As the CPG industry confronts its post-COVID “new normal,” there is a clear imperative for stronger coordination between marketing and revenue management functions to drive consumption growth.
This focus is necessary because volumes for CPGs will remain under pressure in the near term. In part as a response to significant price increases over the last two years, unit sales declined across the board in 2023. Per-capita volumes of at-home staples are now below 2019 levels, according to NielsenIQ.
Recent increases in promotional activity have not translated to higher unit sales. Furthermore, retailers are becoming more focused on improving or expanding their own private brand offerings to attract shoppers. A recent survey by the Private Label Manufacturers Association, for example, found that 67% of Gen Z shoppers are “extremely / very aware” of store brands.
An integrated approach to revenue management actions
To counter these trends and drive unit sales, CPG companies must ground their revenue management actions in marketing-led consumer and shopper insights. CPG companies and their retail partners tend to play the Uniform Game, which means the interlinkage between marketing and revenue management should already be natural. Within the Strategic Pricing Hexagon, the Uniform Game sits at the intersection of cost and customer value. Marketing has the primary responsibility for understanding what motivates consumers and how they derive value, including insights into the key moments when products are consumed or into the attributes or claims that consumers value the most.
The greater collaboration between marketing and revenue management can take several forms. First, they should align distribution and mix priorities with the preferences of their target shoppers. They should also design promotions surgically, so that the offer mechanism clearly links to the consumption occasion, such as multi-buy offers for group settings or sharing occasions. Finally, they should seek out opportunistic secondary placements and displays in occasion-adjacent aisles or sections of the store. This includes chips with beer and soda, as a simple example.
Retailers are clearly seeking these sorts of insights to inform their own strategies. We have observed that the most effective retail promotions are those that derive from the consumer perspective. CPGs that can proactively bring consumer insights into discussions with their retail partners are likely to drive stronger cooperation and win-win outcomes
An integrated approach to processes
CPG companies should also look beyond the tactical coordination for promotions and incorporate a revenue management perspective into key marketing processes. The annual planning process can leverage revenue management insights – for example, on price gaps and promotional ROIs – to inform assortment and merchandising tactics and messaging. The innovation process should consider taking consumer willingness-to-pay into account, along with size and price point growth tiers for the category. The strategic brand planning process should have clear visibility into long-term pricing targets as an input into the broader evolution of the brand strategy.
In an increasingly competitive landscape, CPGs with siloed marketing and revenue management teams will fall behind. To win with consumers and drive stable volume growth, these functions must work together to ensure that their brands’ messaging, value proposition, and presence at shelf are consistent and compelling.
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