REVENUE MANAGEMENT - Part II KNOW YOUR CUSTOMER

Now you’re clear on why #revenuemanagement, where should you start?

First of all, you may need to shift mindset. In hotels the word “yield” is generally understood to be average room rate x occupancy (£ X %), however many in golf, spa and leisure refer to “yield” when discussing to the average green fee, membership subscription or treatment price achieved.

In #revenuemanagement, yield is income divided by the total potential inventory available. So on a typical UK 18 hole golf course playing with 8 minute intervals and 4 hour rounds, 45,000 rounds with a c. £22 average tee time rate (over combined membership and society income) delivers a yield of c. £13. The same #golf course selling 55,000 rounds at £19 would deliver a yield c. £14. Successful revenue management is entirely focussed on total #yield performance (total revenue divided by total defined capacity).

Step 1 – Know your customers

It sounds simple enough, but do you really know the financial value of your customers? What income they generate for you and the cost of providing the services they consume?

You may have overlapping business segments (i.e. golf and accommodation). For simplicity we suggest focussing first on the primary inventory (i.e. the tee sheet customers for a golf course). Identify groups of customers with similar usage, who behave in a similar manner. This might be society golfers, 5 or 7 day members, or green fee segments of significant scale. It is important not to be too granular, maybe keep to six groups or less initially. Whilst not imperative, we would recommend you create pen profiles for the segments identified.

You may find that your systems are not yet set-up, nor have the capability to track spending from different segments, but with your knowledge of what happens in the business and a little ingenuity, it is generally possible to test any assumptions made against the target groups identified and the historical sales information you possess already.

This simple exercise will help you to understand not only their financial worth to the business (this is their total value, including their on spend across your facility), but also how they sit together with other groups and how best to most profitably integrate them into your business. You may also find that there are groups of customers that you may be better off not servicing, which can be one of the most challenging aspects to executing your revenue strategy and sometimes through previous cognitive bias you will find that these are not who you think they are, A simple example might be the wedding that takes over the club house on a Saturday. If this causes you to lose even a small number of memberships, because access to facilities is compromised, which is the most valuable business over time to retain and is there another way to accommodate both? Subscribe or follow for more over the coming weeks.

#revenuemanagement #profitabilityimprovement #revenuestrategy #businessadvice