November 2022 | Resource

How a Revenue Growth Management Strategy Will Help Manufacturers Drive Profitability

Amid uncertainty and predictions of slowing growth, leading manufacturers are taking proactive steps to drive predictable, profitable revenue growth

8-minute read
How a Revenue Growth Management Strategy Will Help Manufacturers Drive Profitability

Becoming digital is now a requirement for manufacturers. This includes modernizing processes for selling and generating revenue—largely in response to buyers’ demands for digital channels and experiences. 

But being digital isn’t just about meeting buyers where they are. It’s also at the core of performance and competitiveness. 

A finely tuned digital revenue-generation engine uses data to produce continuous insight, which enables greater agility. This is particularly critical in an unprecedented and complex environment of high inflation, rising interest rates, and slowing growth—compounded by ongoing supply chain disruption, shifts in the manufacturing workforce, and geopolitical issues.    

Unease is becoming a dominant theme for this decade—and there’s no sign that it will ease soon. Prospects of stagnant growth are forcing manufacturers to make across-the-board cost reductions to manage short-term performance. That can be detrimental. Instead, we believe manufacturers should be doubling down on investments with the potential to deliver even greater returns. One of these areas is revenue-generating activities, a key lever for navigating through uncertain economic times.  

The revenue cycle—from lead generation, to sales, to retaining and growing existing accounts—can be expensive because the activities that contribute to revenue generation often occur in functional silos, creating more work for everyone. Having functional silos also limits effectiveness, agility, and competitive advantage.  

That’s where revenue growth management (RGM) comes in. 

Well-coordinated go-to-market teams, equipped with insight, can deliver more 

The concept of RGM is about aligning all go-to-market processes and teams that contribute to revenue generation—marketing, sales, service, product development, finance, and others—and equipping them with consistent, timely, and relevant insights. When designed well, this approach creates a well-oiled revenue generation engine that uses data to understand customers better, deliver a better customer experience, and respond faster to changing needs and conditions. 

We’ve seen manufacturers that take a strategic approach toward optimizing RGM across functional teams sell more efficiently, increase revenue predictability, and position themselves to capitalize on new or untapped sources of profitable revenue. For one beverage manufacturing client, this strategy delivered an estimated 10% revenue lift over five years along with $2.5 million in operational efficiencies. For one consumer eyewear client, a data-driven RGM strategy unlocked the door to 25% more revenue from existing accounts—realized in a matter of months. 

Once considered a cutting-edge concept, revenue generation management is now considered a standard practice across industries, including manufacturing. In fact, Gartner predicts that by 2025, 75% of the highest-growth companies in the world will employ a this type of model. Manufacturers that aren’t taking steps in this direction now risk falling behind.  

Why aren’t manufacturers further along? 

Simply put, interest is outpacing progress right now. Putting the principles of revenue generation management into practice can be challenging. According to a Forrester study, while 86% of executives view revenue operations as critical for achieving goals, only 41% are confident in their understanding of it.  

There are many reasons why manufacturers aren’t further along:  

  • Disconnected technologies and processes—leading to a lack of understanding of and strategic approach toward revenue sources 
  • Immature data and analytics capabilities that require executives to make decisions based on historical views and hypotheses rather than current data 
  • Lack of trust or confidence in the data 
  • The growing complexity of customer and product portfolios 
  • Strategies and processes built from the inside out (i.e., how we want to operate) rather than from the perspective of customers 

What’s more, the industry has traditionally prioritized investments in operations and supply chain improvements over those in front-office/commercial teams and technology infrastructure. Not surprisingly, many manufacturers lack the experience and perspective to foster new ways of working and a new level of coordination across business functions.   

Finally, and not inconsequentially, the ability to devote sufficient focus while still fighting fires caused by recent issues causes a strain. Having a limited appetite for more change and internal disruption is understandable. 

But there’s good news: These obstacles aren’t insurmountable—and the process of change doesn’t have to be all-consuming. 

