Reducing revenue leakage doesn’t have to be a painful, long process. Check out our guide to pocket price waterfall analysis. Read the full post here: http://thekinigroup.com/blog/minimizing-revenue-leakage-a-guide-for-cxos/

1. How to Minimize
Revenue Leakage
insights from

2. 2
Start by understanding the subtle
elements contributing to the problem.

3. 3
List Price: the price of a product advertised to buyers
Invoice Price: the amount reflected on the invoice. This will
include any on-invoice discounts and allowances.
Net Price: the price including any hidden discounts not on the
invoice, such as warranties, terms, bonuses, and other off-
invoice discounts.
Pocket Margin: the net price minus all related transaction and
service costs. This can include cost of goods sold, freight
costs, special delivery costs, and other extra costs associated
with closing a deal.
Lingo to Know

4. 4
Pocket Margin Waterfall Analysis: the evaluation
of the difference between the list price and the
final pocket margin.

5. 5
Take a detailed look at this much
further down than just the
product and customer level.
Get down to the transaction level.

6. 6
Locate major differences between list price and
pocket margin using profit waterfall analysis.

7. 7
When you find these major differences, act
on them to reduce negative impacts on margin.
Here’s how.

8. 8
1. Get Everyone Involved
and on the Same Page

9. 9
Align data from marketing, sales, and finance
teams to identify negative and low-margin
transactions.
Define metrics collaboratively, and
pull all information into one system.

10. 10
2. Define and Prioritize
Customers and Products

11. 11
Prioritize customers and products
by levels of profitability.
Define and label them to allow all stakeholders
understand how each affects margin.

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3. Sweat the Small Stuff

13. 13
Margin leakage often starts with small customer
accounts and lower volume product lines.
Over time, revenue leakage can add up to quite a
bit of lost profit.
Watch those small accounts!

14. 14
4. Label Deviations
from List Price

15. 15
Conduct an audit of all
discounts, allowances, and rebates
to see how each affects price differently.
Which are successful at closing big deals?
Which are slowly leaking margin over time?

16. 16
5. Define a Prioritized
Path Forward

17. 17
Motivate stakeholders to agree on:
1. Price targets for top products and customers
2. Caps on discounts
3. Data audits
Focus on the areas of greatest opportunity with
the least risk first.
Emphasize value over commodity costs.

18. 18
Your Next Step:
Reduce Revenue Leakage Without
Inciting Customer Rebellion

19. 19
1. Motivate Your Sales Team Appropriately
Incentivize your sales team to specifically
sell on your pocket margin goals.
This may take some experimenting
with your incentive programs.
Give your sales reps multiple paths to success.

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2. Take the Path of Least Resistance First
Start with your prioritized list.
Which customers will pay for value?
Which will be more resistant?
Identify customers who you could entice to
increase volume at higher pocket prices.

21. 21
3. Sell Value, Not Price
The most effective way to convince customers to
pay a higher price is to sell on value.
Sales reps should quantify the impact of
1. Fast customer service
2. On-time delivery, and
3. High-quality products
NOT on the lowest price.

22. 22
Running a profit waterfall
shouldn’t take months.
We help customers build custom waterfalls
from scratch quickly and efficiently.
Uncover Your Revenue Leakage Sources
Click here to see how KiniMetrix
can do this for you.