Question

• Trends in Net Revenues
  • How changes in company net revenues tie to competitive strategy and responses to competitors?

Answer 1

Revenue refers to the value of goods sold and services rendered by an organization during a particular period. Net revenue refers to that portion of revenue from which expenses are deducted. It is net of discounts and returns.

Net revenue helps in optimizing the appropriate pricing strategies and modes of promoting a good or service. This in turn helps an organization to target its customers and provide better value than its competitors. The value not only refers to the purchase and sale of a product or rendering of a service, but refers to the after-sales services as well. A change in net revenue helps in increase the profitability of the firm as against its existing and potential competitors. This also helps in tapping new growth opportunities. When increased net revenue is used appropriately between marketing and financing, it helps in translating brand’s planned strategies into executable plans, in order to earn higher profits and increase customer value. All these reasons, clubbed together, help in gaining a competitive advantage over other alike firms in the market.

When a company is able to provide better facilities and products at a lower price, the competitors try to enter the market with even lower prices. This could be beneficial in the short term but in the long run, these competitor firms find it difficult to survive in the market. Consumers are price sensitive. Even a slight change in the pricing can divert them from firm A to firm B in no time. Hence, pricing, which directly affects net profit, is an important tool in managing the customer relationship. Net revenues tie to competitive strategy and responses to competitors.