Balancing Cost and Value: Key to Growth in Retail and Consumer Goods

This starts with the realisation that being in retail or consumer goods today simply has become more complex than in the past. Success used to largely reside in having a strong brand, offering good quality and value, and going to market accordingly. Now, however, things have changed. It’s not just about your brand, but the technical features and design of your products or offering, the customer experience, customer engagement, personalisation, accessibility, channel presence – and more.

This all introduces complexity. But it’s necessary complexity. If you don’t have that complexity and sophistication to your proposition, you simply won’t win in the market. Consumers have become increasingly discerning. They are pushing the bar higher in their demands at the same time as their attention spans fall. You have to hit exactly the right spot at the right time or else they’ll simply shop elsewhere.

As a result, to achieve growth any business in this space needs to be pulling levers of value in order to win and keep business. Promotions, discounts, campaigns, new products or lines, fuller SKUs, more tempting and timely offers.

At the same though, businesses have to control costs. You can’t pursue value at any price. While you can’t cost-cut your way to growth either. It’s about achieving both at the same time – not one or the other.

The key to success, therefore, is to understand what trade-offs your levers of value may lead to, and whether these are commercially net-beneficial when set against costs. For example, if a business launches a major promotion of a certain item, what effect does this have across the organisation as buyers buy in enough of the product, distribution stores and distributes them, marketing produces advertising collateral to promote the offer, and stores rearrange their shelves? Are all of these costs worth it? And is the business actually just going to cannibalise its sales of other products in that category – and come out flat?

Another useful way of thinking about this is optimising ‘intentional tensions’. There is a natural pull or opposition between different features of the business – store or point of sale, digital channels, distribution and supply chain, marketing and advertising. Success lies in finding the right degree of tension between them – intentionally managing it to produce the ROI needed to generate growth.

To really understand these trade-offs and tensions, businesses need to break down silos across their organisation so that functions and teams are properly connected and working in collaboration.

A data-driven approach is a key enabler – using data analytics to model and assess the impacts of different decisions and generate detailed insight.

It’s something we’re increasingly helping retailers and consumer goods businesses with as they grapple with the difficult task of balancing cost and value in that all-important pursuit of growth. The art of retail and consumer goods is not simple. In fact, it is increasingly becoming a science. You need a single end-to-end view of your data, and the ability to derive actionable insight from it, if you’re to get the equation right. Those that do will be the ones who carve out seams of profitable growth, however challenging the landscape around them is.

Where is your business on this journey? Ask yourselves the following:

• Is greater complexity leading to greater costs in our business – and do we know where these are?

• Do we have a clear picture of the cost and value trade-offs open to us?

• Are we making intentional cost and value decisions – or just being led by the tide?

• Are we making data-driven decisions? Do we have sufficiently smart data analytic tools available us to bring a scientific lens?