What challenge(s) do our clients face?
How to build a robust and effective capability to design, set and monitor pricing, commercial policies and trade spend in a way that is aligned to increasingly fluid channels, competition and consumer journeys?
As channels become more fluid and markets more competitive, guaranteeing the correct price positioning and commercial policy is essential in realizing an organization’s commercial and marketing strategies.
It is common in this new reality to find companies facing a negative price spiral, consciously or unconsciously, due to a variety of challenges:
- Setting the right price: Deploying a price-to-consumer strategy based on competitors’ positioning, consumer willingness to pay, real price to consumer and channel knowledge is a challenge both in terms of information, tools and also internal alignment. Protecting margins across channels while remaining competitive requires dynamism and may change from region to region.
- Connecting revenue management to strategy: Designing Commercial and Trade policies which enable the organization’s strategy and goals regarding brand positioning, market share and profitability, within their current context is also difficult. It requires deep knowledge of company product positioning and client base.
- Aligning commercial policy with sales objectives: Protecting the sales goals and avoiding disruptive price conflicts between clients requires a harmony between commercial conditions and sales targets / incentives which is hard to achieve.
- Optimizing trade spend: Allocating trade spend based on customer needs and resource optimization, rather than “gut feeling” truly engages a company in thinking sell through rather than sell to its clients
- Monitoring revenue management processes through a clear governance: Implementing and sticking to a documented governance to limit “out of policy” approvals which disrupt positioning or profitability is easier said than done. A company must evolve its revenue management process structure over years. Biting off more than one can chew is a common mistake and can jeopardize the whole concept of Revenue Management
- Reaching a shared understanding between stakeholders: Considering how Revenue Management policies can be built to meet different (and sometimes conflicting) stakeholder needs and setting expectations on the true potential and limit of Revenue Management as a lever is a challenge in itself.
How do we help?
We can support you in translating the product strategy of your organization to the price-to-consumer; from setting fair margins between channels, through to defining the best implementation strategy.
We support both products and services companies in:
- Price-to-consumer strategy redesign: How to position your products or services from a consumer-centric perspective and to capture opportunities considering your marketing and commercial strategies and the market’s reality;
- Commercial policy redesign: How to structure your organization’s Commercial Policy based on your Go-to-Market strategy, to balance price architecture between channels and regions to ensure that the commercial team is equipped with simple and effective price levers;
- Trade spend optimization: How to define your optimal level of investment and measure return, to provide direction on future trade spend allocations;
- Governance and processes redesign: Design the governance and processes related to Revenue Management to monitor the outcomes of the defined pricing, commercial policy and trade spend strategies, and react to make adjustments;
- Deployment strategy: Evaluate the best implementation strategy, defining how to phase price changes, when to pilot, and how to “sell” the renewed offering, considering the risks, the impacts (in clients and consumers) and the complexities of each change. This may involve us assisting you in executing pilots and waves of implementation.
- Enabling tools: We are not software or research sellers, we understand the company needs, evaluate tools in the market and recommend what we find to be the best investment for the company moment and need.
What are the benefits?
- Re-create revenue management as a strategic enabler: Set product positioning, price-to-consumer and commercial policy as direct activations of Marketing and GTM strategies, ensuring coherence across the organization
- Improve top line results: Drive volume through clear positioning, brand recognition and right price-to-customer for the company portfolio
- Improve bottom line results: Protect margin through effective capture of opportunities along the value chain, and optimized resource allocation in promotions and discounts based on ROI
- Increase monitoring capability: Bring visibility over market prices, competitor behavior, and opportunities along the value chain, defining the best way to capture and analyze information
How does it work?
Revenue Management must start with an understanding from the consumer perspective and market reality. It is then possible to translate this perspective ‘outside-in’ into your objectives along the whole value, defining the price-to-consumer, sell-in prices, trade levers and margins to be targeted in each channel.
