Drive profitable growth with generative AI
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Drive profitable growth during times of economic uncertainty with generative AI

How CPG companies can optimize price, promotion, and revenue growth with generative AI

The economy has taken many hits since 2020. Businesses have had to get smarter and more strategic about remaining stable among supply chain disruptions, recessionary fears, and geopolitical conflicts. But with the right strategy and tools, consumer packaged goods (CPG) organizations can continue to drive profitable growth during uncertain times.

How? By embedding richer data sources and more advanced analytics into assortment, price, and promotion planning and implementation cycles to enable continuous improvement of category and channel plans. This approach will help ensure profitability even when economic conditions are less than ideal.

Integrating advanced data and analytics into planning and execution activities will enable your organization to improve its go-to-market plans and overcome bottlenecks that hinder speed to market. The result? Plans that are statistically proven to deliver in-market impact. Taking it one step further, companies can develop even faster, more agile planning and execution cycles with a higher certainty of success in the market when they integrate generative artificial intelligence (gen AI) into the cycle. Gen-AI solutions can produce insights and recommend actions to take sales planning from months to minutes with a greater likelihood of delivering favorable results.

But first, the basics.

Back to the basics of planning

Before leaping into generative AI, get back to the basics of planning by investing in advanced data and analytics for better sales forecasting. Advanced modeling and artificial intelligence will automatically generate plans and scenarios with the highest statistical likelihood of success in the market, taking into account shopper behaviors, macro- and microeconomic factors, top-line revenue and profit targets, and supply constraints. These insights will give you the ability to optimize product assortments, pricing, promotion, and planograms at channel, account, and even store/store-cluster levels.

This approach also allows you to:

  • Increase revenue and the associated profit margin contribution
  • Improve your ability to obtain buy-in from retailers
  • Improve order management and reduce the cost per order
  • Improve supply chain planning and forecasting
  • Optimize back-end financial deductions and settlements, reduce leakage, and eliminate unplanned write-offs

Refining your sales planning capabilities will prepare you to weather storms of uncertainty. And for flawless execution, make sure your front, middle, and back offices are connected and operating in lockstep (more on this later).

With a foundation of data and analytics, your company will be well-positioned to use gen-AI technologies to create value for your organization.

Generative AI makes everything faster, better

Shopper dynamics are changing rapidly, given omnichannel options and an ever-changing economic environment. Today's consumers shop across multiple channels based on their purchase intents. CPG organizations can effectively target these consumers with optimized price, promotion, and sales plans and do so quickly with the help of generative AI.

Gen AI is the umbrella term for the subset of AI that can use patterns in existing data to create new, seemingly original content. It can produce text, images, audio, synthetic data, and more. In the context of assortment, price, and promotion planning, it accumulates very robust and relevant datasets and delivers predictive and prescriptive plans with an explanation of why the plan is optimal. This technology improves plans by factoring in internal constraints as well as the external market environment and both global and local considerations. Tapping into this enormous amount of data could take humans years to sort through, but gen AI can sift through it and provide predictions in minutes or seconds.

Gen AI also provides more context to scenario planning, providing explanations for its suggestions so you can understand the rationale behind its recommendations. Additionally, you can compare your own scenarios against what gen-AI technology suggests, and it will compare each plan's performance drivers and their statistical likelihood of succeeding in the market.

This next-generation data and analytics technology also unlocks an opportunity for CPG companies and retailers to collaborate on joint business plans to increase both parties' revenues and profit contributions. To achieve this, CPG and retail partners must agree to share their data with a third party that can keep confidential information private while using datasets from both organizations to produce market plans that maximize shopper satisfaction while improving manufacturer and retailer revenues and profit performance. By joining forces, you can increase performance across digital and physical shelves.

How to get the most out of generative AI

How your company manages data is core to whether it succeeds with AI. But it's not the only foundational element. Here are four building blocks that will help your business get the maximum impact from AI and generative AI:

  1. Identify and prioritize the problems you are trying to solve
  2. Embed analytics in company processes and workflows to drive more agile decision, action, and course correction
  3. Create strong data management and governance for responsible AI and a cloud-based technical architecture that supports AI at scale
  4. Enable a scalable operating model that includes programs to nurture new skills and roles for employees

Point two is a crucial step for embedding gen AI into sales and promotions planning because even with statistically viable plans, front, middle, and back offices must be connected and working collaboratively to execute them in the market.

Real-time course correction and improvement

Generative AI plays another crucial role in sales and commercial planning. The technology can enable your organization's marketing, sales, supply chain, and finance functions to operate in lockstep and have the agility to course correct for continuous improvement and greater flexibility. Gen-AI technology can also help keep all departments in the loop so that each function does its part to ensure plans get implemented efficiently and in full.

This next generation of advanced planning and execution tools integrates marketing campaigns, category, and channel/account planning (including assortment, price, promotion, and space planning) into supply chain forecasting. This is key to ensuring that the right products are in the right place at the right time to increase top-line revenue and profit growth. The data and performance feedback you receive from market execution can be used to inform and optimize sales plans on a continuous basis, leading to shorter planning cycles. This iterative loop gives CPG organizations the ability to keep pushing out new scenarios, test them in the market, and improve performance in real time – especially in digital channels. Quicker and smarter planning, with statistical certainty of outcome, enables your organization to improve top-line sales and profit in good and bad economic times.

Keep growing in uncertain times with generative AI

The economy, as we know, can be hard to predict. Markets ebb and flow. But your organization will keep growing if you build a foundation of data and analytics on which to embed generative AI. That is how you'll optimize planning and execution cycles and keep functions working collaboratively to create statistically accurate scenarios that increase market share, revenue, and profit contribution. When done correctly, this approach will sustain profitable growth even in an unstable market environment.

Use generative AI to drive profitable growth in your organization

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