5 Tips for Boosting Your Secondary Revenue Streams & Profit Margins
With heightened customer expectations and the rise of online shopping hitting the high street hard, retailers need to think differently about how they tackle profitability.
Successful in the airline industry, ancillary revenue, known as secondary revenue streams in the retail environment, can help to supplement profit margins. Here Richard Piper, Director at Webloyalty, provides Total Business with several tips on boosting your secondary revenue streams and profit margins.
According to our Beyond the Core II research, secondary revenue is now used by 46% of retailers to generate at least 10% of their annual turnover. But just how can retailers really maximise the opportunity that these additional income streams present?
Gain senior level support
For new initiatives, it’s important to have the support and backing of the business’ senior management. Third party experts can also share case studies and insight into how diversifying income streams can provide a valuable return on investment. In fact, according to our research, 37% of retailers adopted secondary revenue streams because of greater awareness of secondary or non-core, revenue streams and 21% because of evidence of success from other businesses.
Develop a dedicated secondary revenue strategy
Research into the adoption of secondary revenue streams across the industry has found that retailers with a secondary revenue strategy or manifesto see increased profit margins – with three quarters reporting greater profit margins over the past two years. However, a strategic approach was only found in four in 10 of businesses with a turnover of 100k and half of businesses with a turnover of more than 10m. The bigger retail players are reaping the benefits of additional revenue streams, but there is more that all businesses can do – if they have a dedicated manifesto.
Clearly define ownership
Secondary revenue can fall within the remit of several different departments, including marketing, finance and sales. By establishing who takes ownership of secondary revenue streams and their success, the strategy becomes significantly easier to implement and manage.
Outsource to the experts
There has been an increasing trend of outsourcing to third-parties; this can easily be seen with delivery, logistics and social media management. This trend has now moved into profitability, with the potential of outsourcing a boost for profit margins. Businesses can’t expect to have all the knowledge in house, so outsourcing to third party experts can open companies up to extensive specific skill sets, for example with affiliate marketing. By tapping into a wider ecosystem, this can also free up employees to add-value elsewhere in the company.
Speaking about the benefits of working with a third party secondary revenue provider, Vinay Parmar, Customer & Digital Experience Director, National Express, says ““We are low cost travel. Our customer base use coach and bus for a specific reason, it fits their wallet size. So, adding third party products that meet that same demographic is key.” Harness the benefits a third-party secondary revenue provider can bring you, and you’ll reap the benefits without having to dedicate a whole internal team to oversee the project.
Monitor and evaluate
We all know that one of the most important tips for running any effective campaign is to monitor and evaluate to ensure each is optimised for its target audience and offers the highest engagement possible.
Taking measurement a step further, secondary revenue strategies play such a substantial and positive role in bolstering profits that, in my view, the profits need to be listed on a business’s financial reports in the same way airlines report on their ancillary revenue profits. This will ultimately help show its importance and value to the company.
Secondary revenue strategies are no longer just a ‘nice to have’ but are a necessity to survive in the current retail environment, helping to boost the bottom line beyond profit margins alone. Those businesses that diversify will weather the storm and future-proof their business for years to come.