Article
Discover how NRM can transform your brand and see how you compare to industry leaders.
Published
11 June 2024
Do you wonder what net revenue management is and how it can benefit your brand?
Net revenue management (NRM) is a strategic approach designed to maximise the profitability of your brand by fine-tuning the pricing, promotion, assortment and distribution of your products. By aligning your brand strategy with customer and channel preferences, NRM leverages data-driven decisions to unlock the full potential of your offerings. The framework is tailored for brand owners but also offers valuable insights for B2B companies.
In this article, we break down the core components of the NRM framework, address the common challenges brand owners face during implementation and share best practices and real-world examples to help you overcome these challenges.
Curious about your brand’s standing? To round off the article, we invite you to take our NRM benchmark survey and receive a personalised report to see how your brand compares to industry leaders and identify areas for improvement.
Struggling with these problems? You are not alone
In our experience, the majority of brand owners are struggling to achieve profitable growth in a competitive and dynamic market. External factors, such as recent inflation and its impact on costs and consumer spending and preferences, have affected brands’ ability to effectively manage pricing, promotion, product assortment and distribution.
In our conversations with brand owners, four issues consistently surface:
- Over-reliance on discounts and promotions: many brand owners frequently resort to deep discounts and promotions to boost sales volumes without considering the long-term impact on their profit margins, customer loyalty and brand equity. This practice can alter customers’ perception of the brand, which in turn affects their purchasing behaviour and satisfaction.
- Inconsistent pricing across channels: not accounting for channel-specific willingness to pay and competitive pressure can result in either leaving money on the table (“pricing too low”) or losing market shares (“pricing too high”).
- Lack of internal strategic alignment: different functions and teams within the organisation may have conflicting goals, incentives and metrics, leading to suboptimal decisions and actions that undermine the brand’s overall performance.
- No data in decision-making: over-reliance on intuition, experience or outdated information often results in suboptimal decisions, rather than using data and analytics to test hypotheses, measure outcomes and optimise results. This also includes the use and understanding of customer insights and their associated commercial value.
Sounds familiar? Discover the power of NRM
To address these challenges, brand owners can use the NRM framework, which consists of three main elements: the strategic context as an overarching guideline, interlinked NRM levers and necessary foundational enablers to support the building blocks of NRM.
Net revenue management (NRM) should follow your company’s strategic context, utilising an array of levers enabled by data-driven decision-making.
The strategic context describes the strategic objectives translated into portfolio/brand and customer/channel segmentation strategies that define where to play and how to win in the market. Without a strategic context, NRM decisions and actions lack direction and scope, leading to misalignment with overall business goals and objectives. This absence of a strategic context can result in fragmented efforts across different disciplines, causing inefficiencies and missed opportunities to achieve common organisational goals.
The six NRM levers are the overarching tools and tactics used to optimise the net revenue of products. They include assortment and mix management, space/shelf management for retailers and/or distribution management, promotion, pricing and trade terms/conditions. Working with these levers will help you capture the full value of your products in each demand space, price tier, pack size, geography and channel, while balancing profitability and growth.
A classic example from the industry is Coca-Cola’s strategic approach. The company offers a diverse range of products, sizes and pack sizes – from traditional sodas to diet options and flavoured waters – catering to various consumer preferences, consumption occasions and price ranges. By effectively leveraging these different demand spaces, Coca-Cola significantly optimises its net revenue.
Underlying these levers is a convincing trade story that helps you communicate product value and NRM decisions to your trade partners, creating buy-in for your NRM strategy while rewarding and motivating their trade behaviour and participation.
The foundational enablers are the capabilities, processes and governance that enable the effective execution of your NRM strategy. They include market and customer insights, data-driven decision-making, organisational structures and roles and governance principles and processes within your organisation. These foundational enablers ensure that NRM decisions and actions are based on reliable information, aligned with the strategic objectives and supported by the right people and resources.
This sounds like a lot of work. Do the benefits outweigh this?
Failing to focus on optimising your NRM levers can result in losing out on the benefits to your organisation.
The key benefits are:
- Profitability: without optimising the price (the most impactful lever in your profit calculation), promotion, assortment and distribution of your products, you risk missing out on improved profit margins, return on investment and cash flow.
- Growth: if your brand strategy is not aligned with customer and channel needs and preferences, you may miss out on an increased sales volume, market share and customer loyalty.
- Brand equity: without delivering consistent and differentiated value to your customers and trade partners, your brand awareness, reputation and advocacy can suffer significantly.
- Agility and resilience: failing to leverage data and analytics to monitor and measure NRM performance and outcomes can leave you unable to adapt quickly and effectively to changing market conditions, customer behaviour and competitive actions.
Ready to elevate your organisation?
Do you want to know how your brand strategy compares to best practices in the industry and how to improve your NRM performance and outcomes?
Then take a minute to complete our NRM benchmark survey, and you will receive a personalised report with valuable insights into where you stand compared to the NRM industry benchmark and how to boost your NRM.
Complete the survey
To participate in the survey, please click on the link below and complete the questionnaire. The survey closes on 18 August 2024, and you will receive your report two weeks later.
In the survey, you can choose to complete either a short or an extended version of the survey – the extended version only takes about 10 minutes more than the short version. You will be asked whether you want to continue to the extended version in the survey. The extended survey will allow you to explore the different NRM levers more in depth, and you will receive a more detailed report on your current maturity, along with recommendations on how to move forward with lasting impact.
Participate in the survey here
NRM plays a key role in driving sales, optimising inventory and enhancing overall performance for brand owners. As the landscape continues to evolve, it is essential for brand owners to prioritise NRM in their strategies. By doing so, you can make more informed decisions, improve the customer experience and ultimately increase your profitability.
Unlock your brand’s potential with our NRM benchmark survey today.