- With the right insights in-hand, business leaders can seize fast-evolving market opportunities to capture game-changing new revenue streams.
- Any temporary revenue channels set up last year are worth continuing, so long as CX and margins allow.
- Optimize pricing and perfect scenario planning to maximize your firm's potential to grow through new revenue streams this year.
The opportunity for substantial business growth should extend into 2022, especially for those poised to capitalize on the opportunities that emerged in 2020. There are some challenges — disrupted supply chains, skills gaps, distribution and customer acquisition costs — we know will remain as headwinds. It’s less certain whether inflation and policies to manage it from central banks around the world will be a factor.
While the Fed increased its U.S. inflation forecast for 2021 from 1.8% in December to 2.2% in March, officials have long predicted “transitory inflation” as the economy reopens. With spiking demand for everything from rental cars to lumber, most experts don’t expect reactionary tightening of monetary policy as of now. But those March Fed numbers are way too optimistic: The U.S. Bureau of Economic Analysis says Q1 inflation clocked in at an anualized 6.4%. The second quarter wasn’t far behind, with the consumer price index up 5.23%, according to the Cleveland Fed. So unless we see some deflation in coming quarters, 2.2% for the year is a virtual impossibility.
CFOs need to chart a range of inflation scenarios and have plans in place for pricing strategy, supply chain diversification and how raising the cost of your goods and services might affect customer acquisition and retention. Standard customer churn analysis can shed light on the latter two factors.
One thing is for sure: Finance teams will have their hands full as they determine risks and margins with new revenue streams.
Action Items: 3 Ways to Capture New Revenue Streams
1. Make that “temporary” new revenue channel permanent.
Many companies planned for or opened new revenue channels in 2020, and that experience is a huge advantage. It may be tempting to look at those moves as temporary. Some owners of high-end restaurants, for instance, have talked about ending their takeout programs. They don’t want to compete in that market with what they consider to be inferior versions of their products. That’s a fair point. But most businesses, like manufacturers that stood up direct-to-consumer ecommerce sites or firms that dabbled in subscription-based models, will be happy to continue nurturing new revenue streams as long as the customer experience and margins remain acceptable.
2. Overcome the pricing challenge.
Pricing may be one of the trickier factors to get right during the recovery, so it’s well worth adopting an analytical approach. Consumers with cash and pent-up demand don’t seem to be highly price conscious — at this point, simply being able to deliver goods and services that are in demand is a strong differentiator. At the same time, workers aren’t rushing back to jobs that both paid low wages and put them in harm’s way, whether from the virus or belligerent customers, so labor costs will rise.
Want to get really serious about revamping your pricing? Consider adding a chief revenue officer to focus not just on price but on overall customer happiness and revenue optimization.
3. Make scenario planning part of your DNA.
Everything from unit costs to customer satisfaction will likely be in flux over the next 12 to 18 months. Price hikes acceptable to the market could get chewed up by increases in other areas. 2020 required fine-tuned financial analysis to survive; 2021 and 2022 will require that level of analysis to thrive.
Refine those scenario planning skills you gained in 2020 as you refocus plans amid an uneven recovery. If you haven’t yet started, there are a number of scenario planning templates and formalized frameworks. What’s important is choosing a method that works for your team.
More Resources From NetSuite
Hone your scenario-planning skills in this on-demand roundtable with top financial leaders. Get practical advice from real companies that are using the discipline to take advantage of opportunities.
Understand why customers are or aren’t purchasing more of your offering by running a churn analysis. Use the resulting insights to improve — and potentially add another zero to your monthly revenues.
If you’ve built a recurring revenue stream, then you need an easy way to consolidate invoicing, automate rating processes and support multiple pricing models. Our tool handles it all, so you can focus on boosting retention and acquiring new customers.