In such uncertain and dynamic market conditions, organizations with agile structures and capabilities are more able to stay ahead of the game. Revenue management is one of the best tools organizations can use to maximize revenue.
Organizations with good revenue management discipline help drive better visibility, control, decision-making and collaboration across the entire cross-functional teams. Those who can respond faster to evolving market conditions have a massive advantage over those who are crawling to make even the simplest commercial decisions. This is where establishing revenue management is a key enabler.
It is important to assess what changes you are experiencing within your markets, channels, and categories. In addition, consider how your distribution footprint needs to change to accommodate the market shifts of tomorrow.
The next key step would be to define the role and the positioning of your brands versus the competitive sets and the category average.
You have the option of an offensive or defensive competitive strategy:
Your goal in a defensive competitive strategy would be to hold your share by following the category pricing index increases or decreases.
An offensive competitive strategy is to actively target revenue, volume, and profit pools from your competitive set to win a greater share. This is about winning disproportionately more. Although it is within a recession, you actively target where those revenue, volume or profit pools of opportunity will be captured.
Determine your risk based on the market analysts’ belief that 50% of smaller businesses will not open after the health crisis. This risk will continue with cutbacks in discretionary spend.
If you have risk, shift the risk by considering outsourcing your deliveries and accounts. Determine what the cost to serve versus outsourcing to a 3rd party is. 3rd parties may have a higher cost-to-serve, however they do take on the account risk. Shift risk onto them for account collections, this may be a greater “saving” for your organization.
Define the changes in distribution footprints and spending habits of consumers. Determine the most relevant channels to your consumers in the future.
Map packs (new or existing) with key consumption occasions, missions, and price points to build your pack price architecture and differentiation. Plan how to become relevant in distribution channels where you do not currently compete within, but your consumers have moved into.
Understand where the profit opportunities are within the portfolio. Then effectively scenario plan how you can either fix these through profit improvement programs or exit these parts of the business.
This assessment should be completed on total business level, and then on a category, brand, and even SKU item level.
Determine the optimal pricing by evaluating what a price per oz increase plan would look like for your brands.
Maximize and grow profit pools within the category. Consider relaunching into higher price tiers, introducing additional benefits to charge more or premium innovation.
There are different revenue management strategies you can implement. You may need to revisit pricing and promotion and reset price perception within the category. You can also consider changing packs to hold onto your value positioning if required.
Another strategy is to develop direct to consumer models which would give you greater control over your brand, reputation, marketing, and sales tactics.
The insights and data from this article are explored in greater detail in the white paper “How Revenue Management Can Deliver Growth for Consumer Goods Manufacturers Within a Recession”.
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