Growing demand for personalisation, omnichannel, and responsible products is undeniable and is creating an inevitable and significant increase in innovation, operations, and pricing intricacies. Harnessing intelligence from the entire value chain to proactively manage and predict the cost/opportunity of this complexity is a new frontier which CPG companies need to master in order to achieve new levels of profitable growth.
Today’s consumers know what they want from their products and the companies who make them. Common expectations include:
- Exciting new offerings tailored to their needs
- The variety, convenience and responsiveness of the digital world
- Sustainable offerings that are transparent, locally produced and zero waste, with circular models
These consumer trends are shifting demand to niche and custom products, with higher margin potential; however, this potential is not always realised. The tail end of the product portfolio may command higher prices per SKU, but that does not necessarily apply to the profits. While we see consumer goods leaders redesigning their products to meet these trends, they’re also looking to transform their operations to deliver to margin.
Delivering to margin requires businesses to consider a number of factors, including but not limited to:
- What are the true costs to source, manufacture and fulfil new levels of product complexity?
- Is the customer willing to pay for the additional complexity?
- How does the tradeoff between what the customer is willing to pay versus what it takes to deliver (i.e. cost) impact profitability and speed to market?
- Is end-to-end product cost intelligence leveraged effectively in innovation cycles to offset the costs of product complexity in my R&D and design decisions?
To address these challenges, leaders are embracing a cross functional mindset and leveraging digital and advanced analytics capabilities to make efficient, agile and profitable decisions. Accenture calls this Design to Margin (DTM).
Design to Margin in an overall strategic mindset at the intersection of Customer Centric Innovation, Contextual Pricing & Promotions and Intelligent Operations. Many companies are good in each of these three components, but as they try to make a decision at the intersection, it often becomes cumbersome and isn’t done fast enough or well enough to deliver to margin potential in the business. That’s why Design to Margin is focused on bringing and leveraging insights from all three components together.
Now more than ever, CPG companies should revisit existing product portfolios and new product pipelines to analyse, understand and execute better decisions at the intersection of innovation, operations and pricing. Accenture’s end-to-end expertise and ecosystem partners packaged into our Design to Margin solution brings our clients the methods and tools to break down functional silos and harness the power of data and analytics at this key intersection.
This blog was written and contributed by:
Global Managing Director – Supply Chain & Manufacturing Strategy Practice
This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.
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