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Quantification of Revenue Levers Diagnostic

Quantification of Revenue Levers Diagnostic. Novemeber, 1993. This Panel Set Contains Interim Documentation for a New Diagnostic, Quantification of Revenue Levers. Lever approach to rationally quantifiy revenue enhancements Highly effective, rational approach leads to client buy-in

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Quantification of Revenue Levers Diagnostic

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  1. Quantification of Revenue Levers Diagnostic Novemeber, 1993

  2. This Panel Set Contains Interim Documentation for a New Diagnostic, Quantification of Revenue Levers • Lever approach to rationally quantifiy revenue enhancements • Highly effective, rational approach leads to client buy-in • For assistance, contact Tom Jacobson, VMS 5229 Quantification of Revenue Levers Diagnostic Full documentation, H2 Guide and complete panel set, will be available on the BBS by November 30

  3. Revenue Improvement From Sales Will Come From Two Sources • Focus selling on value-creating business Profitability Products • Sell More Product Volume

  4. ü New Product JIT Environmental Price On-Time Delivery Efficiency Quality Information Customize Local Facility 0 1 2 3 4 5 6 7 8 9 Excellent Very Poor Alignment with Business Strategies Integrated Processes & Systems Customer Driven Strategy Development Continuous Improvement - Processes - Metrics Marketing Effectiveness Customer Identification & Segmentation Process Demonstrable Financial Performance Identified Competitive Advantage MARKETING EXCELLENCE Clear & Timely Communication Clearly Defined Marketing Strategy Organizational Alignment Proactive New Business Development Marketing Tools And Information Support Systems Clearly Defined Marketing Mix Plans Clearly Defined Roles & Responsibilities Optimally Allocated Resources Numerous Analytics Suggest Revenue Opportunities Exist . . . Customer Interviews Sales Force Effectiveness Comparative Performance Rating Improving XYZ customer focus will greatly enhance ability to grow business

  5. ü Quantification of These Opportunities is a Challenge . . . • Customers said on average a 9.75% revenue increase if XYZ were to remove barriers BMFO Survey “If you would, I would do 3 to 20% more business with XYZ” “With better information and more face time we could increase sales by 12%.” What is true impact of Customer Focus?

  6. ü 50% 40% 30% 20% 12.76% 10% The Majority Of Sale Force Believes They Can Increase Sales Volume If Time Is Reallocated . . . 100% 87% 90% 80% 70% 60% 50% 40% 30% 13% 20% 10% Yes No Can We Increase Sales? Sales Improvement And, sales would improve by over 12%

  7. Considering The Customer & Sales Force Reactions . . . The Number Is Big Revenue Opportunity BMFO Sample Average Sales Increase(1): $46MM 9.75% Increase • Remove barriers to doing buisness with XYZ Sales Force Estimation Of Sales Improvement(1): $56MM 12% Increase • Give us more “face time” and information to do our job (1)Based on continuing operations sales of $470MM (1993 estimates)

  8. ü Using a Revenue “Lever” Model Helps Rationally Quantify The Opportunities & Focus Organization LEVER IMPACT Price Increases • May allow price increases or less price cuts in marginal conditions • Most likely specialty chemical oriented Share of Wallet • Increased sales of current products to current customers • Make XYZ easier to do business with • Small increases on current large base Market Penetration • Acquire former/new customers specifically seeking greater ease of service and quality New Product Development • Increased level of new product or new application development Market Growth/Expansion • Selling existing products / process technologies into new applications • “Making the pie bigger” Understanding relative impact of these levers is critical

  9. ü Pulling the Wrong Revenue Levers Can Be Hazardous to Your Health • Baseline: • “Continuing Operations” • 1993 Revenue Estimate • (XYZ) - $470MM ? Understanding the right levers in each business and allocating efforts accordingly will be critical.

  10. ü Analysis Of Chemical Division Levels Indicate Much Of Growth Anticipated In “New” Business Division II - “Chemicals” “Current” Business “New” Business Share of Wallet Market Penetration Product Introduction Market Expansion Projected Impact Price CRM / Isophorones None/Low Med Med/High Med/High None/Low 3 - 6% Specialty Lubes / Visco None/Low Low Low/Med None/Low High 3 - 6% Silanes / Silicones Med Low/Med Low/Med 5 - 10% Intermediates None/Low None/Low Low/Med None/Low Low 7 - 14% Total Impact(2): Revenue Increase $8.7 To 17.4MM (1)Incremental Contribution $1.3 To 2.6MM (1)Contribution defined as gross income (2)Detail computations in Business Case Support work papers, based on increase over 1993 estimated continuing operations.

  11. Potential Cost Implications Also Should Be Considered Sales and Marketing Effectiveness Decision Model A & D Indicated Operational Improvements Possible A & D Suggested Revenue Opportunities Are Process Improvements Generating Revenue Build Revenue And Optimize Resource Model Yes Yes Yes Yes No No Take Out Savings . . . “Do The Same With Less” Improve Process, Take Out Savings “Invest” Savings Stop Cut Costs No

  12. Impact Of Project Will Deliver Between $5.0 & 10.0MM In Contribution Contribution Margin • Focus selling on value-creating business $2.5 To 5.2MM Profitability Products $2.5 To 4.8MM • Sell More Product Volume Total: $5.0 To 10.0MM

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