Reference glossary
RGM Concepts
A practitioner’s reference to the core concepts of Revenue Growth Management in FMCG. Each page explains the formula, shows a worked example, and links to an interactive simulator where you can pull the levers yourself.
New to RGM? Start here
A plain-English guide to what Revenue Growth Management is, the levers it uses, and why it matters for consumer goods teams.
Pricing
Price Elasticity of Demand
Price elasticity of demand (ε) is the ratio of percent change in quantity demanded to percent change in price, negative for normal goods, …
Break-Even Sales Change (BESC)
The Break-Even Sales Change (BESC) is the volume loss a price increase can tolerate before gross profit turns negative, the go/no-go gate …
Break-Even Volume (BEV)
Break-Even Volume (BEV) is the absolute number of units a project must sell to cover its total fixed costs, calculated as Fixed Costs divi…
The 1% Price Leverage Rule
A 1% improvement in price delivers ~8.7% operating-profit lift in the median CPG company, 1.5× the leverage of a 1% variable-cost reductio…
Price Thresholds
Price thresholds are psychological cliffs in the demand curve, round-number boundaries where local elasticity spikes 3 to 5× above the cat…
The Ten Drivers of Consumer Price Sensitivity
The Ten Price Sensitivity Effects framework identifies ten distinct drivers that make consumers more or less price-sensitive, each a lever…
Van Westendorp Price Sensitivity Meter (PSM)
The Van Westendorp Price Sensitivity Meter is a four-question direct-survey method that delivers four named price points (PMC, OPP, IPP, P…
Conjoint Analysis for Pricing
Conjoint analysis is a tradeoff-based survey method that decomposes consumer preference into part-worth utilities for each product attribu…
Economic Value Estimation (EVE)
Economic Value Estimation (EVE) builds a willingness-to-pay number from the bottom up: take the reference price of the next-best alternati…
Gabor-Granger Method
The Gabor-Granger method, developed by André Gabor and Clive Granger in the mid-1960s, asks each respondent yes/no purchase-intent questio…
Value-Based Pricing
Value-based pricing starts from what the product is worth to the consumer and works backward to a price, while cost-plus pricing starts fr…
Willingness to Pay (WTP)
Willingness to pay (WTP) is the maximum price a specific consumer will accept for a specific product in a specific context, a distribution…
Lerner Index
The Lerner Index (L = (P − MC) / P) measures pricing power as the share of selling price that is contribution margin rather than marginal …
Nagle's Value Cascade
The value cascade (Nagle and Müller, 6th edition of *The Strategy and Tactics of Pricing*, 2018) arranges strategic pricing as six choices…
The Value Map and the Value-Equivalence Line
The value map plots each competitor on perceived price versus perceived benefits, and the value-equivalence line (VEL) shows where the tra…
Cross-Price Elasticity (XED)
Cross-price elasticity (XED) is the percent change in demand for Product A divided by the percent change in price of Product B, positive f…
Known Value Items (KVI)
Known Value Items (KVIs) are the small minority of basket SKUs whose prices shoppers can recall and use to judge whether a brand or retail…
Price Corridor
A price corridor is the range of prices a brand can operate inside without changing its competitive position or breaking the linearity of …
Price Pack Architecture
Price Tier Ladders
Price tier ladders are the natural price-per-kg strata every FMCG category develops over time (typically five tiers from Economy to Super-…
Assortment Rationalization
Assortment rationalization is the disciplined removal of low-velocity, low-margin SKUs from a brand portfolio so the surviving SKUs concen…
The Four Pack Roles Framework
The Pack Roles framework gives every SKU in a CPG portfolio one of four strategic roles: Entry (price-point defender), Routine (volume wor…
RSP-per-kg Incentive Curve
The incentive curve plots price per unit (typically RSP per kilogram, per litre, or per 100g) against pack size across every SKU in your r…
Pack-Size Elasticity
Pack-size elasticity is the volume response to a pack-size change holding per-unit price constant, empirically around half the magnitude o…
OBPPC Framework
OBPPC (Occasion-Brand-Pack-Price-Channel) is the master framework for Price Pack Architecture, a five-dimensional grid that forces every S…
Pack-Price Matrix
The pack-price matrix is a two-dimensional grid that plots every SKU in a category along pack size and price tier, turning a portfolio int…
Decoy Pricing and Asymmetric Dominance
Decoy pricing is the deliberate use of an asymmetrically dominated option, clearly worse than the target on at least one dimension while c…
Good-Better-Best Pricing
Good-Better-Best (GBB) is a three-tier product architecture that explicitly leverages the compromise effect, giving consumers a clearly an…
Shrinkflation
Shrinkflation is the practice of reducing pack size while holding the shelf price flat, hiding what is effectively a price-per-unit increa…
Consumer Decision Tree (CDT)
The Consumer Decision Tree (CDT) is the hierarchy of choices a shopper makes when navigating a category. The first gate carries roughly 35…
Trade Promotion
