Volatility and uncertainty ruled the stock markets in 2015. Faced with sluggish organic revenue growth, many companies turned to mergers and acquisitions. According to Dealogic, 2015 M&A activity set a new record, surpassing $5 trillion in volume. In the aftermath of that consolidation, where will companies turn in 2016 for revenue growth?
Despite many forecasts of continued weakness in macroeconomic growth, savvy companies still have an opportunity to experience organic revenue growth. Here are three strategies underpinned by innovative Revenue Management capabilities that can help your company drive organic revenue growth and stay ahead of the curve in a volatile market.
1) Enterprise pricing systems. Although many companies have deployed better business intelligence and data analytics capabilities around pricing in recent years, there are numerous opportunities for improvement. Few companies consistently consolidate the right data, develop predictive modeling capabilities, and deploy sophisticated systems to recommend pricing actions to help inform decisions. These capability gaps result in lost profits from prices that are too low, or lost volume from pushing prices too high. By developing enterprise systems that support pricing decisions, companies have consistently achieved results in excess of 2-3 percent in organic revenue uplift.
2) Dynamic bundling. The concept of product bundling has long been known as a technique for driving sales and creating value perception with consumers. Yet there’s an even greater opportunity available for companies to take product bundling to the next level: Dynamic Bundling. The power of Dynamic Bundling combines traditional product bundling with detailed segmentation and new mathematical models that predict and price the products to bundle the most relevant offer to each customer. Dynamic Bundling can provide a fresh and much-needed revenue boost for companies struggling to show growth to questioning investors. For example, a national auto retailer leveraged Dynamic Bundling and pricing of premium packages and add-ons such as finance and insurance and saw a 7 percent increase in gross profits and a 6 percent improvement in product penetration from deploying this innovative Dynamic Bundling capability.
3) Marketing mix optimization. Finally, as companies allocate a significant amount of money to marketing, there remains a stark lack of science behind understanding the effectiveness of campaigns. Companies need a more sophisticated capability – known as a Marketing Mix Optimization – so that they can better understand which media vehicles work best and do more with the same amount of marketing dollars while driving return on investment to loftier heights. A successful Marketing Mix Optimization will normalize the data, where the analytics will control for the effects of pricing, promotions, seasonality, the latest trends, weather, and capacity.
An international retail company with 11,000 stores learned from Marketing Mix Optimization when and where it should shift advertising dollars from one vehicle, such as local TV, to others, such as national cable ads or digital ads. Making the recommended changes drove a 1 percent uplift in demand for the same total advertising spend.
These results prove that, despite a flat economy, forward-thinking companies can generate organic revenue growth. By implementing innovative Revenue Management capabilities, companies will see a significant uptick in organic revenue growth that will drive shareholder value and deliver the healthy returns that can stave off stock price volatility.