The Finance Playbook: 10 Rules for Revenue Management Success

RGM (Revenue Growth Management) was a “new-ish” concept when I was getting my first job in Finance. Fast forward today, it is a cornerstone of business strategy especially within CPG sector. Many Finance people end-up leading or being part of RGM teams. For obvious reasons: analytical skills, attention to detail, often tech-savvy.

In “finance shoes”, it is easy to perceive RGM as a sophisticated number crunching exercise where you evaluate pricing and promotions trying to maximize returns. You then “deploy” it to your marketing and sales peers. Command and Control system. As much as it is reassuring, it is unlikely to yield great results in practice. I had a pleasure of learning from many talented sales, finance, and marketing people that successful RGM is MUCH MORE than this.

Successful RGM need to combine strategic foresight, tactical agility and good process with the right incentives built in. So, this is my version of Golden Rules of RGM management with a few traps that Finance folks can fall into from time to time. Some of it is very CPG industry specific but I find majority of rules can be easily re-applied in other industries Tech included.

Strategic rules

1.?????? Consumer-centricity as a Guiding Principle.

I know I am stating the obvious, at the end it is a Business 101. But way too many times commercial strategies lose sight of this.

Finance can fall easily into this trap if not careful. An easy example: setting pricing strategy based on “cost-plus” logic. This method starts with the cost of production, adds on a margin for both the manufacturer and the reseller, and arrives at the consumer price. ?I hope there is someone to stop you there. Protecting profitability is important, but not at the expense of understanding and leveraging consumer value perception.

Following a consumer-centric approach means adopting value-based pricing. Here you need to consider competitive landscape, in-store reality and working backwards to the cost base you need to achieve. Is this more work? – Of course! Will you have more chances of success – Absolutely!

For finance professionals dipping their toes into RGM understanding the nuances of the category and its consumers should be a top priority. You will not succeed without it, full stop.

2.?????? Championing category growth.

?A useful lesson came early in my career during a business review. A Key Account Manager boasted about achieving 8% growth on his business, only to encounter a lot of questions when the category's overall performance was revealed to be down by 2%.

Not all growth is created equal, share gains without category expansion is not a sustainable recipe for growth especially in categories that you can grow.

And don’t forget about your external partners! Category-driven growth is also paying road for success with them. At the end, if they cannot grow with you, they will try to grow with your competition!

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3.?????? Choosing your external approach carefully!

?Do you want to win BIG with one partner or consistently grow your brand across the whole trade? The decision-making process surrounding this choice should ultimately be guided by your company's goals and values. But both approaches inevitably will have their consequences.

?Placing your bets on couple of external partners to go for a BIG WIN here and now is easy to understand. At the end, it is more certain. But success might turn out to be a relatively short-term one, that can backfire in the future.

Broad-based growth on the other hand can be HARD. You cannot place all your bets on the winning horse, instead you have to support everyone including clear underdogs. While this can be challenging short-term, it presents long-term opportunities for organic growth and diversification, ultimately strengthening your company's position in the market. Principled decision-making will also help build your company reputation in the eyes of consumers and industry peers. and what you want to be known for.? It is crucial to remember, people talk and move around. Today’s underdog might as well be a future winner!

4.?????? Taking time with big shifts

It is easy to approach RGM as very tactical exercise where you play on the fringes of your strategy making little changes to promotions and execution mechanics that do not fundamentally make a big difference. At the same time there will always be some “sacred cows” in your plan that are too painful to touch.

A good commercial strategy should be “strategic” as the name suggests which means having foresight for the next 2-3 years out. By adopting a longer timeframe, you grant yourself the freedom to address some big unresolved commercial challenges that will not do with a “quick fix”. “Rome wasn't built in a day”, and neither should your strategy be hastily constructed.

Having long-term planning for commercial execution also allows you to 1) split the transition into several stages (“smooth-out” execution), 2) leverage future innovation, 3) integrate choices into a bigger portfolio picture. ?All these elements are helping you to improve your chances of success vs, making short-term tactical moves. ?Taking time with Big Shift is certain to pay out.

Tactical rules

A good commercial Strategy is your 5/10. But you do need to have a good degree of tactical agility in business. It is an “AND” rather than an “OR”.

5.?????? Never miss a window for pricing opportunity.

?Whether you are pricing for innovation, adjusting due to cost inflation, or responding to a competitor's pricing strategy, it’s critical to be proactive about pricing. Pricing in isolation is challenging; aligning your moves with category-wide changes often yields better results.

