Revenue is an important focus in any for-profit organization, or for professionals engaged in a profit making venture.
Ludwig von Mises, the economist, once said, “The masses, in their capacity as consumers, ultimately determine everybody’s revenues and wealth.”
Ludwig’s words are full of wisdom, in fact layers of wisdom captured in one line; anchored around masses, revenue and wealth. Business is often misunderstood as a profiteering venture of a few. While, there is some truth in this, the fact is, it is through this profit generation focus of a few, that the society at large gains wealth. Think about it!
Getting back to the focus for today – revenue, the connection between masses and wealth.
Revenue is an important focus in any for-profit organization, or for professionals engaged in a profit making venture. While, in large conglomerates, and organizations, consistent revenue and growth are an easier subject to deal with, it is not an easy subject for all. Sustaining and growing revenue can be quite the workout for even the best conditioned leadership teams. Sustaining and increasing revenue in a Small and Medium Enterprise (SME) in a consistent fashion requires both strategic planning and effective execution. Large organizations can often boast of a very large established base of products and customers, which often needs only operational excellence in the short to medium run; yes, in the long run they too will need a strategic focus.
In principle, a healthy revenue and consistent revenue growth will require a management team to:
1. Understand the market and offer a product or service
2. Gain and retain customers while improving market share
3. Expand market reach to diversify geographical presence
4. Improve operational efficiency to cut waste
5. Make price adjustments to improve velocity of revenue and accelerate ROCE
6. Introduce new products or services to renew the attractiveness for customers
7. Invest in marketing and advertising to enhance the brand image
8. Form strategic partnerships to accelerate business activities
9. Focus on quality and reputation to ensure customer delight
10. Leverage data and analytics for all the above
As a framework, this is a great approach and it works really well when the market has no competition or limited players. Even a new entrant can take this 10 step framework and be strategically sharper, to introduce a significant entry barrier to the next player. The moment there is one or more competitor, these steps need a strategic sharpening, and a lot more contextualization to the market realities.
To understand this, let’s look at 3 great case studies of growth:
1. Zomato: Is an online food delivery service, based in India. It has been successful in expanding its market reach, and sustaining it, over several years. A key to this success was identifying an under-served niche: delivering food from restaurants that did not offer their own delivery service. Zomato also expanded their market share by diversifying into other areas such as restaurant reviews and reservations. The movement was from a 38.8% share in FY 18, to an impressive 55% in FY 23. (Source: JM Financial note dated June 27) They implemented hyperlocal marketing strategies tailored to specific cities, and used targeted marketing campaigns on social media platforms to expand their user base. Their focus on customer service, including prompt delivery times and a user-friendly app, has helped them to maintain customer loyalty.
2. Nykaa: Nykaa is a Mumbai-based multi-brand beauty retailer selling cosmetic and wellness products. The company differentiated itself by offering a wide range of products covering every price range. This included international brands that were previously hard to find in India. Nykaa used an omni-channel strategy, combining online and offline retail, to increase their market reach. The offline stores provide touch-and-feel experience to the customers for high-value items and this also increased their credibility. They also have a robust online presence, with content marketing playing a significant role. Nykaa has made use of novel approaches like makeup tutorials and beauty advice to build a community. As a result, their GMV (gross merchandise value) and revenue have both grown at over 45% CAGR between FY 19 – FY 21.
3. Cure.Fit: Founded in Bangalore, Cure.Fit is a health and fitness start-up that offers digital and offline experiences across fitness, nutrition, and mental wellbeing. Their Fitness centers, gyms and online content are all branded consistently. Even their merchandise is purpose made and tailored to its subscriber base. The company uses a combination of digital marketing strategies and localized physical presence to expand their market reach. Cure.Fit’s success can be attributed to its holistic approach towards health and wellness, which filled a unique niche in the Indian market. Additionally, they created a user-friendly app that integrates different health aspects, and provided varied workout formats at their fitness centers, appealing to a wider audience. Their acquisitions of several smaller startups in related fields have allowed them to diversify and expand their offerings, increasing their market share.
Based on the success of Zomato, Nykaa, and Cure. Fit, here are some management initiatives that other medium-sized companies can consider. Included are a few assumptions and mistakes to be avoided, while taking these steps to grow.
1. Identify and serve under-served niches: Zomato initially succeeded by providing delivery for restaurants that didn’t offer their own delivery. Hence: Look for areas where customer needs are not being fully met by current offerings in the market.
l Avoid this assumption/mistake – ‘The niche is large enough to be profitable.’ Avoid overestimating the size of the niche or underestimating the cost of serving it. It’s essential to conduct thorough market research before investing in a new niche.
