BlogPost 6328044844 Why your tech company shouldn't care about revenue

Why your tech company shouldn't care about revenue

 

It’s a common misconception that revenue is the be all and end all of marketing. That everything we do is solely to earn revenue and nothing else.

You might wonder why I used the word ‘misconception’ there, because surely it's true?

And yes, to an extent, revenue is important but not in the way you might think.

It’s important because it’s the best indicator of the actual most important metric in business:

Profit.

Revenue doesn’t necessarily equate to success unless it’s high-margin revenue.

Low-margin, no-margin or negative-margin revenue are the wrong kind of revenue, and can cause a business to fail, but they're often more common than the good kind of revenue: the high-margin revenue.

It’s easy to focus on revenue as a whole, but if you want to be successful, you need to change this mindset and start ensuring that you’re focusing on profit instead.

Strategies that are designed with the goal of achieving any kind of revenue are less likely to be successful than strategies that focus on obtaining high-margin revenue alone.

Tempting as it might be to let the sales team worry about maximising profit, if marketers strategise with the goal to achieve high-margin revenue, then not only will you see an increase in profit, but also other metrics such as likes, shares, time spent on-page and MQLs.

So why should we be focusing on profit as opposed to revenue?

The fact is, just because a product or service costs your customers more, it doesn’t mean it’s going to make you the most money.

If you have a cloud-based software product that will cost the consumer less but attracts a large number of customers, your margin will be higher than a more expensive licensed software version that struggles to gain the same level of traction as the cloud-based version. Not only this, but it’s generally cheaper to maintain and offer support for cloud-based products than it is licensed software products.

If you ignore these facts and equally market both versions of the product, your marketing strategy would allow prospects to make their own decision as to whether they should go with the cloud or software version without being swayed one way or the other.

Alternatively, if you base your strategy around profit, and consider the possible benefits of the cloud-based products, you’ll create a strategy that targets 'ideal' prospects, rather than average customers (we talk about those here).

These ‘ideal’ customers would be customers most likely to choose the cloud-based product that don't need coercing into making a purchase. To determine what makes them inclined to invest, you could speak to existing cloud customers and see how they differ from your software customers, finding out exactly what it is that makes them tick.

By isolating these ideal customers, you’re likely to increase your conversion rate, and as such, your profit, since as I mentioned previously, the cloud-based option is ultimately cheaper to maintain.

Not only this, but ideal customers are generally on the same page as you, requiring less persuasion as they value everything you have to offer. They’re more likely to become evangelists and spread the word about everything they love about you, increasing your reach and - again - sales, since consumers value online reviews as much as recommendations from people they know.

If you’re successful in this marketing strategy, then you won’t just be bringing in revenue. You’ll be bringing in high-profit revenue, i.e profit. The holy grail of metrics.

So what can you do?

  • Take the time to find out which of your products and/or services are the most profitable.]
  • Design a profit-focused strategy and compare it to a revenue-focused strategy.
  • Put this strategy into practice, either through your own marketing team or through an agency and see the profit roll in in no time.