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The Power of Revenue Growth Management for CPGs

Whether it’s increased price sensitivity or changing attitudes towards brand loyalty, the cost-of-living crisis has brought about a number of consumer trends. To make matters more complicated, many of these consumer trends are changing rapidly. Indeed, thanks to the evolving economic situation, consumer behaviour this month will not be the same next month.

During this period of uncertainty, many revenue and growth managers are keen to monitor consumer trends more closely. After all, this can assist with more informed decision-making – helping CPGs tailor their products and deliver effective marketing. Monitoring consumer trends is also especially important during the current cost-of-living crisis, as it can help CPGs implement the right pricing strategy.

 

Price, price, price

 

If CPGs want to stay competitive during the cost-of-living crisis, they need to implement the right pricing strategy. However, understanding what the right pricing strategy can be difficult, primarily because, now more than ever, there are a lot of unknowns at play. If a cost price increase is passed on to the consumer, CPGs don’t always know how it will affect revenue. Similarly, CPGs don’t always know when a price change will cannibalise sales of competing items, if a new promotion is likely to drive a movement of demand, or what dynamic pricing technique will be most effective at any given time.

But even though it’s hard, implementing the right pricing strategy is crucial. Price and value are the main reasons that consumers change their purchasing behaviour, and even small pricing changes can have big ramifications.

For example, a small price increase can cause consumers to perceive a product as less affordable, causing them to seek alternatives or abandon the product altogether. Similarly, if a CPG’s base price increase is passed on to the consumer – and the cost of your product does not align with its perceived value – consumers will notice, change their purchasing behaviour, or even switch brands.

It's also worth remembering that consumers who are loyal to a particular CPG might be more sensitive to price changes than others. A price increase could erode their feelings of loyalty and drive them to explore other options. What’s more, poorly managed price increases can bring about disproportionate changes in demand and can negatively affect the CPG-retailer relationship too.

 

How can CPGs face the current uncertainty?

 

When it comes to economic uncertainty, knowledge is power. In the current climate, there is simply no substitute for accurate forecasts and models.

Traditionally, forecasting has been an art and a science – requiring experience, intuition, and debate among teams. When a consensus is reached, the next step would be looking at historical data – ironing out supply chain challenges and seasonality to create a base position.

Here, you might take into account some category and brand-level assumptions, promotional de-escalation, and perhaps some NPD optimism too. The result is often a spreadsheet full of filters and macros. Ultimately, you hope this spreadsheet will tell you what you want to know – that your price changes will land well.

This approach can work. That said, there is a quicker and more accurate way, based on science.

dunnhumby’s revenue growth tool, available for CPGs based in the UK, Revenue Growth Planner, lets UK Brands predict a year’s worth of sales based on the pricing and promotion scenarios of their choice, experiment with modifications virtually before they go live, and spot consumer trends before they happen. Offering unparalleled visibility, the Planner is a sophisticated tool, developed from 15 years of expertise, which can revolutionise how your business plans price changes. Removing human error and bias to create scenarios fed from billions of transactions, the Planner provides the most accurate, SKU-level demand forecasting.

With accurate forecasts and models, CPGs can not only refine their pricing strategies, but also identify new revenue streams, manage inventory more effectively, optimise their demand planning, and streamline their supply chain – all things that can save CPGs time and money.

While there will always be an art to planning and delivering cost changes, dunnhumby can partner with you to deliver the science. If you're a CPG Brand based in the UK and want to find out more Get in touch

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