To fight a war, a country may have at its disposal an arsenal of resources and avenues: air force, army, navy, cyber warfare, public relations, propaganda, etc. When, where and how each is leveraged determines the outcome of each battle and ultimately the war. The successful overall war strategy must include integrated battle plans that exercise the right combination of levers.
It was the ancient Greek physicist and engineer who said, “Give me a place to stand, and I shall move the Earth with a lever.” He realized the power of the lever to increase the force given to it so that the output force is much greater.
Similarly, to drive revenue, a company has several levers at its disposal. However, companies often do not develop and follow an integrated approach to driving revenue. Responsibility for revenue generation falls solely within the sales department’s purview. Too often, individual salespeople independently develop their own approach to drive their own sales.
Revenue levers can have either a long-term or short-term effect. Developing new products/services is an example of a longer-term revenue lever. Companies are better at managing longer-term levers, but they often do a poor job leveraging or optimizing the mix of short-term levers.
Some businesses do excel at optimizing short-term levers. Consider the case of a flea market vendor. She arranges her wares in such a manner as to first attract attention, and second to highlight her best-selling items. If during the day, she notices customer interest shifting to different items, she reconfigures her layout of items to maximize sales.
Larger retailers follow a similar approach. The store layout and items displayed during the Christmas holiday season is quite different than what you will find before Valentine's Day. Ever notice that the high-traffic areas become focal points for customers? Attractive product displays draw customer attention by promoting a sale or welcoming a season.
Other industries that have developed the art and science of maximizing short-term levers include airlines, hotels, and Internet retailers. Airlines and hotels constantly vary prices and promotions to match seasonal demand patterns and adjust prices on a daily basis to match demand against existing inventory. Since airlines and hotels have a perishable commodity (an empty seat on a flight is revenue lost forever), how well they manage their immediate revenue has a huge impact on their annual performance. Internet companies such as Amazon constantly adjust their top-of-list item displays based on each customer’s shifting buying interests to “capture the moment” where they have the customer’s eyeballs. This is done so seamlessly through the use of technology that you don’t even think about it. In a short time, you begin to expect it and count on it to make it simpler for you to find similar products.
Levers can target segments
The levers for your company may include focusing on a mix of products/services to emphasize in the marketplace, targeting certain market and customer segments, leveraging specific marketing and sales messages, offering specific promotions and pricing, and other creative mechanisms based on your particular situation. The movie studios, for example, target different market segments during different seasons. During the summer and winter holidays, they release movies targeting kids and families.
There are other examples of levers. One software company insisted customers buy all their software modules integrated as one system. The integrated system was suitable for larger customers with deeper pockets, but smaller customers could not afford and did not need all the modules. As a result, smaller customers migrated to other solutions. After it recognized the alarming trend, the company decoupled its modules allowing smaller customers to buy the individual modules they needed. A small change in product configuration helped the company impact revenue immediately.
Ask yourself how well do you leverage your short-term revenue levers? How nimble is your strategy to maximize immediate revenue? Do you manage your short-term revenue actively or passively? You must take the time to identify and understand each short-term revenue lever. Then, dynamically and opportunistically choose and exercise the right combination of levers to drive revenue immediately.
Quoted in The Wall Street Journal, Barron’s and WorldNews, Ravi Kathuria is a recognized thought leader. Featured on the BusinessMakers show, CBS Radio, and Nightly Business Report, he is the author of the highly acclaimed book, How Cohesive is Your Company?: A Leadership Parable. Kathuria is the president of Cohegic Corp., a management consulting, executive and sales coaching firm, and president of the Houston Strategy Forum. Reach him at (281) 403-0250 or feedback@ cohegic.com.