But here is no one size fits all. It is about finding the right balance bearing in mind consumer value equation. For example, as a general rule you will consistently ?price for innovation. Failing to do this sets a bad precedent. However there might be some cases where you might consider different, more creative approaches. These cases might include sustainability improvements (considered as a “given”/”expected” by consumer and the industry) or situations when you need a serious correction in perceived consumer value.

Resistance to pricing is common and as a finance person you will be on the receiving side of “doom & gloom” forecasts. Nobody likes to take pricing. But assuming sufficient evidence and the need is there, my advice is to stick to the principles but be prepared to maneuver. ?

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6.?????? Leverage Big Moments.

?Big trade events throughout the year, like Black Friday or holiday sales, tend to be a double-edged sword in finance books. They are usually very dilutive on the bottom-line but drive massive volumes. My old-time boss used to say we fund them “to keep the factories running”. But opting out isn’t really an option—if you don’t participate, you’re out of the game. ?

?Reducing your reliance on volume-driving events takes time and deliberate strategy. In the meantime, the focus should be on leveraging them effectively. Aim to maximize the return on your investment by drawing in new trialists during these events, essentially getting "more bang for your buck."

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7.?????? Strive for a Win-Win in Pricing and Margins

Ever scratched your head wondering why your premium product isn’t performing as expected and missing support from retailers? ?Well, chances are the trade margin on your premium products might be legging behind the rest of your product portfolio. In other words, what’s ?profitable to grow for you, is not what’s profitable to grow for the retailer or reseller you are working with. Your incentives are misaligned. Why does this happen? Several reasons: 1) compromise during product launch leaving unsustainable unit economics, 2) consumer price erosion, 3) focus on volume with trade margin incentives on the base business.

But whatever the reasons are, avoiding mistakes is easier than fixing them. So starting with a structural design, where your internal incentives and rewards are aligned with the external ones, will give you a good starting point. It’s also crucial to monitor evolution of trade margin and pricing ladder over time allowing you to adjust your plans to stay aligned with your strategic goals.

Live or Die by execution

8.?????? Organize for success.

?When it comes to structuring your Revenue Growth Management (RGM) efforts, you're essentially looking at three paths: centralized, decentralized (integrated across the organization), or a hybrid approach. Centralised function is the easiest to execute but in my opinion the one that is the most likely to fail. The reason is simple, nobody likes to be told what to do. To succeed you need to “put the driver in the driving seat”. Key Account Managers (KAMs) need to understand and see the impact of their strategies and choices on pricing and investments firsthand. They should feel equipped and motivated by well-designed systems, capabilities, and incentives that enable them to make informed decisions that ultimately benefit the business and drive balanced growth. As a bonus, you can keep the capability team central.

9.???? Evolve with technology.

I can still recall days when RGM was mostly a manual task, with Excel being our best friend for crunching numbers and providing conclusions. Fast forward to now, technology has changed the playing field. With the right access to data, technology can offer a plethora of insights at a much quicker pace. So, do not start with technology, start with data. If you don’t have the data of sufficient granularity, depth and breadth to meet your business needs, the technology is not going to magically create it. ?

But assuming you have access to a well-organized structured and sufficient data pool, the next real challenge is to find the right technical solution. It needs to be user-friendly, designed by, and tailored to the needs of those who will use it the most. Are you creating RGM tool for Finance? For Leadership team? Or for KAMs? Set you priorities and construct your project team accordingly. Too many times I have seen Finance team being in charge of designing solutions for KAMs. It just doesn’t work.

The last word of advice is with whatever tools you design integrate them into the platforms KAMs already use. This way you will not need? to encourage their adoption; you will practically ensure it. This seamless integration means there’s one less hurdle for your team to jump over, making these insights “hard to ignore”.

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10.? Putting right incentives in place.

It works in any business – you get what you measure. ?If KAMs are evaluated solely on revenue growth, that's where their focus will lie, regardless of the profitability of that growth. By adjusting metrics to give equal weight to both revenue and profit, you naturally steer the team towards engaging with RGM strategies not because they have to follow the rules but because they need it to WIN. You could have the most sophisticated strategy and the most advanced capabilities, but without the right incentives in place, it's like pouring resources down the drain.

There is a lot to consider when setting-up RGM for your business: well though-through strategy is equally important to being tactically agile and organizing for success and with the right incentives. There are many dots to connect across the business. And that’s where Finance can lead the charge and really shine!