When management is mentioned, the first thing that comes to mind is effectively engaging all available resources to achieve set goals. For every business, these set goals include profit, brand awareness, growth and expansion. It means the same for a fitness trainer.
Revenue Management, as the name implies, is about making the most of available resources to maximise the company’s revenue. It is 'selling the right product to the right customer at the right time at the right price' -Robert Cross (1997). This definition has a lot of ‘right’ in it to be wrong. However, business trends have shifted since the time this definition was coined.
Revenue management is about making sales and profit in the presence or absence of demand. It also seeks to minimise loss incurred as seasons and market trends are changing. It is different from your pricing strategy because it is not just about every time you makes sales, but also about the time you don’t make sales and the time it takes you to make sales.
Generally regarded as an art and a science, it requires that you critically examine and creatively put into use all your resources in generating revenue. For your business to run effectively, you need more than a good pricing strategy for your product and services. You need a system in place that ensures revenue generation.
For example, Hotels have to generate enough revenue to run their facility and make profits. We know this is important because their rooms will not be fully booked every day, yet their rooms still need maintenance. Revenue management is about how when the room is occupied it can cater for the day when it is not, or that rooms that are occupied can cater for rooms that are not. The Irony of revenue generation is that it is not about increasing prices to make more profit. It is that money keeps coming in.
Revenue management is an all-inclusive field that encompasses pricing, marketing, maintenance and sales. It is known to improve returns by 6% - 10% and helps to focus on growth through effective use. Here are 5 Revenue management strategies to consider for your business.
Consider what is obtainable in your industry and let it guide you. Trends are fast-paced and fast-changing. You must take advantage, or as the case may be, a cue from what’s going on in your industry to position your business to generate revenue. Remember, it is not just about comparing prices. You also have to consider their management practices in generating revenue.
While it is good to maintain standard pricing online and offline, revenue management leads you to do otherwise. Customers online are more sensitive to price than walk-in customers. Selling at the right price to the right person is that you consider this consumer behaviour and employ it to generate revenue.
Cancellation and Refund Policies
This is inconvenient for every business. Even if no loss is incurred, as in the case of the customer bearing the extra charges, a sales transaction is reversed. Money is leaving, and there is a plus one to the inventory. Set up policies that protect your revenue in the case of cancellation or refunds. Arline companies usually allow their planes to be overbooked to cover up for flights cancellation. That way, when someone cancels, there is a paid customer ready to take their seat, the plane can still fly, at full capacity, and there is no loss of revenue.
Events and Holidays
Even if you deal with everyday products and services like food items - we all eat every day, there are times when people are willing to pay more and purchase more. Every industry has its season, and it is wise that you leverage this for Revenue management. Hotels can take advantage of the holidays when people travel. The goal is to increase revenue. The way to do that might be to reduce their charges and get every room booked. It might be to increase the price, communicate class and attract the highest paying customers. Again they have to consider 'Is this a holiday everyone can afford to come? Is it a holiday for people who have money to spend?' The key is the right customer at the right price.
As already established, revenue management relies so much on customer behaviour. The company's customer engagement and sales record can be used for demand forecasting. Demand forecasting is predicting the level of demand for a product /service over a period based on available data detailing the demand for that product /service in the past. It can influence the company's budget, thereby conserving funds.
Every industry is different, as are the resources they have at hand per time and their sales pattern. Some industries have time-specific products and services. Others meet everyday needs. Nonetheless, Revenue management is essential for every industry. And as a growth-focused business, it is something you should not have second thoughts about. You can hire an expert to handle this for your business or consult with a firm that offers this service.