CPG Revenue Management Success: Using Advanced Analytics To Build Pricing And Promotion Strategies Hemanth Kumar April 18, 2018

CPG Revenue Management Success: Using Advanced Analytics To Build Pricing And Promotion Strategies

CPG Revenue Management Success Using Advanced Analytics To Build Pricing And Promotion Strategies

In recent years, a rapidly increasing number of consumer packaged-goods (CPG) companies and retailers have been successfully using big data and advanced analytics to enhance revenue management.

For CPG companies, important decision-making primarily revolves around the following factors:

  • Strategic pricing
  • Marketing campaigns
  • Sales trade promotions
  • Assortment optimization
  • Inventory management

A Revenue Growth Management (RGM) executive takes all of these factors into consideration during decision making. RGM executives do realize the importance of leveraging data in order to devise effective pricing and promotional strategies for your sales and marketing teams. This is typically achieved by the use of various analytics tools.


  • Most of these do not provide in-depth insights and are also typically cumbersome to use
  • This leads to building strategies based on partial intelligence or worse still, hunches and instincts. These methods are obviously counter-productive at best and at their worst, can severely damage ROI

Needless to say, this implies very strongly that RGM executives have to be particularly careful about how they are leveraging data and analytics to make decisions that benefit their businesses. This can be achieved by:

  • Spending less time analyzing data
  • Switching from multiple BI systems to a single one-stop platform
  • Gaining crisp and granular insights from the data
  • Devising intelligent strategies

And this is where advanced analytics play such a key role..

Now more than ever, CPG businesses have to look into how they can leverage predictive analytics to maximize its benefits and also plan their trade promotions and  marketing strategies with a comprehensive sense of understanding of the buyer’s journey.

The coming together of both structured and unstructured data bring about a myriad possibilities that businesses can take advantage of in order to predict and influence consumer purchases.

There are multiple aspects of the CPG processes where analytics play a key role – better inventory management, assortment optimization, supply chain efficiency, predicting OTIF losses and ensuring better MSL compliance. However, for the scope of this particular blog, we will be specifically focusing on price and promotional analytics.

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Using Compass: An AI-Powered Trade promotion Optimization Solution

Price and promotional analytics enable marketing teams in CPG businesses to devise an optimal price and promotional strategy across all their sales channels as well as their entire range of offerings. For example, through the use of advanced analytics, a CPG company might devise a strategy where they decide to use a specific offline channel, such as billboard ads in order to appeal to a specific target audience. The idea behind leveraging advanced analytics is to be able to bridge the gap between sales and marketing teams in a more compelling and thoughtful way.

But What Exactly Are Advanced Analytics?

Advanced analytics is essentially the analysis or examination of data using sophisticated techniques and tools, in order to identify deeper insights, make predictions and generate recommendations.

Various techniques are used in advanced analytics, including data/text mining, machine learning, pattern matching, forecasting, visualization, semantic analysis, sentiment analysis, network and cluster analysis, multivariate statistics, graph analysis, simulation, complex event processing, neural networks. [Source: Gartner]

What Are the Benefits Offered by Advanced Analytics?

Leveraging advanced analytics brings about accuracy and speed in decision-making.

Tools used for advanced analytics harness key unstructured data which usually includes a variety of metrics such as social media campaigns, search analytics, POS, etc.. All of this data is then analyzed to generate fact based recommendations and make various predictions to improve business outcomes.

Read More: Why CPG companies need AI in their Revenue Management Strategy

Pricing Strategy

Let’s delve into how they specifically help the business optimize their pricing and promotional strategies:

Consider what most customers do when they want to shop for a new product. If you want to buy a TV, for instance, you will most likely surf multiple websites, in order to determine the right price you’d want to pay. Whether you choose to buy in store or online, you conduct your due diligence in obtaining information on the right price.

In another scenario, a customer goes to a retail outlet to pick up a beverage and sees there is a promotion from your competitor with an attractive product packaging and a price point well below of what you are selling at, and ends up buying your competitor’s product.

With the current business environment, the information access buyers have and the competitive scenario, it is evident that smart pricing strategies can create a make or break situation for CPG businesses. When businesses fail to set the right price consistently, it tarnishes their reputation and can seriously affect business in the long run.

Price plays a vital role in chartering the brand image and its value proposition. In order for a brand to ensure long term customer loyalty, it is important to build a connection with its buyers through the way its prices are set. For example, brands like Apple and Lulemon are able to charge premium prices because of the way the brand has been positioned in the market. Pricing, as is obvious, is a key factor in increasing profits and in ensuring consistent business growth over time.

As the internet makes buyers more aware, they are comparing prices on various channels and between competitor products before making a purchase. This means, businesses themselves have to be on top of their game in order to ensure that they are delivering value to the customer, in terms of pricing excellence. But this is where CPG companies typically fail. They aren’t monitoring competitors’ pricing on a frequent basis, they rely on manual data or worse, their instincts to make price setting decisions, they don’t customize pricing based on region, store or target segment. All of these practices result in suboptimal pricing, discouraging buyers from making purchases, and instead of going to the competitor.

Several companies aren’t tapping into the potential of establishing a well defined pricing strategy that aligns with their branding goals. And this is largely because these businesses are not adequately equipped to gain visibility into how profitable they actually are and won’t have insights to the price points of the competition.

Read More: 4 Best Practices For designing a winning CPG pricing strategy

This is why leveraging advanced analytics is crucial…

When companies do not have access to data-driven and centralized pricing analytics, they use instincts to make decisions that results in missed opportunities and makes them vulnerable to needless compliance risk.

Since advanced analytics analyze a vast amount of data to deliver recommendations, they are able to provide CPG companies with accurate pricing suggestions for each category, region and product and comparisons of the same with external data like Promotions & Pricing data of competitors from market research companies like Nielsen or IRI. This helps businesses build resilient price-pack architecture.

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with Compass: An AI-Powered Trade Promotions Optimization Solution

With advanced analytics, marketers have access to adequate information and data before making important pricing decisions. This enables them to make accurate predictions of outcomes prior to making decisions. Leveraging predictive analytics is giving marketers greater control over their decisions and enabling them to make optimal judgments on how a particular product should be priced amidst tough competition.

Promotions Strategy

As complex as promotional analytics may seem, in terms of the variety of the factors that have to be taken into consideration, managing a brand’s promotions is extremely crucial to the way it is perceived by consumers. Marketers need to be invested into developing a meaningful promotional strategy, in order to ensure that the brand’s image is sufficiently reflected across all of its marketing and promotional messaging.

Advanced analytics will allow you to identify high-yield promotional strategies. This enables you to determine how much you need to spend across various customer segments. They also bring personalization into your marketing campaigns, thereby helping you derive greater ROI from your efforts.

As analytics continue to advance at a rapid pace, marketers are now obtaining a deeper understanding of exactly what the modern consumer needs and wants. This helps CPG companies devise a far greater personalized approach than ever in reaching prospective buyers. Businesses that are at the forefront of this growth are already reaping the benefits of harnessing advanced analytics and data management strategies.

If you are a CPG company, looking to generate new growth opportunities and set yourself apart in today’s incredibly competitive business environment, then it’s not too far-fetched to point out that the right time to get started was most likely, yesterday!

If you’d like to learn more about this topic, please feel free to get in touch with one of our experts for a personalized consultation.