in/imran-saeed-608a3b1)
‘Phygital’ is a portmanteau of ‘physical’ and ‘digital’ and symbolizes the seamless relationship between the two channels. It takes the best elements from both and merges them to create an entirely new customer retail experience. Though this does bring in a significant customer-first aspect, it also brings a fair amount of challenges within the Consumer Products and Goods (CPG) organization, especially around areas like Supply Chain and Revenue & Margins.
Revenue Growth Management (RGM) has always been important to CPG organizations given their focus on setting up a win-win paradigm for Manufacturers (Revenue and Margin), Retailers (Value) and the Consumer (Benefit). Now, it is becoming critical – A MUST – as a Capability that needs a full set-up because of the highly dynamic marketplace and consumer behavior. Consumers are constantly evaluating new brands and experimenting with new forms of purchase channels as they fulfill their needs—not just in terms of product benefit but also overall convenience. Recent studies show that “getting a great deal” is still a high priority for consumers, hence the organization needs to provide the best price along with value offering that is tailored to consumer needs in a world that is ‘Online + Physical’. If this was not enough to add to the complexity, there is an ongoing increase in costs from the procurement side, from raw materials to transportation, that’s adding pressure on the CPG organization.
The ability to unlock and solve the three-party equation—Meeting Consumer Preferences (Ease & Benefit, plus Price), Providing Value to Retailers, and Maintaining Margin and Growing Top Line for Shareholders—requires a dedicated set-up, a function with access to data , technology and AI-led decision toolkits to continuously provide recommendations and alternate solutions, refine value capture approaches, and drive more transparent value collaboration with retailers, which is otherwise difficult.
It has been proven that a technology-led capability set-up for Revenue Growth Management can yield approximately 3% to 5% gross profit along with creating value for Customers and Consumers, hence answering the above equation. Yet, organizations are slow in onboarding and driving a dedicated technology set-up for RGM.
An Action Plan for Technology-led RGM
Given the dynamic CPG environment in every aspect, a technology-led setup for RGM requires a relatively new approach. It needs to be –
- More agile, with the ability to learn on an ongoing basis, re-evaluate strategies, and redeploy
- Technology-led, with integrated LEGO approach
- Decision-focused, not-data focused
- Recommendation & forward planning-based, not reporting-oriented with just historical performance
- Capable of exploring new external data sources, not just historically defined data sources
- Outside-in, not Inside-out
- Always-on, with ongoing learning, rather than a one-time Check Box approach
- Standardized for scalability, removing silo approaches
- In sync with stakeholders (seat on the table with them), not a CoE-based approach
- Drive a Consumer View and Shopper Alignment with respect to Phygital, and not just online or digital channels
The above Action Plan needs to be implemented in tandem with 3 main areas, keeping in mind the phygital world of consumers:
- Assortment
- Pricing
- Trade Spends
2021 is an important year for RGM as CPG brands plan for 2022 amid uncertainty on how phygital will pan out. While the above action plan takes time and a strong partner ecosystem to help develop and scale up, the current environment presents the opportunity to step up. However, the window to become agile and responsive continues to narrow and any delay brings additional risks for manufacturers.
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About Course5 Intelligence
Course5 Intelligence drives digital transformation for businesses through analytics, insights, and artificial intelligence. The company helps organizations make the most effective strategic and tactical decisions related to their customers, markets, and competition at the rapid pace that the digital business world demands. Course5 Intelligence creates value for businesses through 360-degree data convergence and actionable insight.
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