How improved revenue management could help your business stay healthy in FY 24
- Written by Carl Warwick, Regional Sales Director – Asia Pacific and Japan at BillingPlatform
Setting prices based on clients’ buying behaviours and willingness to pay can help you maintain and grow your marketshare and profitability in all sorts of times.
Is reviewing your pricing structure high on the agenda this new financial year? For many Australian businesses the answer is a resounding ‘yes’.
The cost of doing business is rising, with everything from electricity to office supplies becoming more expensive by the day. After many years of sluggish growth, wages, too, are on the up and up.
In the face of a severe skills shortage, businesses that want to continue servicing their existing client base, never mind bringing new customers into the fold, have little choice but to pay more for their people.
CPA Australia chief executive Andrew Hunter pulled no punches when he addressed the issue of talent shortfall, at a pre-Jobs and Skills Summit policy forum organised by The Australian Small Business and Family Enterprise Ombudsman in late 2022.
“Before the pandemic, skills shortages in the accounting profession were already an issue. The current situation is now critical.” He went on to say that “Tough economic times mean accountants are in huge demand but the homegrown supply of accounting and finance professionals falls far short of meeting this demand.”
Against this backdrop, businesses have two options: passing the increased costs on to customers; or absorbing them and allowing their profitability to take a hit.
Getting strategic about pricing
Instead of merely upping your rates by what feels like an acceptable percentage, it may pay to take a more holistic approach to the way in which you package, market and price your suite of services.
Implementing a revenue management strategy will allow you to eliminate much of the guess work associated with trying to sell the right offerings to the right clients, at prices they’re willing to pay.
The term ‘revenue management’ refers to the process of maximising revenue, by analysing and adjusting pricing and inventory data. Data analytics technology is commonly used to examine and predict the behaviour of individual customers, or segments of the target market. Successful revenue management occurs when a business offers the optimum product and pricing structure; thereby upping its chances of generating repeat business and engendering long term loyalty.
Here are some of the benefits that can result from adopting this approach.
Understanding customer requirements
Do you know what your clients are seeking from your organisation and how satisfied they are with your current offering? Unless you poll them regularly, the answer is probably ‘not all that well’. A revenue management strategy can remedy that deficit because it entails ongoing data capture and research. Increasing your understanding of your target market’s expectations will enable you to modify and enhance your suite of services and introduce new offerings that address unmet and emerging needs.
Smarter market segmentation
That market intelligence will also allow you to identify and target potentially profitable new market segments and make your services available to customers in different ways.
Rather than selling your services on an hourly or project basis, for example, you may choose to adopt a usage-based pricing model. This might mean clients pay a monthly or annual charge for ongoing access to advice, along with a separate fee reflecting their usage level over the period.
Alternatively, you could decide to utilise the data you collect to introduce dynamic pricing. Just as ride sharing services such as Uber and Lyft charge more than the regular upfront fare when demand is high and drivers are in short supply, you might opt to offer prices which rise and fall in line with market demand.
More competitive pricing
Diving deep into the data may also help you to decide what those prices should be, if you’re to gain market share and increase profitability. It can be a delicate balance to strike and, depending on the nature of your practice and where it’s at in its business life cycle, you may decide to prioritise one of these goals, at the expense of the other.
Knowledge is power and having that knowledge at your fingertips allows you to make the choices that will propel your organisation in the right direction.
Turning to technology
None of these things are possible without the right tools – cloud-based revenue management software that covers the revenue cycle from end to end and integrates seamlessly with any major ERP solution that powers your business.
It’s foundation technology that allows you to capture and consolidate usage data, integrate it with systems that track and manage your customers and extract actionable insights to inform strategic decisions about services and pricing – decisions that will help your business meet its key performance indicators.
If you’re serious about achieving productivity and growth in the upcoming 12 months, it’s an essential investment that’s likely to pay for itself many times over.
