Getting to Know Revenue Growth Management
The only constant in today’s economy is change. From customer expectations, to market trends, to business operations, everything is evolving. Businesses following the right strategies are experiencing a growth boom. Unsystematic growth has become unreliable. Businesses may never know how much revenue might be leaking from overlooked nooks and crannies.
The purpose of the revenue growth management strategy is to steer a business in an organized, and sustainable direction. After all, no business wants its success to be short lived.
In this blog, you will find out the meaning of revenue growth management, its importance, components, and challenges. Also get to know why a revenue growth management platform is necessary for your business.
Beginning from the basics:
What is Revenue Growth Management?
Revenue growth management (RGM) is a business strategy centred around maximizing revenue, and driving sustainable profitability. In simple words, it means that to expand in an unpredictable market landscape, a business has to employ various tactics to maintain a steady cash flow. These are the functions that need to be streamlined for optimum revenue growth: pricing, product launch, marketing, service innovation, customer retention etc.
In short, RGM indicates that all of a business’s processes must be aligned, and working toward a unified goal. And that goal is to boost profitability in a sustainable manner.
Why is the Revenue Growth Management Solution Important?
Revenue Boost: The most straightforward benefit of having RGM in place is increased revenue. Companies optimize their operations in such a way which reduces customer churn. Customer retention is key to unlocking a stable MRR, and ARR.
Enhanced Insights: RGM is a data-driven approach. It relies heavily on reports and analytics so that businesses stay up to date with latest developments. Market research is advantageous also because companies can better understand user behavior patterns, their changing needs and expectations. It also allows businesses to discover untapped markets.
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Improved ROI: Planned and monitored business growth leads to helpful insights. One such insight is the business’s best performing strategies, or promotion channels which drive the most ROI (return on investment). Companies can find out, and make the most out of these channels.
Service Innovation: Conducting RGM empowers businesses to design their products or services according to the customers’ demands. Continuous market research enables you to keep upgrading your services to match the needs of your audience. Consumers are likely to purchase your offerings when they find them valuable.
Profitability: RGM does not only help businesses in creating a stable revenue stream. It also continuously optimizes it to generate as much profit as possible. This is achieved by informed strategies to cut down on costs, and boost sales.
Effective Resource Allocation: Businesses have far moved on from relying on trial and error for success. It is risky, heavy on expenses, and always unpredictable. Therefore, RGM stresses upon a data-driven, and concise approach. This helps companies with better resource allocation, and minimizes resource wastage.
The 5 Components of Revenue Growth Management
1. Pricing
Pricing is an integral part of practicing RGM. It is a huge factor in deciding what groups of customers your company would be targeting. For instance, if a company charges a lot for its services, it is likely that those services are not meant for an individual user. That business would most likely come under the B2B (business to business) category.
On the other hand, offering diverse prices for products and services could attract a plethora of customers. In this way, effective pricing strategies determine how much revenue your company would generate. It is a popular practice for companies to offer plans catering to each class of customers: customers with low and medium budgets, and customers who can spend more.
Offering diverse pricing models is not as easy as it sounds. That is why businesses need a revenue growth management platform to manage such complexities. At SubscriptionFlow, we take care of all your billing scenarios, with AI-driven mechanisms.
2. Promotions
Promotional campaigns are a great strategy to boost short-term revenue, as well as to gain long-term customers. Consumers are likely to purchase goods and services when they are on discounted prices. Similarly, coupons, loyalty point programs, milestone rewards, and bundled discounts are all effective in enticing customers your way.
Businesses can employ either of these promotional campaigns, and then analyze its performance over time. Once they identify which campaign has performed the best, they can leverage it to maximize profit.
3. Product Optimization
RGM places significance upon product innovation and management. Businesses should optimize those services on a priority basis which are the most in-demand. Highlighting products according to shoppers’ preferences is a great way to acquire more customers, and keep the current ones loyal to your brand.
Product optimization also enhances the brand portfolio, and adds more integrity to the company’s name.
4. Channels
Consistent monitoring of sales and marketing channels overtime can give companies informed insights into the performance of each channel. They can identify the channels which are getting them a better ROI. These channels can further be optimized for increased outreach and impact.
5. Customer Segmentation
Dividing customers into groups based on their budgets, locations, professions, individual preferences and more, can help businesses tailor their marketing efforts according to that. Companies can personalize their messages to the customers based on their interests. Personalized messages carry a sharper impact than the general ones.
Via advanced consumer behavior reports, businesses can identify customer interests. Which services they interact the most with, and what appears to be in their wish lists. Personalized offers and discounts can then be extended to these customers to get them onboard.
Customer segmentation is not limited for communication purposes only. In fact, companies can even strategize their pricing according to that. For instance, customers living in certain locations can benefit from cheaper pricing owing to their unstable economy. Similarly, companies might attract a younger audience by giving out special student discounts.
How is Revenue Growth Management Relevant to SaaS?
Our discussion of the RGM model above is highly relevant to the SaaS industry as well. Since the SaaS businesses mostly run on subscription-based models, RGM becomes an even more essential framework for them to follow.
Subscriptions are a great way for businesses to generate stable revenue streams. This is thanks to their customers who show their commitment by subscribing, and then renewing their subscriptions. To take this revenue to the next level, RGM plays an important role. These are some ways how RGM impacts SaaS operations:
Boosting Recurring Revenue
SaaS businesses generate recurring revenue through recurring subscription payments. Implementing RGM can maximize a company’s MRR and ARR.
