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Strategic Revenue Management

In the last blog we discussed the importance of food safety. This topic has grown in importance over the past few years. Whether you’re a private or public company, your customers expect you to act in a certain way with regard to the safety of your products & establishment. With the transparent society we live in today, thanks to cell phones and social media, everything companies do and say is public and immediate. And this has a big impact on your bottom line. As a result, how you price your products and services is paramount to the success of your company.

Over the past few years, the topic of Strategic Revenue Management has grown in importance. More recently things like supply chain issues, commodity costs, gasoline and labor costs have dominated the headlines. Inflation is expected to continue at least through 2022. Most of the growth that we experienced over the past few years has come from lower income households. These people will be most affected by inflation. As a result, many people are predicting a recession over the next year or two. If we look at consumer behavior in past recessions, we can see that consumers have taken multiple actions to cope and as a result both manufacturers and retailers will have to adapt.

Strategic Revenue Management typically revolves around the following:

  1. Creating mutual value for customers, consumers and your company.
  2. Selling the right product, to the right customer, at the right time, at the right price.
  3. Having a financially sustainable approach to drive long term consistent profit.

Strategic Revenue Management is NOT:

  1. Concentrating on actions that only drive profit for your company.
  2. Over reliance on promotions to drive short term revenue.
  3. Top line sales growth at ANY cost.

Whether you’re an on-premise or off-premise retailer, you need to “see” how your customers view your business. It all starts with the products & services that your sell to your customers. Do you know all the inputs that go into delivering these? You should obviously know the Cost of Goods Sold (COGS). Many people use this “first cost” as the basis to make many of their decisions. However, smarter companies take all the things that need to happen from time, convenience, safety and effectiveness into account to make an informed decision.

Think about things like:

  • Trade terms with suppliers & customers.
  • How will you promote your products & services?
  • What kind of promotional planning will you do?
  • Do any standards exist that you can benchmark against?
  • How will you price your products (MSRP & promotion)?
  • What are the price point thresholds in each channel?
  • How are you priced versus key competitors?
  • Do you cover the key price tiers to meet different customer needs?
  • Can you provide different sizes to encourage trade up?
  • Offer seasonal or limited offerings to drive basket size.

How will you handle price increases?

When you promote your products think about:

  • Joint business planning to insure alignment. 
  • Set mutual targets with your customer.
  • Understand how your products “fit” within their category plans.
  • Understand assortment & best practices within each retail channel.

One wrong decision can cost you short term & long term.

You need to make sure you understand how the products & services you sell are produced, stored, shipped, consumed and disposed from a total cost perspective. If you take a stakeholder view of your business and consider price a strategy (that is why we call it Strategic Revenue Management) it will positively impact your bottom line!

And remember, Marketing is a race with no finish line.

George Latella teaches Food Marketing at Saint Joseph’s University in Philadelphia. Food marketing which is one of the largest majors at Saint Joseph’s University is celebrating its 60th anniversary. George does Sales & Marketing consulting & is also a partner in Beacon Marketing group which provides Marketing planning, research, and e-commerce/direct marketing communications for food and beverage companies. George can be reached at glatella@sju.edu or 610-660-2254.

George Latella

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