Revenue Growth Management (RGM) is the backbone of any consumer goods company, balancing pricing strategies, promotional budgets, and trade investment. But here’s where it gets controversial: in a highly competitive market, can a company truly grow both its profit margins and market share simultaneously? Or does focusing on one inevitably compromise the other?
At Wise Athena, we’ve had the privilege of interviewing several top RGM experts to get their take on this very dilemma. Their insights, combined with industry data, reveal a striking divide. Some believe that prioritizing market share is a fool’s errand in a world driven by shrinking margins, while others argue that without dominance in market share, profit growth becomes a fleeting goal.
RGM in the Real World: A Conflict of Interests
Vicente García, an RGM veteran who has worked with companies like Dr. Pepper, Kimberly Clark, and Pepsi, encapsulates this conflict perfectly. “Many companies start by focusing on ROI, optimizing promotions, but at some point, they realize that market share is slipping, and they panic. It’s like trying to fill one bucket without noticing that another one is leaking,” García explains.
This insight cuts to the heart of the issue: most companies today are stuck in a tug-of-war between their sales teams, pushing for volume and market share, and their finance departments, demanding profitability. García highlights how this internal conflict leads to inefficiency, with companies often prioritizing promotions that underperform or even lose money in the pursuit of short-term gains.
Profitability or Market Share: What the Data Tells Us
The article “Strategic Pricing: Behind value capture with competitive strength” published in March 2024 by Allan Gamboa, states that the true challenge for many companies isn’t just choosing between profitability or market share, but capturing value effectively to strengthen competitiveness. The balance, according to the article, hinges on a pricing strategy that takes dynamic price elasticity into account, adjusting to changing market conditions.
The Boston Consulting Group (BCG) conducted a study in 2023 that analyzed 100 companies across various sectors to see how they managed the balance between profit and market share. Their findings were revealing: nearly 60% of companies that focused primarily on market share without a clear profitability strategy found themselves in financial trouble within five years. BCG recommends a more nuanced approach, involving dynamic pricing and smart data segmentation to target both market share and profitability.
The Real Takeaway: It’s About Balance
As Vicente García aptly puts it, “RGM is a journey, not a destination.” Companies that succeed in the long run are those that can pivot quickly, adjusting strategies to maintain profitability while capturing value competitively. They don’t fall into the trap of chasing volume at any cost, nor do they focus solely on profit while competitors chip away at their market base.
Reach out to us at info@wiseathena.com and discover how Athena’s AI-powered models can elevate your revenue growth management strategies. Our team of experts is ready to support you, offering tailored solutions that align perfectly with your business goals.
Seize the chance to outpace the competition and unlock your CPG business’s full potential. Let’s start this transformative journey together!
