Secure "good growth" with Net Revenue Management

Net revenue growth should be at the heart of every business but too many organisations fail to deliver on their targets. Sales, productivity and volumes are up, but you’re left scratching your head wondering what happened to expected corresponding profit gains.

Due to highly competitive and challenging market forces, organisations are under increasing pressure to demonstrate net revenue growth and improve shareholder dividends. Unfortunately, the statistics make poor reading with 85% of product innovations failing to deliver the planned uplifts in net revenue.* In addition, strategies to drive sales growth through promotional activity often have a neutral or even negative effect.

Traditional Key Performance Indicators (KPIs), such as Underlying Sales Growth (USG), can mask this effect. In simple terms, the key is to be able to differentiate ‘good growth’ from ‘bad growth’. This means recognising profitable, sustainable growth, from the hollow activities that take up a lot of energy but result in limited or even negative long-term gain. Common traps are driving volume only at the expense of margin, growth fuelled by unprofitable promotions, or growth by cannibalisation of other product lines. With this clarity, you can then understand the best levers to isolate the good from the bad (and the ugly).

Nick Dawnay and Jon Bradbury look at the background and value of Net Revenue Management, and recommend six practical ways to help your organisation bring the focus back to profitable growth.