Modern Revenue Growth Management functions are increasingly looking to new geographies, technology, ways of working and highly optimised processes to navigate the increasingly complex and uncertain global landscape.
In his book, Factfulness, Hans Rosling writes a rather compelling, upbeat - for most at least - narrative using PHD-led research informed by 18 years of research and practical experience as a doctor, researcher and global health lecturer. He founded the Gapminder Foundation in 2005 in order to ‘fight devastating ignorance with a fact-based world-view'. In his book he writes that, if UN forecasts on population growth rates are correct, and if incomes in Asia and Africa keep growing as now, then the centre of gravity of the world market will shift over the next 20 years from the Atlantic to the Indian Ocean.
Dr Rosling speaks of the prevailing mega misconceptions that the world is divided in two: rich vs poor, and argues that instead of using terms such as ‘developing’ vs ‘developed’ which end up in an ‘us’ vs ‘them’ or ‘West’ vs ‘Rest’ mindset, that the world would be more accurately observed through the prism of a more sensible classification using ‘The Four Levels’ which would enable businesses to find opportunities and funnel aid moneys to the poorest people more effectively. He goes on to define these levels, expressed in terms of dollar income per day, where level 1 earns $1/ day, Level 2 earns $4/ day, level 3 $16/ day and level 4 >$64/ day. If you’re reading this, you’re most certainly in level 4, save perhaps for bootstrappin’ entrepreneurs with a burn rate hotter than Kuwait City on a balmy 60 degree C plus summers day.
Today, people living in rich countries around the North Atlantic, who represent 11 percent of the world population, make up 60% of the Level 4 consumer market. By 2027, if incomes keep growing at their current trajectories, then that figure will have shrunk to 50%. By 2040, 60 percent of Level 4 consumers will live outside the West, suggesting that the Western domination of the world economy will soon be over. I might add that his analysis excluded recent recent events that resulted in Trump becoming president and Brexit stealing the headlines on a daily basis for the last 2 years. These ‘issues’ if left untreated are certain to add velocity to such decline.
By 2100, the world population will increase by another 4 billion from its current 7.6 billion, putting the total at c. 11 billion, with roughly a 1 billion people added over the next 13 years. With 80% of the world population living in Africa and Asia, the opportunities for business are enormous.
Implications for Building Sustainable, Consumer-Oriented Revenue Growth.
Over the course of the last 10 years or so my curious nature has taken me around the world, working extensively in the US, UK/ Europe, Africa and The Middle East, with limited work in Asia, in various roles. With a bias towards research, data and analytics, I started in market research although it wasn’t long before my ego propelled me towards strategy and execution roles, ostensibly to move from ‘making recommendations’ to having a tangible, measurable impact in whatever it was that I was working on. I’ve been fortunate to have worked across Consumer Goods/ Retail, Media, Financial Services (Banking and Insurance), Government Communications and more recently Start-up Sectors, building and iterating coherent plans and strategies for growth.
I grew up as a marketeer but that was beaten out of me in 2008, when strategy and marketing lost the fist-fight to finance at the top table. No more blue-sky thinking, unless it was deeply rooted in commercially pragmatic plans and executions.
The world of marketing, as a discipline, is broad and perceived to be somewhat fluffy by some. We’ve gone from five to about seven p’s, which include everything from product, price, promotions, packaging, place (distribution), positioning (mindspace), people and profit, the latter two mostly as a result of marketing’s evolution to a grander, more nobler strategic and highly commercial function called Revenue Growth Strategy, Nett Revenue Management, or even Revenue Management.
This is your large Consumer Goods company’s equivalent of a well-rounded, experienced SWAT team, the ground-floor founding team in a start-up. The locus of control in this team spans marketing, sales, finance (where critically everything is anchored or measured in the P&L) and depending on the organisation, this team will have strong links to supply chain and strategy and beyond, alongside core functions of marketing such as consumer, shopper, customer (B2B), sales, research, brand, innovation, finance, behavioural psychology and consumer data/ analytics even AI for many modern players. You can read more of what this looks like in my previous articles. Segment value management (as is the case in financial services who look at cross-sell opportunities) for the purposes of driving growth and innovation through a range of different treatments from proposition and product/ brand development to designing world class customer experiences. These functions operate with one objective in mind. To unlock sustainable, profitable growth. But what if growth is now becoming more of a geographic and technological imperative? How do CEO’s and their executive teams use what they have to build reach and scale for their teams, brands and organisations?
One of the more sobering facts, a statistic I recently presented in my keynote address to a group of US Consumer Goods and Tech executives in New York, an audience consisting of multinational companies such as Mars, Kimberley Clark, PepsiCo and Colgate-Palmolive et al, where understanding consumers and how to affect behavioural change is part art, part science and where the use of predictive analytics/ AI and sophisticated data science and analytics platforms have spurned industries in themselves. These businesses invest billions on research and analysis budgets annually to enable building sustainable, profitable revenue growth, often in highly saturated, hyper-competitive markets where changes in price in as little as 1 pence can equate to a £30m impact on the P&L for a UK business alone, battling ruthlessly for mind-space in the world’s most expensive real estate and where survival means being able to turn on a dime, running at 300 m/h hyperloop speeds.
For these players, Year-on-year EBIT growth across the top 100 consumer goods brand owners has been declining since 2010, went into negative growth in 2014 and then flattened out a little bit again in 2015 onwards. To offset this, manufacturers have looked further afield towards BRICS and Emerging markets to offset sluggish growth. Since 2014, more than two thirds of revenue growth and an even bigger share of profit growth - among the top 50 global CPG firms - has come from pricing and mix rather than volume.
Where are your sources of short term and long term growth? Discussions and inputs welcomed. In my next thought-piece, I will be tackling a meta-analysis on emergent economies and categories with socio-economic pulls; those offering attractive scalable growth opportunities, and what it takes to win in these particular spaces.
Andrew Soteriou
Managing Partner, Co-Founder & Advisor to FTSE 500 Companies & Start-Ups | Direct-To-Consumer Propositions | Price & Advanced Revenue Growth | Digital Transformation
Author & Chief Energy Officer, Hustle & Flow Labs (Strategic Advisory On Building Flow and Peak Performance)
Comments