SaaS businesses can enhance their pricing by incorporating the dynamic pricing SaaS strategies. Dynamic pricing includes a range of pricing models such as tiered, volume, usage, and group-based pricing etc. Those models can be adopted which align with your SaaS company’s goals the most.
Offering consumers the pricing they perceive as ‘fair’ can be a game-changer for your company. The longer a customer commits to your services, the greater their LTV, and the more the recurring revenue you generate.
Customizing Promotions
RGM emphasizes on detailed customer behavior study. It enables SaaS businesses to tailor their offerings based on customer preferences. Consumers can be provided with those offers: promotions, coupons, free trials, free guides etc. which address their pain points.
Moreover, they can be sent messages personalized to their needs, as we discussed previously. The timing of these messages or emails can be optimized, so that they reach the users when they are generally active on the internet. These kinds of strategies foster customer retention.
Furthermore, these strategies are effective for churned customers as well. Personalized offers are likely to encourage them back into your subscriber base. SubscriptionFlow offers expert reactivation handling to help you win back lost customers, for increased revenue.
Upselling/Cross-Selling
With an RGM plan, SaaS companies can get smarter insights into their sales funnel, promotion channels, and customer activity. This data facilitates the companies to upsell and cross-sell their services.
Companies can identify users who are likely to purchase more. They can also point out which of their service features are not being fully used. These insights can assist them in crafting offers which increase the purchase of these features. Or plans which encourage purchasing additional services.
Moreover, SaaS businesses can come up with bundled offers as well. These packages can include the core features that customers want, along with some complimentary features. Buying the whole bundle would cost users lesser than buying each feature separately. This is likely to entice users into buying the whole bundle.
Scaling
Following the RGM approach can help businesses scale in a well-planned and organized manner. Also, RGM’s components such as pricing and resource allocation are of immense importance in this regard too.
SaaS businesses benefit from dynamic pricing models to acquire customers around the globe. SubscriptionFlow, following the principles of RGM, allows businesses to offer multi-currency support. Accepting multiple currencies helps companies establish themselves in world markets.
Additionally, businesses can focus on optimizing their digital products and services according to the regions they are the most popular in. This facilitates them in achieving a stronghold in the markets of those regions.
Hence, these are some major ways in which the RGM approach is fruitful for SaaS businesses. It aligns different departments of a company to get them on the same page with regards to data, revenue goals, and KPIs tracking.
Pain Points of Implementing Revenue Growth Management
Data Integration
Collection and integration of data across different departments is easier said than done. It is important to remember that RGM is a data-driven approach. This means that any inefficiencies in data collection impact RGM’s success a lot.
Manual data collection is especially unreliable owing to human errors. Moreover, it is difficult to derive accurate insights from data without being certain of its integrity. Therefore, an advanced and reliable subscription management software like SubscriptionFlow is needed to provide high-quality, and accurate data insights.
Compliance
It is challenging to scale your business, and tap into your desired markets without considering local and international regulations. Failure in complying to service regulations can cost you penalties. Penalties do more than financial harm. They can potentially damage your brand image.
Navigating the world of compliance can be very demanding. We have regulations such as the SaaS sales tax which keep on changing on a regular basis. Geographical locations also impact compliance a lot. Every country has its own jurisdiction.
In order to overcome these hurdles, RGM platforms like SubscriptionFlow exist. We automate tax compliance and calculation based on different regions. Additionally, we are ASC 606 and IFRS 15 compliant. We provide the services of revenue recognition, and prediction by adhering to the standard revenue recognition principle.
Unwilling Employees
It is natural for businesses to face resistance to change when adopting innovative practices. Some departments might favor the traditional methods of handling things. However, overcoming this challenge is a major success.
Businesses can carry out team learning and training sessions with experts to educate their people on RGM. They can be made aware of all the benefits they can reap. Getting everyone on board is important for a hassle-free and enthusiastic strategy implementation.
Resource Limitations
Resource constraints are a very realistic hurdle when it comes to RGM implementation. It takes a good amount of investment to adopt the technology, deliver the training, and purchase the software for effective RGM operations.
Luckily, SubscriptionFlow has the solution for this. We provide subscription plans catering to small and medium-sized enterprises, so that they can benefit from the RGM technology on a budget.
How Does SubscriptionFlow’s Revenue Growth Management Platform Help You?
Since you have learned about the importance of RGM, it is time to delve into its implementation. SubscriptionFlow equips you with all the required tools to avoid RGM’s pain points. Here are some of our stellar features to fuel your revenue, as well as profitability:
- Automated recurring billing and invoicing to eliminate errors and minimize revenue leakage
- Multiple pricing models and multi-currency support for the creation of flexible pricing strategies
- Automated revenue recognition and tax-compliance for you to scale globally
- Advanced reporting and analytics to easily track KPIs and monitor RGM performance
- Automated discounts and coupons billing to streamline your promotion campaigns
- Customer Reactivation and Retention to grow and maintain steady cash flows
- PCI-DSS and HIPAA compliance for secure payment processing, and data protection
Book a demo and try our RGM platform today. Become a part of our happy subscribers, and scale free of worry.
