Revenue Growth Management; Your Path to Sustainable Topline Growth

Have you ever had all-you-can-eat shrimp at Red Lobster?

If you have, you have experienced firsthand what poor Revenue Growth Management tastes like.

Revenue Growth Management (RGM) is a function that looks holistically at an organization and balances different growth strategies or levers to increase sustainable topline growth. It sounds straightforward but becomes complex as it involves cross-department collaboration and embedding a new discipline for making decisions into the operating cadence of your business.

Consider the case of Red Lobster, where management’s goal was like that of many current organizations looking to accelerate top-line growth – drive more traffic, increase sales, and ensure this promotional revenue offsets the costs, leading to improved profitability. However, this instance underscores the perils of failing to understand all the levers necessary for sustainable growth as an unbalanced promotion of all-you-can-eat shrimp without considering the cost offset led to bankruptcy.

Revenue Growth Management Strategies

A simple way to think about improving Top Line Growth is by pulling one or all 3 of these levers:

1. Price 
2. Volume
3. Mix

Price

Adjusting your price can be used as a strategy to manage revenue growth.

Understanding the sales channels you operate in, your competitive set and your product price elasticity are critical components to making this strategy work.

One of the main blind spots I often see companies make when thinking about the price lever is around cannibalization.  They fail to consider the impact of trading consumers within their existing portfolio of offerings or having them switch to a competitor with a better value proposition. This can be an expensive lesson, so tread cautiously when thinking about pulling the price lever without having a sensitivity analysis of the impact on your financials. 

Volume

There are only 2 ways (that I know of) to sell more of something:

1. Increase Distribution
2. Increase Rate of Sale

While this is overly simplistic, understanding the impact of these two volume drivers can have a material impact on your results.

If we land a new customer to carry our product, we have increased distribution. If we promote or optimize our product or service and better align it to consumer and customer needs, we may be rewarded with an increase in the sale rate.

There are several strategies to attack these 2 volume drivers, but the first steps are identifying them, prioritizing the right ones and resourcing an action plan to deliver a meaningful ROI.  

Mix

Do you understand your product profit pools? Unfortunately, many organizations can’t answer this question with a definitive YES! Yet, In all the organizations I have worked with in all different industries, I have yet to see the Pareto Principle discriminate, meaning it is most likely similar to your organization in that 80% of your revenue comes from 20% of your products.

A more comprehensive approach to optimizing your Mix is through a Brand, Pack, Price, Channel Strategy or (BPPC). Companies use a Brand Pack Price Channel (BPPC) strategy to optimize their product offerings across different brands, packaging formats, price points, and distribution channels. The strategy aims to maximize revenue and profitability by tailoring products to meet the needs and preferences of various customer segments in different channels.

If that sounds too complex at this stage of your organization’s journey, focus on finding ways to sell more of your most profitable items and less of the ones you make less money on. Mix can be a powerful lever that sometimes takes longer for results to appear on your scorecard. When you see it, you won’t be able to deny its impact if executed effectively.

Revenue Growth Management Can Improve Your Business

A not-so-Bold Prediction: Organizations resourcing an RGM function in their business are poised to win and do it consistently.

This department is meant to be self-funded, and from my experience, the payback can be immediate and material. If you want to discuss RGM in more detail and how to stand up this function in your organization or optimize your current one, reach out.

 

Andrew Stordeur

Andrew Stordeur is a partner at Lighthouse NINE in Calgary, where he co-leads the firm’s Strategies for Growth practice. He also serves clients in the areas of Leadership Development and Coaching, High Performance Teams, Change Management, Sales and Supply Chain Effectiveness.With more than 20 years of progressive senior leadership experience, Andrew brings a wealth of practical knowledge that allows him to leverage a world-class tool kit. Andrew has worked with several Fortune 500 companies, including rapid-growth start-ups and mature businesses. Andrew’s enterprise-wide approach has allowed him to optimize strategies for growth through building and enabling effective teams. His experience includes President & COO of Nasdaq listed SNDL, Chief Sales and Customer Officer for the Molson Coors Beverage Company and leading national grocery, drug and convenience sales channels for Mars Canada.Andrew is a practitioner with a proven track record in building businesses, brands and leaders to their greatest potential. His unique blend of strategic and people-focused talents invokes passion and commitment to drive personal and organizational success. He believes in key leadership operating principles in the following areas – sales force effectiveness, route to market, revenue management, category solutions, end-to-end supply chain and manufacturing.At Lighthouse NINE, Andrew collaborates closely with his colleagues, whose team has an extraordinary dedication to ensuring clients are thrilled with winning service and delivering consistent, sustainable results.

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