Simply defined, revenue management is selling the right product to the right customer at the right time, the right price, and through the right sales channel. Sounds easy enough, right? Although an accurate description, it oversimplifies what revenue management really involves. Let’s take a look at another definition that is much more complex. Revenue management is the application of disciplined analytics that predict consumer behavior at the micro-market levels and optimizes product availability, leveraging price elasticity to maximize revenue growth and thereby, profitability. Basically, what these definitions are expressing is that revenue management relies on having an in-depth understanding of your customer’s perception of the products and services you sell. Then being able to accurately align prices, availability, and distribution with each of your customer segments. This is why having a good revenue management solution is not only necessary but more critical for some industries than others.
Why Revenue Management Is Important
About fifty years ago, airlines began to experiment with fluctuating fares by controlling seat capacity. American Airlines, one of the early adopters of revenue management, saw revenue increase by over 14% and profits climb by nearly 50%. Other industries, like hospitality, took notice and implemented similar strategies to take advantage of perishable inventory, advance booking, competitive pricing, and balancing supply and demand. By the time we reached the 1990s, television networks began placing advertisements based on demand forecasting and program ratings. Not far behind was the Ford Motor Company, who segmented customers into micro-markets and created differentiated and targeted pricing structures for each of their segments. In less than a decade, Ford estimated that their revenue management initiatives yielded nearly $3 billion in additional profits.
Benefits of Revenue Management Solutions
The benefits of revenue management are numerous, starting with increased revenue and profits. However, there are other advantages that need to be taken into consideration – many of which provide the building blocks for improving revenue and profitability. Successful revenue management relies on having extensive knowledge of your customer base. This enables you to accurately predict their wants and needs; develop more effective and competitive pricing strategies; meet customer expectations and increase customer satisfaction; improve demand forecasting; expand into other markets; and develop stronger inter-company relationships.
Acquiring this knowledge takes data, and a lot of it! Imagine the time and effort to pull data from CRM, ERP, financial systems, etc., analyze it, create a strategy, and act on the intelligence. Gathering the information you need from diverse systems isn’t a one-and-done initiative. Plus, relying on manual processes, spreadsheets, and outdated systems can result in errors that have the opposite effect of what you’re trying to achieve – increased profitability.
In order to drive additional revenue and higher profitability you need a system that will not only centralize your revenue streams, automate revenue calculations, and close books faster, but help ensure ASC 606 and IFRS 15 compliance. In order to capture all of the benefits revenue management offers, you need revenue management solutions that combine and automate many of your systems such as billing, payments, collections, sales, and service.
Successful Revenue Management Relies on the Right System
Revenue management is both a science and an art, and to get it right you need a system that takes the guesswork out of your pricing strategies. To help you choose a system that is right for your business, we’ve listed the top four features and functionality revenue management solutions should provide.
1) Extensible data models
Regardless of your pricing model or whether you sell products, services or software as a service, you need integrated revenue management solutions that provide flexible data models. In order to determine what pricing changes to implement and what products and services to offer at each price point, the system needs the ability to recognize revenue from various sources such as opportunities, orders, contracts, and invoices.
2) Seamless and limitless integration capabilities
Creating a complete financial ecosystem requires you to effortlessly connect critical front- and back-office applications. Seamless integration to third-party platforms provides the connections you need to synchronize data between systems. Regardless of whether you use custom-built connectors, powerful APIs or a mix of the two, you’ll have access to virtually all of the data you require for successful revenue management.
3) Open architecture
Running your business in the most efficient and profitable way requires a system that adapts to your requirements. For you to be in total control, you need an open architecture-based solution. With a system that provides point-and-click configuration, you’re able to create custom objects, fields, and relationships that enable you to capture and organize data. Custom entities and fields give you the flexibility to quickly modify applications and data structures so that you can quickly respond to market or regulatory changes. And, user interface layouts and widgets allow you to create exceptional user experiences for any use case, as well as automate repetitive tasks, integrate with external systems and consolidate data into a single view.
4) Ongoing innovation
Time doesn’t stand still and nor should your revenue management solution vendor. Staying ahead of market changes and the competition requires fresh ideas. Whether it’s using artificial intelligence and machine learning to improve customer retention, simulating the revenue impact of new pricing models or price changes across your products, services or bundles, or virtually anything else that will put you on the road to revenue management success, you need a partner that is committed to your success and acts upon your innovation ideas.
Increase Your Revenue and Profitability Today and Beyond
Isn’t it time to strengthen your financial position and rise above the competition? BillingPlatform’s cloud-based, flexible and scalable revenue management solution puts financial control where it belongs – your hands. With us as your revenue management partner, you get the agility needed to quickly adapt to any market condition, and the flexibility to support all of your business requirements. With more out-of-the-box functionality than other solutions and the tools you need to easily extend the system’s user interfaces, data models, workflows, etc., you’re able to automate the entire end-to-end billing and revenue management processes.
BillingPlatform provides everything you need to simplify revenue management. Our rules-based revenue recognition engine enables you to define rules specific to your company and make assignments in real-time as billing, payments, and credit events take place. You can also speed financial close processes with real-time subledger transactions that seamlessly integrate into downstream ERP and accounting systems. With BillingPlatform, you have a complete solution that enables you to aggregate and analyze data from any source and transform it into revenue potential – in real time. Take a 14-day test drive today to see for yourself.