5 Pillars of Customer Profitability in the Consumer Packaged Goods Industry

In today’s CPG industry, customer profitability hinges on a balanced approach that minimizes waste, maximizes product visibility, and aligns pricing and promotions with strategic insights. The following five pillars offer a roadmap for brands looking to drive sustainable growth and optimize their impact on both retailers and consumers.

1. Eliminate Waste

Reducing waste in the CPG industry means addressing inefficiencies head-on:

• Deductions: Understanding customer contracts and having a process to review deductions thoroughly helps ensure only valid deductions are taken, reclaiming lost revenue.

• Out-of-Stock (OOS): Use analytics to manage inventory accurately and prevent stockouts or overstock. Real-time data improves demand forecasting and response time.

• Supply Chain Efficiency: Streamline your supply chain by leveraging technology and standardizing processes. Enhanced logistics, shorter lead times, and effective communication can reduce operational delays and improve profitability.

2. Get Your Pricing Right

Pricing accuracy is critical to maintaining margins and meeting customer expectations:

• On-Shelf Pricing:

  • Consider your product’s role within the category, and ensure pricing reflects its position.
  • Account for the retailer's go-to-market strategy (Hi/Low, EDLP, or Hybrid).

• Landed Price to Customer:

  • Calculate landed cost by including all elements in the supply chain, such as distributor markups.
  • Assess customer margin requirements and ensure your pricing aligns with both their needs and your internal margin goals.

3. Optimize Your Assortment

Ensuring the right products are available at the right time helps grow sales and capture consumer demand:

• Assortment Optimization:

  • Focus on SKUs that meet customer hurdle rates and identify where sales volume is generated.
  • Aim to trade shoppers up, over, or into the category—premium products attract new shoppers, quality products maintain loyalty, and innovative products expand the category.

• Planogram Compliance:

  • Collaborate with retailers to maintain prominent shelf placement.
  • Leverage data to track shelf availability and restocking rates, ensuring products are accessible to consumers.

4. Know Your Brand, Shopper, and Customer’s Promotional Sweet Spots

Aligning promotional strategies with brand, shopper insights, and market trends enhances engagement and efficiency:

• Shopper and Consumer Insights: Use retail card and consumer data to understand your customer base, refine targeting, and tailor promotions.

• Brand Positioning: Consistent messaging that aligns with brand values builds trust and loyalty.

• Strategic Promotion Timing: Use retail and syndicated data to identify optimal pricing and tactics that drive lift, factoring in seasonality to maximize reach during high-engagement periods or build brand loyalty off-season.

• In-store and Digital Marketing:

  • In-store displays, sampling, and point-of-purchase materials can attract impulse purchases and reinforce brand messages.
  • Digital coupons and loyalty programs offer targeted outreach and encourage repeat purchases, while collaborative retailer promotions expand reach.

5. Partner for Best Results

Effective partnerships strengthen your brand's market presence and streamline go-to-market efforts:

• Retailer Partnerships: Joint business planning and setting shared goals can maximize profitability.

• Brand Partnerships: Collaboration with other brands can unlock innovative solutions, broaden market reach, and enhance resource sharing, leveling the field against larger competitors.

Each of these five pillars is instrumental to driving customer profitability and building a brand that resonates with both retailers and consumers. By aligning operations, optimizing assortment, and leveraging data-driven insights, brands can position themselves for long-term success.

At Modus Planning, we’re here to help CPG brands simplify the complex, eliminate inefficiencies, and foster meaningful connections across the supply chain. Contact us today to learn how we can help your brand harness these pillars for greater profitability.