Four areas of focus for maximizing the value of revenue generation management 

Organizations that realize the greatest value from their RGM programs focus on and build maturity in four key areas: customer insight, people and organization, data and measurement, and technology.  

1. Understand your customers

Many organizations have longstanding views that all sales and customers are “good”—and their rewards and incentives reflect this. While done with the best of intentions, valuing and serving all customers the same way is rarely effective or efficient.

In any customer base, there are some that represent higher future growth and value potential. Optimizing revenue operations should begin with a thorough understanding of current customers and accounts—not only their journey, buying behaviors, and expectations—but also their current and potential value to the organization based on qualitative and quantitative analysis. This provides data-driven insight for determining where to focus resources and investments.  

This exercise should include segmenting customer accounts into groups that reflect their priority to the organization’s vision and growth strategy.  

This provides the insight for aligning marketing, sales, services, and other activities that are part of the revenue-generation process—for example, emphasizing high-touch personal contacts for profitable customers with high growth potential and more efficient digital connections for smaller but still-valuable customer segments. This step is essential to managing the cost of revenue generation and ensuring that staff spend their time in the most effective manner.  

To get the greatest value from RGM, you must be able to answer these questions: 

  • How do we identify, engage, and retain customers today? How do we identify “ideal” customers? 
  • Which customer segments, channels, and products are driving profitability and revenue growth or decline/churn? 
  • Are we servicing customers in the way they want to be serviced—through the right channels with the right tools? 
  • Are we selling the right products to the right customers at the right times?  
  • Are we aligning customer service levels with value potential?  
  • Is our pricing strategy nimble and responsive to the market? 

2. Build a dedicated, cross-functional team 

As noted, various functions in the organization affect the efficiency and effectiveness of the revenue-generation process. Each is critical to success and helping generate revenue from new and existing customers. In most organizations, these teams operate independently. They may have a shared goal to drive revenue, but they also have their own strategies and goals. This can limit revenue growth potential—not to mention being more expensive.  

Manufacturers that are successful in adopting an RGM model prioritize internal alignment to break down silos. This doesn’t mean a full-scale reorganization of teams. One effective strategy is establishing a cross-functional governance council whose mission is to share information and pursue opportunities to improve process coordination. 

Some leaders have taken governance a step further, forming a revenue growth team that guides and focuses the efforts of all go-to-market teams toward sales efficiency and effectiveness goals—with a chief revenue or commercial officer leading the effort. This role is different from, and not a replacement for, a senior sales leadership role as it takes a broader view across functions. 

There isn’t a one-size-fits-all approach. Many organization-specific factors will influence the right degree of centralization (or decentralization), as well as the best structure, roles, skills, and incentives.  

To get the greatest value from RGM, you must be able to answer these questions: 

  • How does product/service innovation occur, and how well-aligned is it to the revenue-generation process? 
  • How rapidly can we respond to shifts in the market? 
  • How many customer segments do we serve, and how diverse or consistent are they?  
  • How effective is our cross-selling? Do we have cross-selling and up-selling targets by account/customer? How could we identify and capitalize on upsell or cross-sell opportunities in a more systematic manner? 
  • What is the balance between field/inside sales and digital channels?  
  • What roles interact with customers? Are we reaching customers at the “moments” that matter? 
  • Are we allocating the right resources to the right customers? 
  • Do customers have a dedicated account manager or are there multiple account coverage tiers? 
  • What are the specific drivers of sales performance? Do we have the right incentives for driving efficient revenue growth? Does our incentive structure reinforce the desired behaviors? Are there any conflicts in incentives between functional departments?  
  • Do we have the right skills and talent to lead the required change?   

