When CEOs ponder how best to grow their company’s top line, they often think first of the next great product or service, a quick acquisition, geographic expansion, or perhaps extending an already successful product line.
But these aren’t always the best options for organic revenue growth. For starters, each carries a degree of risk that might offset any gains.
A blockbuster new product, for example, could dramatically push up profits but the downside is that 83 percent of new products never become financially viable. Similarly, 44 percent of internally launched startups fail, and those that survive take an average of seven years to become profitable.
Mergers and acquisitions are exciting and loaded with potential, but also statistically risky. One Harvard Business Review study of acquisitions showed that the average acquiring firm experiences a loss of 10 percent of its wealth in the first five years of the combined operation.
An easy way to boost revenue is through extending a product line. Adding functionality, colors, different bundling and packaging to a successful product expands the potential market. The risks are relatively low, but the incremental costs are often enough to keep these efforts from significantly moving the needle.
So if these options either carry too much risk, or not enough impact, what’s the answer?
Revenue Optimization. Revenue Optimization uses Big Data and predictive analytics to forecast customer demand and optimize the price and availability of a company’s existing products. This strategy has high potential, low risk and is a more effective utilization of a company’s existing assets, providing immediate organic revenue growth. Fortune 500 companies have leveraged this capability and typically generate 3 to 7 percent in organic revenue growth.
Selling the right product to the right customer at the right time for the right price, is essential to growth. Revenue Optimization can generate the greatest ROI of any growth strategy.