Rising inflation rates and tighter household budgets are forcing consumers to be more mindful of their spending decisions. In fact, 43% of U.S. consumers cited inflation’s impact on everyday expenses and saving as their top financial concern for 2023, and 71% of households are looking for sales and coupons to combat rising grocery store prices. With such extreme price sensitivity dominating the market, companies are increasingly turning to Revenue Growth Management (RGM) to realize growth today and into the future. But, how do you know where your organization stands when it comes to your RGM capabilities, and how can you ensure you’re realizing true value? This is where Clarkston’s RGM Maturity Model can help.
The Challenge with RGM
Some organizations believe RGM is mostly about pricing or trade spend management. In reality, RGM is much more holistic than that. Comprehensive RGM includes a number of revenue and profitability levers. For organizations to truly execute RGM, efforts must be coordinated and applied across a range of cross-functional areas of the business, including revenue, price pack architecture, promotions, expenses, marketing spend, and assortment.
Since RGM is cross-functional by nature, its challenges also span across business functions. As such, RGM can’t just be seen as a tool or a single technology. Instead, RGM is about the processes and behaviors that take place across several key levers and enablers: people and organizations, processes, tools, data, and metrics. For companies looking to improve or transform their RGM processes, it’s important to assess their current RGM capabilities. In order to help our clients assess where they are in their RGM journey, Clarkston has developed an RGM Maturity Model.
RGM Maturity Model
Below, we outline the four core levels of our RGM Maturity Model, providing insight into where your organization’s current RGM capabilities fall and the benefits that each level can bring to your organization.
Foundational: Pre-Trade Performance Management
- Annual performance management
- Decentralized systems
- Inconsistent pricing
- Inefficient spending
- Infrequent analytics
- Sales Team focused on order management
Developing: Trade Promotion Management
- TPM system in place
- Limited data integration
- Customer segmentation
- Some analytics available
- Analysis done in silos
- Developing Price Pack Architecture
Managing: Advanced Trade Promotion Management
- Robust use of TPM
- Strategic approach to customer and product segmentation
- Analytics tools available
- Cost-To-Serve Model used to assess customer profitability
- Customer and competitor analysis
- Elasticity and marketing mix drive price pack architecture and marketing strategy
Optimizing: Analytical Revenue Growth Management
- Centralized management of revenue growth across brands, customers, and consumers
- Integration of channel and consumer insights
- Analytics woven into customer planning process
- Predictive analytics with dedicated data scientists
- Performance management process to assess performance against plan
- Compensation and incentives tied to profitability strategies
- Sales functions as partner/advisor with key customers
Realizing the Full Benefits of RGM
RGM is a journey, not a destination. In order to realize the full benefits of RGM, it’s critical to involve key functions across your organization and to ensure the correct alignment of people, processes, and technology. RGM can help you focus on measuring what matters, developing consistent processes and analytics, promoting a culture of knowledge and sharing, and focusing your team on analytics rather than compiling data.
Need strategic guidance in the RGM space? Our experts can help.
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