3. Measure what matters 

Optimizing both revenue-generation efficiency and effectiveness requires clearly defined goals that are aligned with the overall strategy—as well as metrics that all functions support and embrace. Having accurate and consistent measures that focus on the metrics that matter drives predictability. It also enables agility by providing timely and continuous insight into changes in customer behavior or expectations and opportunities to bring innovations to market. When organizations measure everything, it’s often hard to identify the signals from the noise. During unpredictable times, the ability to constantly identify the signals and pivot is critical. 

Establishing common metrics and measuring against them requires data and the ability to analyze it. That means developing capabilities for: 

  • Collecting and accessing timely, accurate, and comprehensive data from internal and external sources  
  • Sharing data and insight across teams 
  • Integrating systems to assess underlying drivers of revenue performance and provide insight into costs and profitability 
  • Creating a single, consistent view of the customer  
  • Implementing operational analytics that provide deeper insight into key processes and opportunities to drive efficient growth and financial impact 

To get the greatest value from RGM, you must be able to answer these questions: 

  • Are we currently able to use transaction data to measure customer lifetime value and acquisition costs? 
  • Is there organization-wide agreement around what measurements should be prioritized for each activity? Are we measuring the right metrics for the right teams? 
  • Do various stakeholders have a shared definition of what key metrics are and how to calculate them? More important, what’s the level of data literacy? Do people at all levels understand the purpose of key metrics and use them to make effective business decisions? 
  • Is there proper data governance and processes to ensure access to high-quality data that can help measure KPIs? 

4. Employ and integrate the right technology and tools 

Most companies don’t believe they have the data required or needed for managing revenue operations. We can assure that’s not the case. But collecting, understanding, and sharing it remains a challenge without the right supporting technology platform.  

Like an automobile, a modern revenue generation model for manufacturing requires multiple systems to run efficiently—typically, enterprise resource planning (ERP) systems, customer relationship management (CRM) system, marketing automation tools, analytics tools, e-commerce solutions, and others. 

The goal is to ensure all of these use a single, centralized data source to facilitate collaboration across functions and enable effective decisions. This is easier said than done when ownership of these systems and tools resides within specific functional silos. 

A good place to start is evaluating which systems and tools touch the revenue generation process—looking for opportunities to integrate systems more effectively and/or upgrade to modern digital capabilities that enable more efficient data management and flow. Building a well-integrated, digital revenue management platform will require investment, but in addition to reducing the cost per sale it can enable staff to redirect their time to the most productive activities—for example, spending less time creating reports and more time pursuing new accounts. 

To get the greatest value from RGM, you must be able to answer these questions: 

  • Are teams using current technology effectively and to its full potential? What aren’t we getting from existing technology that we had expected to?  
  • Are there pain points that we could address with improved technology such as CPQ tools or a shared account database? 
  • How efficiently does data flow from one system to another? Do we require substantial manual effort to move data from one to another?  
  • To what degree do we use modern data and digital platforms to unlock and sustain value today? How could we use these more effectively? 

Start moving the needle now 

If revenue generation management is a new concept for your organization, the critical first step is developing cross-functional consensus around a vision and measurable goals—it’ll be difficult to drive measurable change without that. 

Once you have that direction, take stock of where your organization stands today and what changes are required across the four areas discussed above—customer insight, people and organization, data and measurement, and technology—to begin building your revenue generation engine. 

It’s important to keep in mind that this is not a one-and-done project but rather an ongoing journey. The market and technology capabilities are evolving quickly, and plans must adapt along with them. Look for ways to deliver quick wins through improved coordination across relevant teams—for example, reassigning administrative activities from field representatives to lower-cost inside sales support roles or resigning incentives to motivate profitable growth and aligning them across functions. These types of small successes engender confidence and organizational support for bigger investments. 

For most manufacturers, a cross-functional RGM model represents a shift in both thinking and operations, and few in the organization may understand or have experience with execution. Don’t hesitate to tap outside expertise in areas such as data analytics, technology selection, or change management. Equipping your team with the right expertise and resources will make the process more efficient and bring your revenue generation engine to full speed sooner.

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