2. Expand and diversify offerings: All three companies expanded their market share by diversifying their services, from Zomato’s addition of restaurant reviews and reservations, to Cure.Fit’s holistic merchandise, health and wellness offerings, to Nykaa’s comprehensive range of beauty products. Hence: Have a scope for expanding horizontally or vertically around your business niche, avoid overspecializing (unless there is an unlimited opportunity there).
l Avoid this assumption/mistake – ‘Diversification is always beneficial.’ It’s important to diversify in a way that aligns with your core competencies and brand identity. Diversifying into areas where you lack expertise can lead to poor quality products/services and can dilute your brand.
3. Use an omni-channel strategy: Nykaa’s combination of online and offline retail allowed it to reach more customers and meet their needs more effectively. Hence: Consider how different channels can complement each other; engage them strategically to enhance your customer experience.
l Avoid this assumption/mistake – ‘All channels are equally effective.’ Not all channels will be appropriate for your business or your customers. It’s essential to understand where your customers are and how they prefer to interact with your business.
4. Leverage content marketing: Nykaa has effectively used content marketing, including makeup tutorials and beauty advice, to engage its customer base and build a community. Hence: create and spread content that adds value to the customer’s life; this can help to build brand loyalty.
l Avoid this assumption/mistake – ‘Content marketing will result in immediate sales.’ Content marketing is a long-term strategy that builds brand authority and customer relationships. Don’t expect instant sales; instead, focus on providing value and building trust with your audience.
5. Prioritize customer experience: Zomato focuses on customer service, including a user-friendly app and prompt delivery times. A positive customer experience can result in repeat business and positive word-of-mouth. Hence: Invest in knowing and improving your customer’s experience.
l Avoid this assumption/mistake ‘We know what the customer wants.’ Businesses often think they know what their customers want, but without regular feedback and interaction, they can quickly be out of touch. Always seek and be open to customer feedback.
6. Use data to optimize operations: These companies used data to understand their customers and optimize their operations. Data can inform everything from marketing strategies to operational improvements. Hence: Create processes and embrace technology to capture date; and train your people to do this well.
l Avoid this assumption/mistake – ‘Data alone can drive decisions.’ While data is crucial, it must be analysed and interpreted correctly; and this is where experience, experimentation and intuition can all come handy. Relying solely on data without considering the broader business context can lead to misguided decisions.
7. Form strategic partnerships or make acquisitions: Cure.Fit expanded and diversified its offerings by acquiring smaller startups in related fields. Strategic partnerships and acquisitions can provide opportunities for rapid growth and diversification. Hence: know and build the ecosystem which will make the customer stay with you.
l Avoid this assumption/mistake – ‘Partnerships or acquisitions will automatically add value.’ Companies often underestimate the challenges of integrating a new partner or acquisition. Thorough due diligence is critical, as well as careful planning and execution of the integration process.
8. Create a strong, recognizable brand: Each of these companies has a strong brand that is recognized and trusted by their customers. Branding should be a key component of your marketing and customer engagement strategy. Hence: define, enable, sustain and grow the image of the brand, you want your customers to ascribe to you.
l Avoid this assumption/mistake – ‘A good product or service is enough.’ While having a quality product/service is critical, so is effective branding. Neglecting investments in building a strong brand can limit your company’s potential to attract and retain customers, even talent.
9. Implement hyperlocal marketing strategies: Zomato tailored its marketing strategies to specific cities, which helped it to expand its user base. Hyperlocal strategies can allow for more targeted and effective marketing. Hence: discover and unlock what hyperlocal means for your business. Even sourcing and talent can be looked at from this lens.
l Avoid this assumption/mistake – ‘What works in one location will work in another.’ Markets can vary greatly by location, and what is successful in one area may not work in another. It’s important to understand the unique characteristics of each local market.
10. Offer a holistic solution: Cure.Fit, Zomato and Nykaa all have a holistic approach their offerings. Consider how you can provide comprehensive solutions to your customers’ problems or needs. Hence: let your vision be guided by a customer’s real life, in all its forms and shapes. Then define what comprehensive means for your business, choose a strategic starting point and develop the business rapidly to offer full scale solutions.
l Avoid this assumption/mistake -‘A holistic solution is always better.’ While it may sound attractive to offer your customers a one-stop-shop, not every customer wants or needs a comprehensive solution. Moreover, trying to offer everything to everybody can spread your resources thin and impact the quality of your offerings. Train your staff and channels to do targeted selling and upselling.
“Profit in business comes from repeat customers, customers that boast about your project or service and that bring friends with them.” – W. Edwards Deming
Now is the time for you to ask this question: What do we need to do in the next 6, 18, and 36 months to give our customers a reason to boast about us? Hope you find the guidance in this article directional and your journey fruitful in this endeavour.
Sai Kumar Chandran is the founder of OrbitShift. He is a coaching and consulting practitioner and an entrepreneur at heart. He can be reached at firstname.lastname@example.org.