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Revenue Management Golden Rules for Winning Within a Recession

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In such uncertain and dynamic market conditions, organizations with agile structures and capabilities are more able to stay ahead of the game. Revenue management is one of the best tools organizations can use to maximize revenue.

 

Organizations with good revenue management discipline help drive better visibility, control, decision-making and collaboration across the entire cross-functional teams. Those who can respond faster to evolving market conditions have a massive advantage over those who are crawling to make even the simplest commercial decisions. This is where establishing revenue management is a key enabler.

Here are 7 revenue management golden rules that can deliver revenue growth for consumer goods companies:

Revenue Management within a Recession

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. Although it is within a recession, you actively target where those revenue, volume or profit pools of opportunity will be captured.

Rule 2: Shift and manage your risk, and mitigate your exposure

Determine your risk based on the market analysts’ belief that 50% of smaller businesses will not open after the health crisis. This risk will continue with cutbacks in discretionary spend.

 

If you have risk, shift the risk by considering outsourcing your deliveries and accounts. Determine what the cost to serve versus outsourcing to a 3rd party is. 3rd parties may have a higher cost-to-serve, however they do take on the account risk. Shift risk onto them for account collections, this may be a greater “saving” for your organization.

Rule 3: Follow your consumers

Define the changes in distribution footprints and spending habits of consumers. Determine the most relevant channels to your consumers in the future.

“Seventy-five percent of consumers have tried a new shopping behavior, and most intend to continue it beyond the crisis.”

-McKinsey & Company

Map packs (new or existing) with key consumption occasions, missions, and price points to build your pack price architecture and differentiation. Plan how to become relevant in distribution channels where you do not currently compete within, but your consumers have moved into. 

Rule 4: Complete full end to end value assessment across the full portfolio

Understand where the profit opportunities are within the portfolio. Then effectively scenario 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 pound/gallon, and this should grow ahead of the category

Determine the optimal pricing by evaluating what a price per oz 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 if required.

 

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: Re-write 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 – Analyze how you compare now and how this will change in the future. Recognize whether your opportunity lies in baseline sales or winning in promotional volume.
  • Effectively scenario plan and externalize your promotional program – Link revenue objectives into your joint business plan or flight path that will help manage your customer base and defend your position with retailer asks.
  • Continually optimize this promotional program and respond quickly to changing market conditions.

The insights and data from this article are explored in greater detail in the white paper “How Revenue Management Can Deliver Growth for Consumer Goods Manufacturers Within a Recession”.

Working with Exceedra and ensuring ongoing investment optimization through a Trade Promotion Management tool is a critical enabler, linking the revenue management strategy and tactics we have been talking about to a purpose-fit tool to monitor, optimize, plan, and execute.

You can keep up to date with what Exceedra & AFS Technologies are working on by following us on LinkedIn.

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