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Strategies for increasing revenue

At Rus­sell & Rus­sell we can pro­vide busi­ness­es in the Lanark­shire area with assis­tance and advice on a wide range of busi­ness issues. Here is a guide to strate­gies for increas­ing rev­enue…

One of the keys to suc­cess­ful prof­it improve­ment and sus­tained busi­ness growth is to devel­op strate­gies that increase rev­enue for your busi­ness.

A use­ful tool in devel­op­ing such strate­gies is the product/market matrix:

 Exist­ing prod­uctsNew Prod­ucts
Exist­ing mar­kets13
New mar­kets24

The matrix defines four areas where you might con­sid­er rev­enue-increas­ing strate­gies.

Although it refers specif­i­cal­ly to sell­ing prod­ucts to cus­tomers, it can be applied equal­ly effec­tive­ly to sell­ing ser­vices to clients.

1. Existing products in existing markets: Highest rate of return

As a gen­er­al rule, strate­gies focused in the top left quad­rant will require less resources and are more like­ly to gen­er­ate the high­est rate of return on your efforts, at least in the short term. Here you might con­sid­er:

  • Increas­ing the sell­ing price to increase your mar­gins
  • Reduc­ing the sell­ing price to increase sales vol­ume or mar­ket share
  • Cross-sell­ing addi­tion­al prod­ucts or ser­vices to exist­ing cus­tomers or clients
  • Per­suad­ing cus­tomers to increase the size of their order
  • Upgrad­ing, ie. encour­ag­ing cus­tomers or clients to pur­chase a more sophis­ti­cat­ed ver­sion of the prod­uct or a high­er lev­el of ser­vice

Profit Point: Take care of your existing customers

It costs more to gain a new cus­tomer than to keep an old one. Make sure you look after your best cus­tomers.

2. New markets for existing products: Extending your market

Pos­si­bil­i­ties in the low­er left quad­rant include, for exam­ple, extend­ing your mar­ket geo­graph­i­cal­ly or repo­si­tion­ing an exist­ing prod­uct or ser­vice to occu­py a dif­fer­ent mar­ket niche.

Profit Point: Target new customers for high profit goods and services

New cus­tomers are expen­sive to acquire, but high prof­it items make it worth seek­ing them out. Decide upon the best geo­graph­ic areas and sec­tors to start with, oth­er­wise you risk spread­ing the mes­sage too thin.

3. New products for existing markets: Leveraging increased revenue

The top right quad­rant is all about lis­ten­ing to your cus­tomers and meet­ing their needs.  Busi­ness­es that lis­ten close­ly to their cus­tomers or clients will have no short­age of ideas for lever­ag­ing increased rev­enue from exist­ing mar­kets by intro­duc­ing new prod­ucts or ser­vices tai­lored to their needs. Pos­si­ble strate­gies here include devel­op­ing prod­uct line exten­sions and acces­sories or bundling new prod­ucts or ser­vices with exist­ing ones.

Profit Point: Understand customer demands

Make sure you have mech­a­nisms in place for find­ing our what your cus­tomers think of your ser­vice, and what their real needs are. Don’t just offer them what you think they want.

4. New products in new markets: Diversification

The bot­tom right quad­rant rep­re­sents per­haps the most ambi­tious pos­si­bil­i­ty, and obvi­ous­ly calls for care­ful research before too many resources are invest­ed in a new ven­ture.

Though there might be dan­gers for some busi­ness­es in depart­ing too ear­ly or too far from their core com­pe­ten­cies, for oth­ers such diver­si­fi­ca­tion might pro­vide more sta­bil­i­ty and a stronger cash flow in a volatile mar­ket.

Such growth can be achieved either by addi­tion­al invest­ment with­in your exist­ing busi­ness struc­ture or through an appro­pri­ate merg­er or acqui­si­tion.

Profit Point: Make alliances to move into new markets

Some­times it can be very effec­tive to arrange joint ven­tures with busi­ness­es that have com­pli­men­ta­ry assets or skills before ven­tur­ing out­side the sec­tors that are known to you.

If you are in the Lanark­shire area and are look­ing for sup­port and assis­tance from expe­ri­enced accoun­tants and busi­ness advis­ers, con­tact Rus­sell & Rus­sell.