Building a robust Revenue Growth Management (RGM) department is essential to success in the CPG industry. RGM teams, especially those supported by artificial intelligence and machine learning technologies and tools, can provide every department in their company—from Sales to Marketing and beyond—with impactful, actionable data.
Trade promotion strategy, for example, is one place where building a stronger RGM team can really help. AI/ML will support deeper dives into understanding and predicting customer buying and consuming occasions. This will save you both time and money on ineffective campaigns.
And saving money is critical for CPGs. According to a Path to Purchase IQ article, over $500 billion is spent worldwide on trade promotional decisions alone. That includes weekly circular features, temporary price reductions, and in-store displays. The article also notes that spending on retailer trade programs can add up to as much as 25% of a CPG company’s revenue and 60% of its marketing budget. That’s too much.
Other tips include embedding KPIs into your commercial routine, being flexible when choosing tools and partners, building a portable solution, and lastly, bringing retailers into the fold.
Path to Purchase IQ additionally suggests having your RGM team focus on the big picture, but still, start small; assign ownership from top corporate talent; and get your data ducks in a row. Other tips include embedding KPIs into your commercial routine, being flexible when choosing tools and partners, building a portable solution, and, lastly, bringing retailers into the fold.
A Wise Athena case study, regarding optimal price increases by SKU for pet food, for example, shows that with traditional methodology—which does not consider the sensitivity of demand per price point—an 8% price increase across an entire portfolio can lead to a 6.8% drop in volume.
With AI/ML, however, which considers demand sensitivity for every single product in the portfolio, you’d be looking at a -1.6% drop in volume, with 7% growth in margin and 4.1% growth in value. An 8% average price increase would also be achieved through increases between 4 and 10% for each individual product.
Knowing how much to raise every single product in order to achieve your overall goals? That’s power
Wise Athena helps CPG companies optimize Pricing & Trade Promotions strategies with A.I., giving clients insight into seasonal trends, fluctuating product demands, and daily changes resulting from market discrepancies. We’ve proven that we can increase sales and margins in less time, and with less effort, with data harmonization capabilities, high definition elasticity, and prediction certainty between 85-95%.