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A Dual Approach to Determining the Value of Software on Your Sales and Revenue  

Darius Fekete< Darius Fekete September 15, 2023

Confident decision-making relies on data-backed insights and accurate performance measurement. In this article by Vendavo’s Director of Value Acceleration, Darius Fekete, discover a dual approach to verification: Vendavo’s value formula and the margin bridge. 

Business decisions aren’t just choices. They’re the lifeblood that shapes a company’s future and the livelihoods of the people who work within them. That’s why we need to make informed, calculated, and verified decisions in business, because each decision carries the potential to impact your bottom line. If you’re leveraging pricing, selling, and commercial excellence software that’s designed to boost revenue and sales, you need verifiable information to help you make these critical decisions.   

At Vendavo, we have a dedicated program and team to help you realize value. Plus, we have an established measurement formula that can help you measure the value our software has on your business. Let’s unpack the formula and the concept of creating a margin bridge to track commercial performance.   

A Formula for Measuring Impact of Pricing and Commercial Excellence Software 

Our formula (Revenue X Scope % X Adoption % X Lift %) quantitatively measures the additional revenue attributable to the software. It’s a calculated approach that quantifies the assumed benefit.

  • Total Revenue: This represents the total income from sales, the starting point of our calculation. 
  • Scope %: This is the portion of the business impacted by the software. For instance, the scope might be 50% if applied to one product line. 
  • Adoption %: This tells us how much the software is utilized within that defined scope. Full Adoption would mean 100%. 
  • Lift %: This is the increase in revenue directly attributable to the software. For example, this year’s planned price increase program could aim to achieve a 7% lift. 

 For a $500m business, this would result in a $17.5m benefit ($500m X 50% scope X 100% adoption X 7% lift). 

How to use a Margin Bridge as a Second Layer of Verification 

A margin bridge is another valuable tool that provides insight into commercial performance. It breaks down the changes in margin between periods, allowing for the analysis of various factors such as volume, price, mix, and cost.  

We can identify which impact we are influencing with our technological capabilities. For example, a solution to manage discounts will reflect the discount impact, while a rebate management solution will drive better results on accrued vs paid rebates. Defining which commercial decisions we need to track is critical when we set up our margin bridge. Technology supports capabilities in decision-making, execution, and tracking -, thus influencing profitability.  

By comparing the margin bridge analysis with our measurement formula, we can cross-verify our business decision’s impact on revenue and sales. 

A Dual Approach to Interpreting Discrepancies 

But what if there’s a discrepancy between the formula and the margin bridge analysis? This is the part where things get interesting. 

  • Understanding the Gap: Remember, there could be factors outside the software’s influence impacting revenue like market changes, competitive dynamics, or internal operational variations. For example, there could be a slower update on pricing changes in the market. In our experience, this often helps to validate the Adoption %. While we increased prices, customer invoices do not reflect them in full. 
  • Informed Decision Making: You get a holistic view by interpreting the formula and margin bridge. The dual approach offers more profound insights and aids in making more strategic decisions. Verifying actual price realization indicates areas which require executive-level support. Is there an area that needs to catch up with rollouts? Or perhaps we need more resources to address change management? 

Ultimately, discrepancies will highlight business areas in need of attention. They will help explain how we used the software and the actual results. 

Why Both Approaches Matter

The measurement formula and the margin bridge are like having two sets of eyes examining your commercial performance. Each provides unique insights, offering a robust understanding of your revenue growth dynamics.  

  • Comprehensive Insight: While the formula gives a focused view of the software’s impact, the margin bridge offers a broader perspective on the overall commercial performance. 
  • Accuracy and Confidence: Cross-verification ensures that the realised benefits accurately link to your strategic decisions supported by the software. 

The Path to Verified Success 

Increasing revenue and sales through pricing and commercial excellence software is not just about implementation but verification, understanding, and strategic alignment. By employing both the formula and margin bridge, you foster a culture of continuous verification and learning. 

At Vendavo, Value Realization is not only about uncovering the path to success but also ensuring that every step is verified, understood, and value-driven.