Last month I wrote about the cruise industry’s full-ship mentality; their no exceptions, no excuses, all-hands-on-deck drive to sell every single cabin on every single cruise.
That article struck a chord. The feedback I got was, “Makes perfect sense. How do I do that at my business?”
The answer is: There are lots of ways, depending upon the unique characteristics of your business. But as the Chinese philosopher Lao Tzu said: “A journey of a thousand miles begins with a single step.”
And when it comes to revenue optimization, the first step is to prioritize revenue. To say that every company exists to create revenue sounds obvious. But it’s not. In business, we talk a lot about the bottom line. But we don’t talk about the top line — the revenue line — nearly as much.
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Senior management is all over business processes like distribution management, supply-chain technology innovation, manufacturing efficiency and cost control. But the revenue process is still one of the least well understood, under-analyzed and inefficient areas of most businesses.
Which is a mistake. Because if your business has a profit margin of 20 percent, a modest 3 percent efficiency improvement in revenue generation will increase profits by 15 percent, which is huge.
That’s why a new C-level executive role has been gaining traction in corporate America, the Chief Revenue Officer, or CRO. This new executive office is responsible for all revenue generation activities in a company and is accountable for getting the people charged with advertising, digital marketing, sales, PR, customer support, social media, pricing and revenue management all rowing in the same direction.
The CRO is the person with their finger on the pulse of all revenue activities and who has the analytical basis to forecast the revenue impact of various trade-offs such as: adding sales reps, expanding PR initiatives, increasing the pay-per-click advertising budget or funding additional webinars.
While Chief Financial Officers (CFOs) are responsible for controlling expenditures and for tracking the overall financial health of a company — including its relationships with bankers and investors, the CRO is responsible for stitching together and measuring the performance of all activities that touch future revenues.
A successful CRO should be able to identify a company’s customer segments and create profit-maximizing product versions and pricing strategies for each. The CRO should ensure that sales strategies aim to sell each product to the most valuable customers through the most effective distribution channel possible. The CRO should also ensure that investments in marketing drive incremental revenue and clearly meet return-on-investment targets.
To do this, the CRO works closely with the CEO and executive team to translate the company’s vision into a strategy that will open new markets and sales opportunities, accompanied by a holistic execution plan that aligns all relevant revenue-generating functions.
A good CRO measures effectiveness of all revenue-generating activities, helps to create market positioning and competitive advantages and drives toward the continual improvement of sustainable revenue results, both near-term and long-term.
Some revenue performance gurus estimate that hiring a CRO can deliver revenue improvement and efficiencies as high as 10 percent. I wouldn’t necessarily bank on that. But in my experience, the perspectives of a revenue performance professional can easily increase revenues by 4 percent to 7 percent annually, almost all of which falls to the bottom line.
So, if you’re intrigued by the focus and intensity of the cruise lines’ full-ship mentality, you may want to begin your search for a Chief Revenue Officer. Or, find someone who can get you started on Lao Tzu’s journey of a thousand miles. Or, in this case, many thousands of dollars.
Adam Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a consulting firm that specializes in designing and executing innovative revenue optimization strategies. He can be reached at firstname.lastname@example.org, or via the company’s website at PeakRevenuePerformance.com.