Our approach to Revenue Management considers not only our experience from applying our methodology in organizations from different sectors, but also an organization’s team’s knowledge about its market reality. We go beyond data analysis to make sure we understand the company strategies and ability to implement our recommendation, making every project unique. Working side-by-side with teams across the organization, our approach is divided into seven steps:
We can be as hands-on as needed throughout the project – training your sales team, producing negotiation materials, and/or managing the implementation of new systems and tools – to make sure the transition is as smooth as possible.
A home appliance client approached us to help them implement a pre-defined Commercial Policy strategy, by analyzing the transition and speed of implementation. From the initial review of documentation, inputs from internal interviews and visits to the field, it became clear that the designed strategy was overly complex, non-compliant with legislation, and misaligned between Sales and Marketing.
We took a step back and together with the client simplified the solution – making adjustments to consider local tax regulations and to ensure product positioning aligning Marketing and Sales strategies through consumer price and channel price relativity.
Based on the new Commercial Policy, we defined a roll out strategy minimizing possible impacts, and developed tools and procedures for the company to be able to implement without investment in additional systems. For the first two pilots, we monitored the implementation, increasing the speed of the transition where possible based on feedback from the field.
We supported the implementation of the first 2 pilots and sped up the roll out plan based on feedback from the Sales Team, who were seeing the benefits of price consistency, reduced conflicts between clients, better visibility of investment returns and overall higher profitability. The project was rolled out to all channels and regions, and as a result, over the following 2 years the organization increased market share by 15%, and profitability by 30%.
A major producer of metal fittings and sanitary ware approached us to review its commercial policy, which had been in place for many years, and to implement a new Revenue Management area in the company. Despite being the national market leader, the organization had different brand awareness and market share in different categories/regions but served all with a single commercial approach.
Understanding the client’s reality, we saw that the challenge went beyond pricing into product portfolio. Adjusting the scope of the project, we undertook a product portfolio analysis which considered scarcely available information on share, competitors and consumer behavior.
Through workshops with a multifunctional client team we defined a new and clear price strategy to consumer, as well as overlaps and gaps in products which required adjustment to the portfolio in the short term.
We constructed our analysis in multiple regions to ensure it fit different contexts and prepared the internal team to lead the implementation moving forward.
Through the project we built a comprehensive price architecture aligned with the Organization’s Product and GTM strategies, aimed at reducing price conflicts between channels and regions. The adjusted value chain margins recovered the market share that had been lost in recent years, increased net revenue by 15%, and added 2p.p to the bottom line.
An American fast-moving consumer goods company had just recently broken a joint venture with a Brazilian company and was advancing as a standalone operation in the Brazilian market. With a newly designed GTM strategy, the company had the challenge of correctly positioning a new portfolio for its consumers and adjusting the whole value chain according to the new segmentation, including sell in prices and trade allowances that should be executed by a brand new direct sales force.
We assessed the situation of each part of the distribution chain in the commercial policy from an outside-in perspective, and defined the new parameters of the revenue management policy, including; corrections in price positioning, adjustments in regional prices, definition of promotional prices, and corrections between channel margins. To guarantee a smooth transition and adequate oversight in future, we designed and implemented a new governance model and necessary tools.
The new commercial policy provided a profitability gain of 4 p.p. and of 40% in absolute values. These results were even better than the predicted outcomes, allowing a bigger penetration of the portfolio.
OUR INDUSTRY EXPERIENCE
We have worked with several premier FMCG companies as they take on the incredible complexity of defining and implementing Revenue Management strategies. This experience includes projects across Food & Beverages, Personal Care & Homecare, as well as organizations in the Pharmaceuticals, Distribution, Metal Fittings & Sanitary Ware, and Home Appliances.
Working across continents (South America, North America and Europe) our professionals have developed an understanding of the market dynamics, best practices and client/consumer needs across geographies as well as industry segments. This allows us to bring robust and customized solutions to our clients that take into consideration the internal and external context.