Forward Buying and Pantry Loading
Forward buying and pantry loading are the two demand-shifting failures in trade promotion: forward buying is the retailer ordering excess …
Promotion ROI
Promotion ROI is the ratio of incremental profit generated to promotional spend, and it separates value-creating promotions from expensive…
Cannibalisation Rate
Cannibalisation rate is the share of a promoted SKU's apparent uplift that came from your own non-promoted SKUs, and it typically runs 15 …
Source of Volume
Source of Volume (SoV) decomposition breaks a promotion's volume lift into its four components (cross-brand switching, pull-forward, stock…
The Thirds Rule
The thirds rule is the academic decomposition of promotional uplift, showing that roughly 74% of an apparent FMCG promo bump comes from wi…
Promotional Baseline
The promotional baseline is the volume you would have sold without the promotion, a counterfactual constructed from non-promoted weeks, tr…
Reference Price Decay
Reference price decay is the slow re-anchoring of a shopper's internal fair price toward the deal price, and in heavy-TPR FMCG categories …
BOGO and Multibuy Mechanics
BOGO (Buy One Get One) and multibuy mechanics force shoppers to take more units to access the deal, which lifts uplift more than a straigh…
Promotional Mechanics
Promotional mechanic selection is the decision of how to spend a given discount budget, and the choice between TPR, BOGO, multibuy, bundle…
Customer Value Assessment (CVA)
Customer Value Assessment (CVA) is a structured multi-dimensional framework for quantifying the strategic worth of each retail customer, c…
The 13 Levers of Trade Promotion ROI
The 13 TPO Levers framework enumerates every commercial variable that meaningfully shifts trade-promotion ROI, from the obvious (depth, fr…
EDLP vs HiLo Pricing Strategy
EDLP (Every Day Low Price) and HiLo (High-Low) are the two foundational retail pricing strategies, and they call for very different manufa…
Trade Terms
Trade Terms Anatomy
Trade Terms Anatomy is the full classification of financial flows between FMCG manufacturer and retailer, from unconditional off-invoice a…
Gross-to-Net Waterfall
The Gross-to-Net (G2N) waterfall is the cascade of trade-term deductions from gross list price to net invoice price, typically 20 to 30% o…
Pocket Price Waterfall
The pocket price waterfall is the customer-level cut of the gross-to-net cascade, and the spread between your best and worst customer's po…
Customer Profitability Matrix
The customer profitability matrix sorts a portfolio on net price received (vertical) and cost to serve (horizontal) into four cells with d…
Customer Tiering
The Seed / Accelerate / Drive / Defend (SADD) tiering framework aligns trade investment to customer POTENTIAL rather than current size, fu…
Trade Spend Efficiency
Trade Spend Efficiency measures output (volume, distribution, share) per dollar of trade investment (the efficiency lens), while trade spe…
Joint Business Plan (JBP)
A Joint Business Plan (JBP) is the annual contract that locks volume targets, trade investment, listing commitments, and growth initiative…
Trade Investment ROI
Trade Investment ROI is the ratio of incremental gross profit a customer delivers to the trade dollars you spend with them across a year, …
BATNA & Walk-Away Analysis
A BATNA (Best Alternative To Negotiated Agreement) plus a calculated walk-away threshold turns trade-terms negotiation from concession-man…
P&L Impact Lab
Contribution Margin
Contribution margin (CM) is the share of price remaining after variable costs, the correct metric for every marginal pricing decision, bec…
Manufacturer P&L Architecture
An FMCG manufacturer P&L follows a seven-layer cascade: Gross Sales, Trade Investment (Gross-to-Net deductions), Net Revenue, COGS, Gross …
Manufacturer P&L Sensitivity
Manufacturer P&L sensitivity analysis traces how a percent change in each commercial lever (price, volume, variable cost, fixed cost) flow…
Price Pass-Through Rate
The price pass-through rate is the share of a manufacturer's list price change that the retailer reflects in the shelf price, and it usual…
Retailer P&L Architecture
An FMCG retailer P&L is structured in seven layers: Consumer Sales, Cost of Goods, Front Margin, Back Margin, Total Gross Margin, Operatin…
Retailer P&L
The retailer P&L traces consumer sales through retail gross profit, trade income from manufacturers, and OPEX to net operating margin, and…
Dual P&L Bridge
The dual P&L bridge reconciles each trade-investment mechanic across the manufacturer P&L and the retailer P&L line by line, exposing why …
Integration Lab
Cross-Lever P&L Sensitivity
Cross-lever P&L sensitivity is the EBIT-impact comparison across every RGM lever pulled in isolation, showing consistently across FMCG cat…
Volume-Price-Mix (VPM) Decomposition
Volume-Price-Mix (VPM) decomposition separates revenue growth into three mathematically distinct components: volume (units sold), price (r…
The Five RGM Levers
The Five RGM Levers (Pricing, Price Pack Architecture, Trade Promotion Optimization, Trade Terms, and Mix Management) are the complete set…
Net Revenue Management (NRM)
Net Revenue Management is the FMCG commercial discipline that integrates pricing, price-pack architecture, trade promotion, trade terms an…