David Moss, partner at PwC, made a return appearance to B2B Reimagined this week. David walked us through four strategies to combat inflation the last time we spoke to him, and he’s back to tackle another big topic – revenue growth management (RGM).
David and host Lindsay Duran start by defining RGM as a way to manage the combination of your revenue and margin in a manner that maximizes economic value add. To make that concept more tangible, they walked through the six pillars of successful B2B revenue growth management.
Check out some words of wisdom from David on each of these pillars and then stream the podcast to get the full story!
Six Pillars of Successful Revenue Growth Management
“Data standards are also a cultural thing. You need a common dictionary and a common understanding of the taxonomy so up and down the value chain everyone is speaking the same language. I see so many companies that have the same data but with different meanings in different functional areas of the business.”
Customer Product Profitability
“The top four or five customers are usually pretty well managed. Then as you go down the list you start to see what I call incongruent pricing. Meaning that the pricing levels, whether it’s list price or the level of discounting or rebates that that customer gets don’t necessarily equate to the contribution they are making. Often, we’ll start by trying to improve the bottom 25%, especially if there are any customers with a net negative contribution. You want to correct those quite quickly, because you’re hurting your marketplace and you’re not getting the value you deserve.”
“This is a great example of where the Zilliant software can start to create opportunities. Here we are talking about what is the overall pricing structure of the market? Are you playing in a “good” offering area, are you playing in a “better” one, are you playing in a “best” or premium...Where are you going to play and be competitive?”
Value Chain & Opportunity Assessment
“This is really where strategy and pricing come together. Think about the whole value chain end-to-end and where your customer’s customer, your distributors and intermediaries all get a few pennies of every dollar that goes into that industry. Understanding who’s making what money is important for your negotiation and important for you to match the value that you provide to the whole value chain.”
“Promotions can help to provide bundled opportunities, so if you have a high velocity product and you want to promote a slower moving product you can bundle them together and use the strength of the product that sells well. What promotions shouldn’t be used for is to fix a bad plan. You’re behind plan and you need to catch up, so you promote because you’re low on volume. People do that, but that’s the wrong reason to promote. You should be using Zilliant’s capabilities to have the right price to begin with. I will admit that most of my clients are promoting for that reason, but I try to get them off of that drug as soon as possible.”
Trade Funds and Business Development
“If it’s on-invoice it may wind up in your competitor’s hands as to how your pricing works, while rebates are a valuable behind-the-scenes strategy. Rebates are a really important tool to reward the customers you want to win with in the long run. But keeping up with that can be difficult. I see clients that create tons of liability, and they didn’t understand that they had liability, and then they get a nasty surprise at the end of the year when they have to cut a check.”