While no one can argue with the basic premise of category management - simply to put the shopper at the heart of strategic thinking - the movement still floundered. This was primarily due to the way consultants sold and ran it. Suppliers assigned teams that were locked away in insights departments, and when they tried to influence sales implementation months later the accounts teams found it totally abstract and failed to land the wonderful growth plan with customers.
Revenue growth management (RGM) is a focus for suppliers these days and it can learn from the pitfalls in cat man. I spoke alongside specialists in the subject at the leading RGM software group Exceedra’s RGM conference last month, and as a commercial expert I did feel slightly out of place. The audience were all major names in fmcg but it was largely the senior functional or finance experts that were present. Meanwhile, once again, the customer implementation presents a major barrier to realising the benefits.
A whole host of suppliers will tell you RGM has been the biggest contributor to their bottom line over the past five years, while others have no clue what ‘revenue management’ even is. Put simply, it is a consolidated look at all live data with a strong financial lens to drive business into more profitable directions.
While the potential is there to drive the relationship with key customers by showing them how to engineer profit wins, I don’t see many suppliers leveraging that. So now it’s just a way to ensure suppliers are pushing the lines on which they make the most money and sure, there’s nothing wrong with that. However, at times RGM can focus too much on reducing promotional incentives and pushing lines that are less attractive to shoppers. If it’s not shopper-driven it’s at odds with the retailer effort. RGM can be uncomfortable viewing for sales teams when it highlights past acquiescing to customer pressure explaining less margin on the bigger sellers.
It is essential to push through the pain of implementing the right systems. The live multifaceted data stream then ensures conclusions are applicable, unlike that out-of-date cat man work. But while this points to an ongoing ‘way of working’, RGM still feels like a project to me. Once again this is due to the siloed resource expertise and lack of translating strategy into the everyday operations. Getting this right will ultimately require aligned KPIs too, as sales need more profit accountability.
Salespeople are now required to be finance and shopper-savvy. They need support systems and also to be persuasive negotiators as, to step-change the customer relationship, they need to show the current way doesn’t work, as well as show a better way.
I’m predicting a resurgence in category management as shopper thinking gives you alignment through the supply chain, but this time with the overlay of rigorous revenue growth management principles.
David Sables is CEO of Sentinel Management Consultants
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