Revenue Management (RGM) is the application of disciplined analytics that predict consumer behavior at the micro market levels and optimize product availability and price to maximize revenue growth. The practice of Revenue Growth Management has been used for decades in the hotel and airline industry and has historically utilized statistical models and price elasticities based on supply and demand to maximize revenues. It also supports consumer analysis and fare structures based on the concept that not all consumers are created equal.
Consumer behavior and the retail landscape is rapidly changing and is driving unprecedented pressures and opportunities for retailers and manufacturers. In these dynamic times mastering pricing, planning and execution is critical, and it starts with a plan built around strategic priorities.
The RGM planning diligence and profit focus has transformed episodic, once a year planning, into an ongoing and dynamic planning practice deeply rooted in advanced analytics.
RGM governs at the center of the organization, working closely with functions such as brand management, finance sales & operations to develop and implement strategies. The ultimate goal is transforming the siloed functions into an ongoing streamlined effort of balance & positively affecting efficiency across the Enterprise.
RGM Teams Drive a Holistic Enterprise Approach
Proper allocation, planning, and monitoring of trade spend is critical. CPG companies spend between 11% and 27+% of revenues on Trade Promotions, which is the second largest expense on the P&L.
RGM Teams Help to Shift the Focus & Drive Efficiency:
- Achieving more efficient volume through trade
- Reducing administrative burden and maximizing cross-functional work & insights
- Providing account teams with capabilities & practices to sell smarter
KPI’s to Measure Promotion Success:
State of the Industry survey respondents noted the most common KPI’s to measure promotion success are: ROI- incremental profit, incremental volume, incremental revenue, incremental gross dollar sales, and dollar profit per incremental case.
With the criticality of trade effectiveness, one can understand why more companies are investing in Revenue Management Organizations.
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