How revenue management forces the alignment of the value chain

Revenue management and the value chain
Revenue management allows companies to forecast demand, and make better decisions on pricing strategies, inventory management, and capacity planning

Why should you and your business care?

Simply put, increasing revenue is essential for long-term profitability and success.

Revenue management helps companies maximize revenue by using various pricing and inventory strategies. 

Revenue management also helps your company to better understand your customer base and how to meet their needs. By analyzing data on customer behavior and preferences, your company can develop targeted pricing and inventory strategies that will appeal to different segments of their customer base.

Related content: Customer experience and how to improve it in 7 easy steps

Another important aspect of revenue management is its ability to help you better manage your costs.

By effectively managing inventory levels and using dynamic pricing strategies, your company can reduce costs and increase revenue.

Additionally, by using distribution and logistics strategies, you can reduce the cost of delivering products to your customers, which also increases revenue.

Revenue management also helps you to be more responsive to changes in the marketplace.

By being able to quickly adjust pricing and inventory strategies in response to changes in demand, companies can ensure that they are capturing the maximum possible revenue from each sale.

In addition to these, Revenue management ties into your value chain because it allows you to forecast demand, and make better decisions on pricing strategies, inventory management, and capacity planning. This can enable companies to avoid overbooking, stockouts, and price undercutting, which can lead to lost revenue.

Revenue management through the entire value chain

We approach revenue management as a process of maximizing revenue through the use of various pricing and inventory strategies.

We know this is a critical component of a company’s overall business strategy and is closely aligned with the value chain.

Under this model, you need to analyze and measure the various activities that your company engages in to create and deliver products or services to its customers.

In any production company, like yours, the value chain is made up of a series of activities, including inbound logistics, operations, outbound logistics, marketing and sales, and customer service.

Each of these activities plays a critical role in creating value for customers, and revenue management is closely aligned with each of them.

Inbound logistics

This is the process of receiving and storing raw materials, and it is closely aligned with revenue management through the use of inventory management strategies. By managing inventory levels effectively, your company can ensure that you have the right amount of materials on hand to meet customer demand, while also keeping costs low.

This allows you to charge higher prices for your products, which increases revenue.

Operations

This is the process of transforming raw materials into finished products, and revenue management is closely aligned with this activity through the use of pricing strategies and product portfolio.

By charging different prices for different products or services, you can ensure that you are capturing the maximum possible revenue from each sale.

This can be done through the use of dynamic pricing, or through the use of differentiated pricing, where different customers are charged different prices based on factors such as their location or their purchasing history.

Outbound logistics

This is the process of delivering finished products to customers, and revenue management is closely aligned with this activity through the use of distribution and logistics strategies.

By managing the distribution of products effectively, you can ensure that you are reaching the right customers at the right time, while also keeping costs low.

Marketing and sales

This is the process of promoting and selling products or services to your customers, and revenue management is closely aligned with this activity through the use of marketing and sales strategies.

By effectively promoting and selling products or services, you can increase demand for your products, and drive customer satisfaction.

Customer service

This aspect of revenue management is often neglected or overlooked.

This is the process of providing support and assistance to customers, and revenue management is closely aligned with this activity through the use of customer service strategies.

By providing excellent customer service, you can build strong relationships with your customers, drive brand loyalty and in consequence reinforce customer experience.

Related content: How ecommerce has shifted the B2B customer experience

The value chain misalignment hurts your revenue

Revenue management is closely aligned with the value chain, with each activity playing a critical role in creating value for customers and increasing revenue for the company.

By effectively managing inventory, pricing, distribution and logistics, marketing and sales, and customer service, you can ensure that are are capturing the maximum possible revenue from each sale.

One thing that we have learned in decades of helping FMCG companies, is the inefficient flow of information and disconnection between part of the value chain breaks the virtual cycle of this revenue management methodology.

The correct orchestration of a strong and continuous value chain is essential for long-term profitability and success in today’s competitive business environment.

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