A methodology to optimize revenue and margin objectives

Companies target separate sales and cost targets, but they do not manage profitability, which requires a cross-functional effort integrating finance and sales to consistently achieve an optimal balance of revenue and margin objectives. It is an effective performance management tool because it is a data- and analytics-based approach.

Definition

Profitability management is a cross-functional effort that integrates finance and sales to achieve an optimal balance of revenue and margin objectives. This is a more effective performance management tool because it is a data- and analytics-based approach designed to consistently achieve higher sales and fatter margins.

Research Fact

Our Office of Finance benchmark research found that only 34% manage customer profitability, and just 30% of companies manage product profitability.

Best Practice

Leadership needs to drive alignment across sales, marketing and customer success to ensure that teams recognize the importance of coordinated efforts. Technology should support these cross-team efforts, not reinforce silos of data and activity.

Profitability management is a software-enabled discipline for today’s rapidly changing market conditions. Sellers must be able to quickly adapt by having a full understanding of the true economic costs of products, the cost to serve customers and to operate channels. They must be able to make pricing decisions that enable them to successfully execute their go-to-market strategy. Profitability management is not simple, which is the reason it can be a source of sustainable competitive advantage.

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