Revenue Management Components: The right path to your pricing career! 👞
What are the key Revenue Management Components you need to consider to build a bright future in pricing and revenue management?
Building a career in revenue management can be a very rewarding experience – in many ways, we believe it is one of the closest career paths to actually being an entrepreneur and building your own business. A strong revenue manager or pricing manager needs to understand their value offering to the market, their ability to market it and also their sales and pricing strategy. When pricing is done properly, it is a very wide-ranging role that requires various skill-sets.
However, sometimes, we all run into fundamental career development issues which block us or delay progress. For example, if you are an entrepreneurial and ambitious pricing professional but not particularly well versed in office politics – how do you gain the influence in an organisation to implement your skill set but also reap the rewards you know you deserve. Career development and talent management is a pressing issue in nearly all professional fields – however, we feel it may be an even bigger issue in the pricing community.
Issues that commonly impact your career development – and need to be considered include:
Does your business actually understand what a revenue manager is?
For roles that deliver more profitability and value creation, fewer Australian business have pricing centred in their commercial management. Companies like US-based Parker Hannifin are few and far between. When seeking to build a career in pricing and revenue management; ask yourself, do you have to start a revenue management function, and if you do; do you have access to the decision-makers required to win that buy-in and implement the change management required.
An analysis is needed to work out the position your current role is in an organisation. And whether you have the influence needed to make the changes that will enable you to demonstrate your value.
In basic terms, if the revenue management function or pricing team is positioned as operational, it’s going to be very hard for you to get a seat at the executive table and drive strategic pricing setting decisions and strategy.
The pricing maturity may be much lower than you first anticipated when you first joined the business. Executives may not always know how to unlock the profit potential of your team. You need a pricing team planning framework to align management on the role of pricing in your business. This will make it easier for you to drive change and re-position yourself and your team in the right way.
Is the Reporting Structure right?
Who does your pricing function report too? – Is it routed through finance or marketing or is there a senior pricing leader in the business.
Correct positioning of revenue management and pricing functions are vital in enabling benefits and profit increases possible to be delivered.
Many businesses focuses on operational issues rather than commercial strategy and growth. In this context, a business may be more wedded to a cost-based pricing strategy and hence making the transition to a value-based system may be more demanding.
“Revenue management is a business process that is designed to optimize the revenue performance of an asset through all market conditions.” – Trevor Stuart-Hill
In order for revenue management principles to apply, four criteria must be met:
- Constrained Capacity: fixed inventory (or resources) available for sale
- Perishability: revenue-producing potential of inventory (or resources) diminishes rapidly or instantly
- Customer Segmentation: different customers are willing to pay different prices
- Predictability: ability exists to forecast demand for future points in time
Given the above set of criteria, it is easy to comprehend how revenue management principles can apply in a variety of settings including, parking lots, apartment housing, advertising, restaurants, golf courses, spas and even surgery centers.
Revenue Manager Job Description…
Revenue manager’s primary job is analysing a company’s finances. Have insights on financial data help boost revenue growth.
Provide advice and support to directors of sales, finance managers, and other general managers. Main responsibilities lie in the strategic planning of an organization so that it can meet its revenue goals.
Revenue Manager must be leaders, mentors, and coaches to the team, and making sure to remove any barriers that stop the revenue flow. Additionally, they must perform various actions that further improve revenue, for instance by increasing productivity and efficiency in various areas.
How to become a Revenue Manager…
Revenue management was an art and becoming more of a science. It’s a constantly evolving process due to better systems, process and value creation. In this area of ever-changing elements, such as customer behaviour trends and the continual march of technological advances; even the most experienced revenue manager must keep learning. In order to become a good Revenue Manager:
- Create Good Habits;– You must work to have a daily routine that makes sense to you, and then stick to it.
- Understand the Data;– The main objective is to look at available data and understand what is truly relevant and what’s extraneous.
- Stay Organised– Have everything organised to a point where you can review daily. But don’t spend too much time reading it all.
- Get the Metrics Right– You should have the ability to forecast demand by segment or channel or special event; You need to anticipate that demand and how you are going to manage it.
- Train, Train, Train– Engage in all the offered training through brands and other resources. Then be sure to use those tools and those systems effectively at the property level. Work with folks at the property level to understand what they are looking at.
Pricing can offer more quick wins in a business where it is not appreciated historically.
One of the major frustrations of a pricing professional or revenue manager career – is seeing the potential profit increases available, but being unable to implement the simple strategies of pricing needed – due to office polities, silo-ed operations etc. The ironic thing is that often the worse the office politics etc. The larger the upside potential if we move away from infighting – and towards a strategic pricing approach.
We’ll be publishing future blogs on best gauging the maturity of a revenue manager or pricing function in a business. And also techniques to help you gain the influence needed to help grow pricing in your business. See a review of the book Priceless: The Myth of Fair Value (And How to Take Advantage Of It) here – market-based pricing – a book we often recommend to share with other stakeholders to grow the understanding of pricing.
Of course- it is also vital for you to back yourself and invest in your own career.