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1. PROFIT OPTIMIZATION DEFINITION
Profit optimization, also frequently known as revenue optimization or profit maximization, could be defined as a business strategy which combines demand, pricing, and strategies in marketing in order to maximize a business’ revenue. This involves gaining deep insights of your pricing, which includes sales channels, price points, and such.
2. WHICH FACTORS PLAY AN IMPORTANT ROLE IN PROFIT OPTIMIZATION?
2.1. Data collection
There is no doubt that in order to achieve success in the competitive market, it is important for every business to gain a deep understanding about their targeted customers via collecting customer insights, which could certainly be useful for profit optimization. The two most popular practices of data collection for revenue optimization are forecasting and segmentation.
Forecasting refers to using historical market trends, sales data, and other statistics to predict future sales and also help you in managing cash flow, workforce, and resources for better business development. This is a fundamental part of basic financial management.
Segmentation refers to grouping your customers in order to better develop your marketing. Example market segments should be based on the following shared attributes:
- Age
- Gender
- Geographical location
- Occupation
- History of product usage
- Buying history & spending habits
2.2. Pricings
It is obvious that pricing has a direct impact on your revenue. Some businesses think if they just lower the prices of their products, they would have more sales. While this might be true for many cases, in some other ones, customers might perceive a low price with a low quality.
What does this mean? Other than pricing, it is also important to consider other factors such as brand image, customer supports and such as well.
2.3. Demands
While it is true that you cannot create demands out of thin air, you can totally influence demands by applying the right strategies. Some recommended ones including:
- Social media marketing
- SMS promotional campaign
- Social proof
