Imagine what could happen if you got your pricing right every single time!
These are the benefits that would accrue:
- Dominant market share
- Clear understanding of customer needs
- Superior returns
Topline Growth through Revenue Management
Can pricing truly be that powerful? Consider the average S&P 500 companies’ financial statement:
“A 1% improvement in price results in a 4.1% increase in operating profit. More than twice the leverage when compared to improving volume by 1%”
Companies are starting to realize this key trade-off and are looking to improve their capabilities around pricing. Revenue Growth Management (RGM) is a process inclusive of pricing with the goal to maximize topline growth. The distinct drivers of RGM are:
Setting Your Company Up for Success
While Revenue Growth Management identifies the insights necessary to grow, secondary levers are needed to realize the benefits. It is essential to ensure the right Systems & Data, Structure and People are in place to bring the strategy to life.
Systems & Data: How to Use Analytic Tools
Enable data-driven decisions through predictive analytics tools and pricing analytics techniques by ensuring:
- Quick access to real-time data
- Incorporating diverse data sets including competitive benchmarks
- There is a seamless input of data into analytical engines
Your team should be spending time on driving insights versus generating manual reporting.
Structure: Accountability in Business
Streamline the organization’s ability to make the right RGM decisions by:
- Defining roles and responsibilities that clarify who owns pricing and establishes structures of accountability
- Determining what RGM footprint is required and where it should live within the organization
People: How to Build a Strong Team
Ensure the right building blocks are in place for a strong team:
- Instilling a value-based pricing culture across the organization to promote alignment
- Quantifying targets that will drive the optimal behaviour.
Why You Need Revenue
Revenue Growth Management is a core capability for any company. Like Marketing, Finance and Sales, you either take it seriously as a key business pillar or you’re left with a significant gap. In the end, if being off by 1% on price causes you to lose 4.1% of gross margin, can you afford not to plan for Revenue Growth Management?
ABOUT THE AUTHOR Avy Punwasee is a Partner at Revenue Management Labs & Karthik Balaji is a Senior Consultant at Revenue Management Labs. Revenue Management Labs help companies develop and execute practical solutions to maximize long-term revenue and profitability. Connect with Avy and Karthik at [email protected] or [email protected].