Where Do We Go From Here? Protecting and Growing Revenue in the Short Term.
April 17, 2020
By Axel Leichum, Partner
The COVID-19 pandemic and the measures governments have taken to address the pandemic have disrupted markets across virtually all sectors. While companies need to understand what the “new normal” will look like post the crisis period and adjust their long-term strategies, in the short term, key decisions need to be made on where to focus to protect and grow revenue.
In the short term, for most companies, the degrees of freedom are limited. The offerings are set, markets served defined, and customer base known. Where to focus comes down to…
- Prioritizing customer segments (or for certain companies, even specific customers) which have greater revenue potential and…
- Putting initiatives in place to maximize revenue capture.
Prioritizing to Identify Greater Revenue Potential
While most sales organizations likely have some sort of customer segment prioritization or customer tiering system in place, these models most likely aren’t designed with the current market dynamics in mind. From our perspective, there are five factors B2B companies should consider to determine where to focus in the short term:
- Growth-Advantaged, Growth-Neutral, or Growth-Disadvantaged?
- Where there is growth now is most likely a lot different than 2 months ago. Which segments are now growth-advantaged (even if not in absolute terms, in relative terms)?
- Customer or Non-Customer?
- In periods of uncertainty there is less appetite for risk. Customers who know you and trust you are a better bet. However, if there are supply challenges in the market this can flip as previous non-customers look for alternative sources.
- Strategic or Transactional?
- Among existing customers, strategic relationships are more important to maintain and support; this is true for both customer and supplier. During periods such as these, strengthening these relationships is often beneficial for both parties.
- Supply-Challenged or Supply-Robust?
- For non-customers, those that have become supply-challenged (i.e. where incumbent suppliers cannot reliably meet demand) are where there are opportunities to take share.
- Financially Strong or Financially Weak?
- Unfortunately, some businesses will not make it to the other side of this crisis. Companies need to be more vigilant especially with transactional customers and non-customers regarding credit risk.
Mapping out your markets either at a segment or customer level utilizing these factors provides clear guidance on where to focus. Strategic customers in growth-advantaged sectors will be at the top of the list. Non-customers with robust supply in growth-disadvantaged sectors at the bottom of the list. Supply-challenged financially strong growth-advantaged non-customers should be a priority, especially if they can replace revenue losses from existing customers that are growth-disadvantaged. With clarity on where to focus, sales teams will know which customers to target, marketing where to spend, and executives where they should direct their energy.
Putting Initiatives in Place to Maximize Revenue Capture
Knowing where to go to access greater revenue potential in the short term is the first step, but initiatives need to be put in place to make sure you maximize revenue captured. These initiatives vary based on the customer and the situation. With strategic customers, initiatives should focus on protecting or growing share of wallet especially if the overall market is depressed, as competitors will become more aggressive. Guaranteeing access to supply or lead times can strengthen your position. With customers who have higher certainty in their future demand, offer discounts to lock in future purchases now. With customers who have greater uncertainty in their future demand, offer flexibility in pricing and terms in exchange for current business and first call position for upcoming purchases. For non-customers, offer risk-sharing arrangements to make the decision to bring you on as a new supplier easier. For non-customers who have not been targets in the past, consider if your offering can quickly be repurposed or repackaged to meet their needs (e.g. smaller quantities, minor modifications/additions, de-contenting).
Move Quickly and Constantly Reevaluate
In the current market environment, speed is critical to be able to protect and grow short-term revenue. Every day without a clear plan on where to focus and what revenue capture initiatives to deploy puts key current and future revenue streams at risk.
The analysis also needs to be a living exercise as market dynamics change. The picture the analysis paints today will not be the same in 2 or 3 months when certain sectors or geographies open-up again or temporary demand spikes recede in others. Growth-disadvantaged segments may turn into growth-advantaged and vice versa. Best in class companies will have produced future looks driven by key market turning points and understand proactively when and where to shift focus going forward.
This article is a continuation of our thoughts on the impact of the COVID-19 pandemic and the key strategic decisions B2B companies should be focusing on. You can find our other articles here: