I find it hard to think about synergies. If I’m thinking about revenue synergies through increasing Avg price per customer or # of customers, what are some general ways I can have this?
Get Active in Our Amazing Community of Over 451,000 Peers!
Schedule mock interviews on the Meeting Board, join the latest community discussions in our Consulting Q&A and find like-minded Case Partners to connect and practice with!
revenue synergies
Overview of answers
Upvotes
Best answer
Hi!
Increasing avg price per se is not a synergy.
A synergy merges on the ground of common usage of tangible or intangible assets/resources which have complimentary features. For example, if two companies merge, one has a fantastic product portfolio but no established sales expertise, while the other has great sales processes, but dusty products, then the merger might result in significant revenue synergies if the great products get pushed into the market via state of the art sales processes and channels.
Such complimentarities can emerge in EVERY sub driver of profit. So yes, there could also be pricing synergies, if for example through a merger the brand power of the seller increases and thereby the willingness to pay of potential customers.
Cheers, Sidi
Was this answer helpful?
In revenue, it's mostly about one company leveraging the other company's assets or capabilities. Examples:
- Selling my products to their customers (x-selling)
- Selling my products in new geographies or channels
- Access to their IP in order to improve my products
- Creating more competitive offerings (bundling)
Regarding cost… it's usually by having scale effects (e.g. purchase cheaper because of increased market power), by adopting “internal” best practices (e.g. better procurement, better producing processes) or by eliminating redundancies (e.g. shared services, duplicated sales teams, duplicated IT systems, etc.).
So to increase “average price”, you might be able to upsell the other company's products. You increase number of customers if you use the other company's market or channel presence, or even customer base to sell your own products.
Hope this helps,
Pedro
Was this answer helpful?
Synergies mean 2 + 2 = 5
They can impact revenue, price, volume, costs - anything.
An example: Merger of 2 petchem facilities located close to each other in the same industrial cluster
Some of the synergies:
- Cost: Economies of scale through better procurement
- Cost: Economies of scale through sharing of inputs (material, staff, equipment, facilities etc.)
- Revenue: Improving product quality through knowledge sharing and hence increasing pricing and/or volume
- Revenue: Additional customers due to improved value proposition (in addition to the combined customer base)
- …and more
Was this answer helpful?
Hmmm, I think you need to take a step back here.
Synergies are where company A adds something to company B or vice-versa.
Your sentence doesn't really make sense at all in the context of synergies.
There are a lot of Q&As on this already so I suggest you read through some of them for examples :)
https://www.preplounge.com/en/consulting-forum/synergies-between-big-company-and-startup-10332
https://www.preplounge.com/en/consulting-forum/quantifycalculate-synergies-formulae-11710
https://www.preplounge.com/en/consulting-forum/cost-vs-revenue-synergies-10669
(edited)
Was this answer helpful?
Hi!
There are multiple sources of revenue synergies besides the ones you mentioned. They might come from increased company dimension, brand reputation, bigger client portfolio or product mix, etc.
Hope this helps.
Best,
Anto
Was this answer helpful?
Related Cases
Expert case by Francesco
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US.The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadv
...
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US.The mission of SmartBridge is to help as many stude
...
(Open whole case)
31.6k
Times solved
Advanced
Difficulty
Expert case by Francesco
Style:
Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
(Open whole case)
13.6k
Times solved
Intermediate
Difficulty
Expert case by Ian
Style:
Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability.==========================
...
Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in pro
...
(Open whole case)
11.3k
Times solved
Intermediate
Difficulty
Expert case by Casper
Style:
Our clients are two beer manufacturers from a well-developed country who just decided to merge. We can call them Company A and Company B. The decision about the merger has already been taken and our clients are certain it will soon be approved by regulators.What is expected from you is to help
...
Our clients are two beer manufacturers from a well-developed country who just decided to merge. We can call them Company A and Company B. The decision about the merger has already been taken
...
(Open whole case)
7.4k
Times solved
Advanced
Difficulty
Expert case by Agrim
Style:
Our client is a pharmacy in Dubai - called NewWave Pharmacy. This pharmacy wants to start a new & unique delivery service and want to understand if it is a good idea or not? If yes, then how should they price it? And how should they start it?
Our client is a pharmacy in Dubai - called NewWave Pharmacy. This pharmacy wants to start a new & unique delivery service and want to understand if it is a good idea or not? If yes, then how should they price it? And how should they start it?
(Open whole case)
800+
Times solved
Advanced
Difficulty
would increasing avg price be a synergy if you hypothesize that they could now do 1) dynamic pricing (assuming more sales volume post merger, so now can invest in such capabilities) 2) have specialized skills post merger they can charge for 3) provide personalized customer support with greater support/sales staff..all of which could potentially justify a higher price increase?