Drive retail success with effective revenue management

Effective revenue management can help retail businesses maximise sales and boost profits.  The approach, which combines data analytics, strategic pricing and customer segmentation, helps retailers refine their sales strategy and increase profitability.

What is revenue management?

Revenue management is a data-driven approach to pricing, discounts and procurement.  It uses methods like customer segmentation, category analytics and market research to help your organisation develop effective pricing and procurement strategies.  The specifics depend on your organisational goals and current sales – you may want to increase the average transaction value, bring in new customers, sell more of a specific product, or all of the above.

Often, revenue management projects involve connecting your inventory management, procurement, sales and marketing teams so they can work together more effectively.  It may also leverage analytics tools to make real-time pricing changes or recommendations.

 

Why is revenue management important in business?

 

Revenue management is important in business as a way to boost profitability and maximise the value you extract from every product sold.  In the hyper-competitive, fast-moving world of retail, it’s particularly crucial to understand the dynamic between pricing, discounts, and sales volumes so you can make quick decisions and keep up with market fluctuations.

Revenue management benefits  

The benefits of revenue management include maximising revenue, getting deeper insights into your sales data and products, and building the capability to create precise, targeted discount strategies.

Graph 1

Maximise revenue

Revenue management can help you increase revenue and reduce wasteful under or overstocking by aligning pricing and sales with customer demand.  

 

Wallet

Insight into sales data

Insight into your data is valuable for your sales, marketing and procurement teams.  Sales data can help you understand seasonal buying patterns, spot trends, and learn which products are purchased together.  This feeds into sales, personalised recommendations and stock decisions.

 

Price Tag

Targeted discount strategies

Revenue management can help you create more targeted discount strategies, which can boost sales volumes.  Potential strategies include seasonal discounts, early-bird or presale offers, volume and tiered pricing, and flash sales to clear out old stock.

 

Credit Card

Better knowledge of product values

Knowing the value of your products and brands can help you maximise potential sales and boost overall profitability.  For example, if your data analysis shows that customers are very loyal to a particular brand or product, you may choose to stock that product at higher levels.  In contrast, if some products sell better when they’re discounted (price elasticity), you can pull that lever if you need to offload product.

 

Want to understand your product, customers and pricing potential? Talk to the team at Datamine now.

Revenue management strategies

 

Revenue management strategies include competitive pricing, demand forecasting, customer segmentation and category analytics.

 

Competitive pricing

With this method, you set prices to align with or undercut your closest competitors, which helps you attract cost-conscious customers.  This strategy should be underpinned by ongoing competitor research or automated price tracking to keep prices at the right level.

Demand forecasting

Demand forecasting uses historical sales data to predict future sales trends.  With this information, your procurement and inventory management teams can make decisions about purchasing, sales and discounts.

Customer segmentation

Customer segmentation involves sorting customers into groups based on shared behaviours or characteristics.  This helps you target customers with precise recommendations, offers and discounts.  You can also focus your marketing resources on the highest-value customer groups.

Category analytics

Category analytics is often part of a revenue management project.  This analytics method examines your product range in depth, giving you insights into customer preferences, loyalty and price elasticity.  This information informs your pricing and inventory decisions, ensuring you set appropriate price points, keep the right products in stock, and use discounts tactically to drive sales.

 

KPIs and metrics used in revenue management

 

The KPIs and metrics used in your revenue management project will depend on your objectives.  Because revenue management focuses on increasing sales and retaining customers, metrics often relate to these goals.

Common KPIs include:

  • Conversion rate
  • Inventory turnover rate
  • Average transaction value
  • Gross sales revenue
  • Customer lifetime value
  • Customer retention rate

 

DM Guide to Customer Segmentation

DM Guide to Customer Segmentation

1 min read
Our Pricing Page

Our Pricing Page

1 min read
Mastering Forecasting for Increased Profits

Mastering Forecasting for Increased Profits

Nov 13, 2023 10:18:07 AM 6 min read
Techniques for more impactful problem-solving
Techniques for more impactful problem-solving

Techniques for more impactful problem-solving

Jul 16, 2024 12:17:06 PM 5 min read
Ways Customer Analytics Amplify Marketing Strategies

Ways Customer Analytics Amplify Marketing Strategies

Mar 5, 2024 1:31:18 PM 4 min read
Market Share - the Kingpin of Marketing Analytics
Market Share - the Kingpin of Marketing Analytics

Market Share - the Kingpin of Marketing Analytics

Dec 5, 2022 10:09:13 AM 6 min read

Essential steps in revenue management

Revenue management is a multi-step process that starts with data collection and ends with evaluating your new strategy.

Statistical Modelling

Data collection

This stage involves collecting and collating data from a range of sources, both internal and external.  These may include historical sales information, customer browsing data, competitor analytics, market research and third-party data – for example, from your census or Datamine’s Retailwatch dashboard.

 

Insights

Data analysis

This stage can involve several analytics methods, including customer segmentation, category analysis and customer acquisition modelling.  Essentially, the Datamine team looks at the data from different angles and configurations to build insight into your customers, products and business.

 

Umbrella

Forecasting

Forecasting takes analytics a step further, using past data to model future performance.  For example, you could look at predicted sales volumes or revenue for an upcoming period for specific product category or brand sales, or potential price fluctuations.

 

Credit Card 2

Implementation

This is when your new pricing strategy and other elements are put into practice.  For some organisations, this could involve implementing an app or other tool to track competitor pricing.  For others, it could mean setting up new price systems in a POS system.  It may also involve changing how your sales, marketing and procurement teams work and communicate.

 

Analysis

Evaluation 

Testing and evaluation are about measuring your progress and looking for more opportunities for improvement.  Track your chosen KPIs when changes occur, and tweak your approach if they don’t seem to be changing.  For example, if you implement new price levels based on competitor prices, you might track overall revenue, average transaction value and customer numbers to build your understanding of your performance.  If customer numbers are up but revenue is stable, it could indicate that you need to try another approach.

Talk to our team to find out more about using Revenue Management in your organisation.

 

Revenue management services solutions for a range of industries

Revenue management offers benefits for a range of customer-facing sectors.  At Datamine, we’ve delivered revenue management services to businesses across Australia and New Zealand.

Industries include:

 WHAT'S NEXT?

Measure, manage, maximise

 

Using your business data and Datamine’s analytics expertise, we can help you develop a revenue management strategy that fits your business.  The goal is to help you adapt your pricing, marketing and procurement strategies to maximise sales and minimise waste.

Ready to start? Fill in our contact form, and we’ll be in touch.