What exactly is revenue management? With a history dating back to the 1980s, it’s certainly not a new buzzword. However, there remain misconceptions around recurring revenue management that this blog aims to resolve, as well as explain why it’s becoming an essential strategy for enterprises with a recurring revenue business model.
Let’s start with the basics and provide the definition of revenue management and what it entails. Designed to optimize an organization’s revenue potential regardless of market conditions, revenue management is commonly described as selling the right product to the right customer at the right moment and at the right price via the right distribution channel with the best cost efficiency.
Perhaps an oversimplified description, let’s dive a bit deeper into revenue management. Focused on predicting demand and optimizing price and product/services availability, revenue management applies data analytics to increase profitability. This is accomplished by predicting customer behavior, fine-tuning product and services pricing, and adjusting the availability of products and services. This is done to create additional revenue and maximize profitability.
Is Revenue Management Right for all Industries?
Revenue management is emerging as a popular strategy for organizations across all industries, including software-as-a-service (SaaS) and recurring revenue businesses. Some of these enterprises take it a step further and implement revenue operations (RevOps) methodologies.
Revenue management, however, has a few caveats that make it more beneficial for some industries than others. To get an idea if a revenue management strategy is right for your organization, look at the following conditions that need to be met for revenue management to deliver on its profitability expectations.
- Whether services or products, you’re limited by a fixed number of assets available for sale
- Customers are willing to pay different amounts for your products and services
- You’re able, with some level of precision, to predict changing levels of demand for your products and services
If you’ve answered yes to the above, read on to learn the importance of revenue management and its methodologies.
Revenue Management: Its Importance and Strategies
The financial benefits of implementing a revenue management strategy are obvious. When done right, it boosts your revenue and profitability. However, there are other advantages that revenue management provides. To start, it enables you to make data-driven decisions which means decisions made will be based on facts. This allows you to set yourself apart from the competition.
Since research and forecasting are at its core, organizations that onboard revenue management methodologies gain additional benefits. These can be better understanding what customers expect from the products and services you provide; the ability to develop a competitive pricing strategy that will draw customers to your company and away from competitors; the knowledge to expand into new market segments; and better coordination and functionality between internal organizational divisions.
To realize these benefits, adopt the following six strategies:
1) Understand your industry and target market
This includes having an in-depth understanding of your competitors, both within your specific industry and competitors that could potentially impact your business.
2) Choose the right pricing strategy
There’s no shortage of available pricing strategies. Keep in mind that the pricing strategy needs to be for the current moment and approached on a value-added basis. Successfully used pricing strategies include forecast-based pricing, price-per-market segment, discounts and special offers, packaged offerings, and up-sales and cross-sale initiatives.
3) Align cross-departments
To achieve the common goal, it’s imperative to build a revenue management culture. Create awareness and ensure that all departments work in unison to ensure consistent messaging and experiences for customers.
4) Track customer behavior
While historical data is important, you also need to stay on top of changes in customer behaviors and purchasing habits.
5) Emphasize value over price
It’s often thought that customers gravitate to the lowest cost option. While true in some cases, this isn’t always the case nor is it always advisable. By emphasizing value rather than price, you’ll change customer behavior by delivering better products and/or service levels, and ultimately better customer experiences.
6) Use automation
Don’t overlook automating specific tasks and functions. This is a significant contributor to the success of your recurring revenue management strategy. We’ll take a closer look at automation in the next section.
Take the Guesswork out of Recurring Revenue Management
At the core of successful recurring revenue management strategies lies technology. You need the ability to automate billing, manage complex products and pricing models, modify billing contracts, and change revenue recognition schedules. Doing this manually is not only time-consuming but prone to errors.
By automating recurring revenue management, you’ll gain the ability to quickly and easily offer flexible billing and revenue recognition schedules. You’ll also appeal to a broader customer base by offering pricing and subscription plans that meet a variety of customer needs. It aligns all internal stakeholders – sales, finance, customer service, finance, executives, and even partners. Plus you’ll gain real-time visibility into current and projected revenue for better decision-making, and improve customer satisfaction by minimizing billing errors. The right recurring revenue management system enables you to tailor your billing models to meet changing needs, maximize revenue opportunities, improve cash flow, and quickly adapt to changing industry and customer needs.
Why Companies are Choosing BillingPlatform for Recurring Revenue Management
BillingPlatform’s enterprise-ready billing and revenue management platform provides full lifecycle support of the entire quote-to-cash (Q2C) process – all on a secure, next-generation cloud platform. With unparalleled flexibility, enterprises can make the most of their recurring revenue management strategy to differentiate in the market, maximize profitability, reduce operational costs, and improve the customer experience. But don’t take our word for it…
Recently two global leading companies selected BillingPlatform to transform billing and recurring revenue management. Here’s what these leading organizations had to say about BillingPlatform and our industry-leading suite of offerings.
“BillingPlatform will be a key strategic enabler of our future growth initiatives based on its ability to handle our sophisticated business, easy-to-use interface, scalability, and its enterprise-class security to help our mobile operator customers more easily manage and consume our infrastructure and services to optimize networks, said Lena Bettermann, Head of Supply Chain at Vantage Towers.”
“With BillingPlatform, we will be able to automate complex billing and pricing structures, support our ASC 606 revenue recognition requirements and optimize our invoicing and rebate management processes which will be a key driver of our future growth initiatives, said Frank Davis, Senior Vice President, Digital Transformation at Emburse.
Are you ready to join these global industry leaders and put your recurring revenue organization on track? Get ready to increase revenue and improve profitability through revenue management. Let our team help you start that journey!