The KPI Connection -- Revenue Growth to Cross-Sell/Up-Sell

December 18, 2017 | Dr. Stephen Timme
On Tuesday we posted the metric of the month (Revenue Growth this month). Today we’re going to take it one step further and talk about how Revenue Growth translates into – or “connects” -- to Key Performance Indicators (KPIs)….specifically, how it relates to cross-sell/up-sell. In other words, something you can actually talk to your client about impacting through your solutions. Said differently – This is the HOW to make the numbers make your job easier. You are talking to a Chief Marketing Officer (CMO) who has a business objective to grow revenues by $50 million. What the CMO wants to know is HOW and HOW MUCH can your solutions can help? Unfortunately, many companies’ glossy marketing materials don’t really help answer these questions. Business Process Maps – Answering the HOW First, let’s help provide insights into answering the HOW question. A tool we use here at FinListics is what we call a Business Process Map. They do just what you might think from the name – they map a financial metric to the business processes that impact it, the activities related to each process, and ultimately to the KPIs that can be impacted by changes or improvements in that business process. The following example maps revenue growth to its primary business processes. Note that the map is not complete but is presented for illustrative purposes. The KPI Connection -- Revenue Growth to Cross-Sell/Up-Sell Since you are talking to a CMO, we will focus on the business process Marketing. You provide solutions like Big Data Analytics that help clients better understand their customers. You could explain HOW your solutions have helped other clients grow revenue by helping them better managing activities like Understand Customer and Market Segmentation. And by doing so, clients have seen an increase in cross-sell/up-sell revenues. This is not a technology discussion but a business discussion. Operational KPIs – Answering the HOW MUCH You have answered the HOW question and the CMO appears interested. But for sellers, clients never make decisions fast enough. Using operational KPIs help motivate clients to move faster by providing insights into HOW MUCH financial value your solutions potentially will deliver and how it compares to their financial goals. You know that your solutions have helped other clients increase cross-sell/up-sell by at least 10% - 20%. But what does this mean for this CMO and her $50 million revenue goal? You know that the client has $1 billion in revenue and the profit margin is 10%. The client has not yet shared with you what percentage of revenue comes from cross-sell/up-sell. But you do know that in their industry cross-sell/up-sell revenues is on average 15% of total revenue. Without going into all the calculations, you can share with the CMO if their percentage of cross-sell/up-sell revenues is like the industry average and your solutions deliver the same improvements like they have for other clients, the annual revenues gains are $15 million to $30 million and with a 10% profit margin, the increase in profits is $1.5 million to $3.0 million. Sharing this information provides several benefits. It shows the CMO that you are interested in your solution’s business results. It also helps the CMO understand the relative importance of your solution. In this example, your solution potentially helps the CMO achieve 30% to 60% of her $50 million goal. This will get her attention since she likely is exploring other initiatives like better managing new customer acquisition and customer retention to achieve the $50 million goal. Another benefit is that the estimated financial benefits help the CMO better understand the cost of delay. In this example, using the mid-point range of improvement of 15% lost revenue each month of delay is close to $2 million, which means lost profits of $0.2 million per month. The key to getting the above information? Asking questions:
  • For your clients’ industries, what metrics, business processes and operational KPIs can your solutions significantly impact?
  • How do these align with an individual CxOs business objectives?
  • What are industry norms for these operational KPIs your solutions can improve?
  • What ranges of improvement do your solutions provide for these KPIs and what is the cash flow value to your clients?

And of course – the most important question: How can you impact these areas and ultimately drive results for your client’s business? For a deeper discussion on Operational KPIs and how they drive sales, see our previous blog post at http://www.finlistics.com/blog/introducing-a-new-series/

This blog was originally posted on December 19, 2013. 

Posted in Executive Industry Insights, KPI, Metric Matrix, Key Performance Indicator

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