Revenue Analytics employs more than 50.
Company going on eight straight years of growth in market data.
Zach Cross is a data miner. As managing partner of At· lanta-based Revenue Analytics, he runs a company that crunches millions of numbers that can provide clients with critical insights to make smarter decisions – and more money. The 50-plus employees include a “chief scientist” and others with advanced degrees in math, engineering and consumer science. They tackle such issues as how car companies should price new models and promote them, and when orange juice manufactur· ers should plan to buy the fruit they’ll need to squeeze to meet consumer demand.
Q: Explain what your company does.
A: We use market data to predict trends, ultimately informing business decisions. To me, it’s turning information into wisdom. There’s a slogan, “In God we trust; all others must bring data.” We help our part· ners make better pricing and inventory allocation decisions.
Q: Do you sell companies the software?
A: No. We crunch the numbers. We are a consulting company that uses technology. We have a strategy consulting group, an operations research group, and a data and engineering group. We learn the client’s business. We collect as much data as we can. We analyze it, creating
forecasting algorithms – market response models. We measure customer response to various circumstances.
Q: Would you please give an example?
A: We are working with a large auto manufacturer. There are a few areas of focus – how do they set their suggested manufactured retail price and incenives. What happens if they offer a $2,000 cash-back deal,
or financing incentives? Large auto companies spend oil
lions a year on incentives. We look at historical data and other factors to help them understand the effect of incentives on transaction price. Knowing how people have responded in the past under various circumstances helps.
Q: Who are your customers?
A: Right now we have clients in automotive, communications, retail, consumer package goods, hotels, travel, media, manufacturing and distribution. Our clients are Fortune 1000 companies with over a billion a year in annual revenue. At any point in time we have eight to 10 active projects going.
Q: What did you do for those clients?
A: We helped them improve pricing, promotion and inventory allocation decisions. These types of improvements typically result in a 2 percent to 7 percent increase in revenue.
Q: How important is data on how the overall economy is doing in your mathematical models?
A: A lot of times macroeconomic data helps for overall, longrange forecasting, but it’s not eno.,ugh. We do a lot of work in hospitality, for example. The number of daily pricing decisions your average hotel has to make is mind-blowing – about 76,000. An average hotel has one person responsible for pricing decisions, such as negotiated rates, or howmuch inventory is needed for weddings. We look at expected demand, price sensitivity, how people respond when prices change, how competitors price. We ere? ate an analytical model, with historical data and competitive data. For example, if we go up $100, how much demand do you lose? We help them understand when and where to change pricing and by·how much.
Q: Would you please discuss your annual revenue and growth?
A: We are a private company, so we don’t give out those numbers. But we have been growing at roughly SO percent a year for the last three years. Every year since inception in 2005, we have achieved profitable
Q: What businesses are best suited to be your clients?
A: Large, highly complex businesses that would have a lot of data, where a slight tweak [in variables] could result in tens of millions of dollars.
Q: Do you have competitors?
A: Yes. We sit between the big strategic consulting firms on one side and software companies that would offer a pricing software.
Q: Have you been affected by the recession?
A: The short answer is no. We have been growing and hiring a lot of folks. For us, there are plenty of companies that realized they needed new ideas because historical practices were no longer producing the results they expected.
Q: What’s your biggest challenge?
A: Sales is always something of a challenge – getting people to understand and commit time, money and energy to solving these complex problems. I would say a more recent challenge is finding the right people.
Q: Would you please talk about your father, Robert Cross, who pioneered revenue management in the airline industry during the 1980s and 1990s, and then took the concept to hotels and other sectors?
A: He developed rigorous business processes for segmenting the market, forecasting the demand of each market segment and then opti· mizing discount seat inventory decisions. He came up with this approach while working at Delta Air Lines, just after deregulation. The first year of implementing this new approach resulted in over $300 million in increased revenue for Delta. (Robert Cross wrote the book, “Revenue Management,” in 1997.)
MEET ZACH CROSS
Job: Managing partner, Revenue Analytics
Education: Bachelor’s of business administration, University of Miami
Life-changing event: Quitting a well-paying, secure job and deciding to launch a start-up Currently reading: “Nudge:
Currently reading: “Nudge: Improving Decisions About Health, Wealth, and Happiness;” by Richard Thaler and Cass Sunstein
Favorite quote: “Seriousness is the only refuge of the shallow:· -OscarWilde