Revenue Growth Management for Sustainable Success

Revenue Growth Management for Sustainable Success

In recent years, many consumer companies have posted robust price-driven sales growth but often at the expense of volume. As inflation begins to moderate, these businesses will likely need a more holistic approach to balance both price and volume for sustainable growth.

Economic shifts brought on by the COVID-19 pandemic and a period of elevated inflation changed the way consumer-packaged-goods (CPG) companies generated sales growth. Before 2020, both pricing and volume contributed to net-sales expansion, with price playing a slightly larger role. However, extended inflation made price the dominant factor, and volume either flattened or declined across most consumer goods categories.

Now that inflation in several regions appears to be returning to more typical levels, relying on price increases alone is less certain. Retailers have begun to run more promotions in an effort to protect volume, yet many consumers continue to trade down, switching from name brands to private-label alternatives. This evolving environment requires a more sophisticated plan to maintain and grow sales without sacrificing market share.

A comprehensive revenue growth management (RGM) approach can help. While RGM includes four main levers – pricing, promotions, assortment, and trade investment – companies frequently focused too heavily on raising headline prices during the inflationary surge. Now, leveraging the full set of levers with greater nuance is crucial.

This article first examines how price elasticity shifted in recent years, then presents five recommendations for business leaders seeking a balanced approach:

1. Adopting realistic, long-term growth aspirations;
2. Deeply understanding the latest consumer behaviors;
3. Identifying which RGM levers to apply;
4. Strengthening retailer partnerships;
5. Enhancing technology and analytics capabilities.

Taken together, these steps can help consumer companies adapt to an evolving landscape – and position themselves for durable success in a new pricing reality. 
How pricing elasticity changed in inflationary conditions

Prior to 2020, publicly traded CPG companies typically generated mid-single-digit net-sales growth, with pricing contributing slightly more than volume. Growth dipped sharply in 2020 amid global shutdowns, then soared the following year, supported by both price and volume gains of about 3% apiece. In 2022, steep inflation drove prices up over 10% while volume sank. Net sales remained high, but nearly all of that expansion came from higher prices.

In 2023, inflation cooled somewhat, so net-sales growth dipped again – yet volume still did not recover. Initial data from 2024 suggests subdued price growth and continued volume pressure. Investors and analysts, wary of volume deterioration, are now watching for more balanced strategies that rely on pricing yet also protect or grow volume. 
Revenue growth management

Investors remain cautious about whether CPG companies can achieve attractive growth rates without overemphasizing price. As commodity costs stabilize, retailers and other stakeholders increasingly question price hikes. Given this environment, robust RGM techniques that go beyond simple list-price adjustments are becoming indispensable.

Businesses can improve their odds by activating all RGM levers to refine pricing, shift their portfolio toward higher-margin offerings, and potentially reclaim volume. Below are five steps companies can take to reset their RGM approach and better cope with current market shifts.
Set the goals across multiple time horizons

Central banks worldwide are signaling a potential “soft landing,” indicating that inflation may revert closer to pre-2020 levels within a couple of years. Projections from leading institutions point toward annual inflation possibly hovering around 2–3 percent during 2025–26.

While no forecast is guaranteed, these projections provide a reference for CPG companies’ net-price and volume planning. If inflation settles near 2%, businesses might target a price-mix realization of approximately 2%, along with volume growth of 1–2%, depending on category dynamics. Top-performing companies with strong RGM capabilities will look to outpace these baselines.

Companies can set incremental net-sales targets by leveraging clear competitive advantages, such as brand equity that reduces price sensitivity, a distribution network that prioritizes high-growth channels, or strong positions in market subsegments with higher growth rates. Additional initiatives – like launching innovative products, expanding shelf presence, or ramping up marketing – can help exceed the baseline.

Even amid somewhat reassuring macroeconomic signals, companies must stay alert to evolving consumer sentiment and changes in household spending. While inflation has cooled from earlier peaks, the cost of essentials remains significantly higher than it was before the pandemic. In many regions, consumer disposable incomes have not risen in tandem.

For revenue growth management, granular insights matter. 

