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How can we grow our business? How can we increase sales? How can we maintain or lower expenses?

If you're in business, you hear these questions almost daily. If you're in marketing, you have the authority and responsibility to address all of them.

For example, most marketers today are interested in campaign ROI, lead generation, and pipeline support and marketing costs as a percent of revenue.

It's axiomatic that businesses want to increase their top line (revenue) or decrease their middle line (expenses), often at the same time. The million-dollar question is how to do it.

Given entrenched competitors and charging upstarts, shorter product cycles and rapid commoditization, where can a company increase its chances of capturing incremental revenue profitably?

If we go back to a classic marketing framework, the Ansoff Matrix (see below, adapted from “Strategies for Diversification,” Harvard Business Review, September-October, 1957, p.114), we can discover a way to reliably segment revenues in terms of probability of capture (see The Channel Advantage by L. Friedman and T. Furey for additional discussion).

Revenue Segmentation

In a nutshell, revenue segmentation states that certain revenues have a higher probability of being captured than other revenues. For example, it is generally easier to cross- and up-sell (i.e., further penetrate) an existing customer than to initially penetrate a new customer. It's generally easier to sell established, tried-and-tested products than new and untested products. If we look at the Ansoff matrix, we have a useful method of ranking the probability of revenue capture.

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ABOUT THE AUTHOR

Michael L. Perla is a principal consultant at a sales and marketing consulting firm. He can be reached at michaelperla@bellsouth.net.