Golden revenue management rules for winning within a recession
In uncertain market conditions, organizations with agile capabilities have a massive advantage over those who make decisions slowly. Revenue management provides the visibility and control that enables cross-functional teams to act decisively.
Here are seven revenue management golden rules that can deliver revenue growth for consumer goods companies:
Rule 1: Evaluate and protect your market position
It is important to assess what changes you are experiencing within your markets, channels and categories. In addition, consider how your distribution footprint needs to change to accommodate the market shifts of tomorrow.
The next key step would be to define the role and the positioning of your brands versus the competitive sets and the category average. You have the option of an offensive or defensive competitive strategy.
Your goal in a defensive competitive strategy would be to hold your share by following the category pricing index increases or decreases.
An offensive competitive strategy is to actively target revenue, volume and profit pools from your competitive set to win a greater share. This is about winning disproportionately more, actively targeting where revenue, volume or profit pools of opportunity will be captured.
Rule 2: Shift and manage your risk and mitigate your exposure
To address risk, you must first determine what it is. For instance, let’s assume that 50% of smaller businesses may not open after the health crisis. This risk will likely continue with cutbacks in discretionary spend.
To potentially shift your risks, you could consider outsourcing your deliveries and accounts. Although third parties may have higher cost-to-service, they typically take on the account and collection risks, which in turn could potentially result in greater “savings” for your organization.
Rule 3: Follow your consumers
Define the changes in distribution footprints and consumer spending habits. Determine the most relevant channels to your consumers in the future. Map packs with key consumption occasions, missions and price points to build your pack price architecture and differentiation. Plan how you’ll become relevant in distribution channels where your consumers have moved to, but you do not currently compete.
Rule 4: Complete full end-to-end value assessment across the full portfolio
Understand where the profit opportunities are within the portfolio. Then plan how you can either fix these through profit improvement programs or exit these parts of the business. This assessment should be completed on total business level, and then on a category, brand and even SKU item level.
Rule 5: Every brand needs a clear strategy on price per weight/volume, and this should grow ahead of the category
Determine the optimal pricing by evaluating what a price per weight/volume increase plan would look like for your brands.
Maximize and grow profit pools within the category. Consider relaunching into higher price tiers, introducing additional benefits to charge more or premium innovation.
Rule 6: Protect the profitable portfolio and capture the full value of your brands
There are different revenue management strategies you can implement. You may need to revisit pricing and promotion and reset price perception within the category. You can also consider changing packs to hold onto your value positioning.
Another strategy is to develop direct-to-consumer models which would give you greater control over your brand, reputation, marketing and sales tactics.
Rule 7: Rewrite the promotional program, plan, execute, evaluate and ongoing optimization
Determine the revenue and pricing objectives across the portfolio during the recession. Identify the roles of your brands, packs and distribution channels. Which packs are you going to accelerate or reduce investment? If you are realizing price, which levers from the promotional program will you pull?
Determine the cost to compete or promotional intensity within the category. Compare now and how this will change in the future. Recognize whether your opportunity lies in baseline sales or winning in promotional volume.
Plan and externalize your promotional program. Link revenue objectives to your joint business plan to help manage your customer base and defend your position with retailers.
Continually optimize this promotional program and respond quickly to changing market conditions.