Some consumers might swap a preferred grocery product for a private-label version at one retailer, while others continue buying their favorite brand but in bulk at warehouse clubs to secure a better unit price. People often choose to save in certain categories while spending more in others. A precise, data-driven grasp of these habits can help a company tailor its pricing, promotions, and assortment decisions.

Use every RGM lever and know when to pull it

Most companies articulate growth targets, but fewer map a clear course of action. RGM, used correctly, offers a range of tactics that can improve net-price realization in ways that may limit negative volume impact. Different RGM levers carry different levels of visibility to the customer: 

• Manufacturer’s suggested retail price (MSRP): direct price hikes are highly noticeable to consumers.
• Pack sizes: adjusting package weight or volume can influence perceived value or direct price comparisons.
• Promotions: reducing promotional spend or reevaluating low-return deals can raise net prices with less consumer resistance, though it still requires careful analysis.
• Product mix: emphasizing higher-margin premium items can lift net price and profit – often with less noticeable changes to shoppers.
• Channel mix: steering consumers toward more profitable distribution channels can capture higher net returns.
• Trade terms: optimizing trade spend or renegotiating allowances can drive net-price gains behind the scenes, with minimal disruption to end-consumer prices.

Each tactic resonates differently based on category and brand strength. For instance, a 10% list-price increase will likely have a bigger, more immediate effect on consumers than optimizing promotional depth or channel mix in ways that subtly shift net prices.

 Strengthen tech capabilities for data-driven decisions

Managing so many variables, especially at the SKU level, where each product may have a distinct demand curve, competitor set, and promotional elasticity, demands advanced analytics, often powered by artificial intelligence (AI). However, many consumer-goods players struggle to implement these technologies effectively.

Consider a real scenario: A company that optimize its MSRPs using shopper analytics to predict volume changes, after implementing the adjustments, the company discovered actual consumer behavior diverged significantly from model expectations, undercutting its approach. 

It then refined its data and modeling in two ways:

1. Detailed switching analysis: instead of viewing a price increase as only affecting one SKU, the company recognized some fraction of losses on that SKU simply transferred to other items in its own portfolio—so from a portfolio perspective, the “true” net volume loss was smaller.
2. AI-based optimization: by introducing advanced, AI-driven simulation tools, the company could explore thousands of potential price configurations in seconds—factoring in constraints like maintaining share or maximizing profit.

Additionally, robust analytics help detect how short-term promotions might alter long-term household penetration. With loyalty and transaction data, machine learning can isolate behaviors like trial from new consumers vs. repeat purchases by loyalists, guiding more cost-effective promotional budgets.

Generative AI promises further applications, from summarizing RGM data into user-friendly outputs for cross-functional teams to quickly designing targeted “sell-in” stories for retailer negotiations. Yet technology alone cannot solve RGM challenges; successful transformation requires well-chosen data, collaboration between functions, and a culture that embraces continuous learning.

 Find Retailer partnerships

The tension between brand owners and retailers can spur innovation but also hinder collaboration, especially around pricing and promotions. Some retailers, for instance, are using heavy promotions on key items that manufacturers feel devalue the category. To move beyond clashes, two areas stand out: 

1. Retail media networks (RMNs): many retailers operate their own ad platforms, and consumer-goods companies often invest heavily in them. Yet sales teams negotiating trade terms may not coordinate closely with marketing teams orchestrating RMN budgets. Leading organizations integrate these activities, aligning digital campaigns with in-store promotions under a single commercial strategy to boost return on investment and better engage consumers.
2. Data partnerships: major retailers today often function as data providers. Platforms that share shopper behavior—sometimes in near real-time – allow manufacturers to gauge performance by SKU and track market share changes. Access to such data can make conversations with buyers more strategic and fact-based. Instead of blanket discounts, companies can tailor proposals that truly benefit both retailer and manufacturer.

Organizations that successfully align with retailer incentives and leverage granular data may be best positioned to preserve margins while nurturing volume growth in a price-sensitive market. 

Given the current climate, delivering net sales growth has become more difficult for consumer-goods companies. Heavy reliance on inflation-driven price hikes no longer looks feasible, and consumers remain guarded in their spending. A refined RGM approach that uses a realistic viewpoint on inflation trends, invests in advanced analytics, and works cooperatively with retail partners stands the best chance of success.