RGM 101

RGM can seem to be a complex and difficult concept to gain confidence with.  Here are the key principles to get you going:

Revenue Growth Management (RGM) is the practice of using data and information to identify ways of driving new growth into your business.  The areas of focus are Pricing, Promotions, Pack Sizes and customer management. Specifically note that RGM should be based on data and facts.  Most CPG firms are already driven by assumption and opinion, RGM should not add to that.

Pricing and Promotions

There are two key types of pricing in the mix, Every Day and Promotion.  Setting the Every Day price correctly will impact the base demand for your product.    Promotion prices are typically discounted either by a price decrease or a value bundle (2for the price of 1).

If you understand the price elasticity's of your products and you can see what will happen when you change a price to:

   1) Own Product

   2) Other Products in your Portfolio

   3) Competitor Products

    4) The Category

Then you will be able to set prices at the point that achieves your business goal in the most efficient way.

Pack Sizing

is another method of essentially changing the price of a product, however another key attribute needs to be taken into account:

The wealth context of your shopper.  If you move the pack size up and subsequently your unit price increases to a point above the ability to pay (even though the offer per gram is better), then you will lose some demand.  If you have the ability to model a price change in a specific market condition that takes the wealth context of the shopper into account, you can avoid these errors and make the right decisions.