Customer Profitability

“Customer profitability (CP) is the profit the firm makes from serving a customer or customer group over a specified period of time, specifically the difference between the revenues earned from and the costs associated with the customer relationship in a specified period.” Source: Wikipedia, https://en.wikipedia.org/wiki/Customer_profitability

How many times have you heard of this?

The Pareto Law or the 80/20 Principle!

80% of our business comes from 20% of our customers and vice-versa.

Are you in high-value & low-volume sales or low-value & high-volume sales?

Your sales process will be different depending on the answer to the above question.

Most high-volume sales are b2c.

On the contrary, most high-value sales are b2b.

But there are certain b2b that are high volume as well.

Likewise, some b2c companies do have a division that focuses on the needs of business consumers. In essence, Such divisions are b2b in nature.

Account-Based Marketing [ABM] or simply Account Management is always a high-value low volume business. The Pareto principle definitely works in this scenario.

Out of all the accounts, you are managing, if you take a look, only 20% of them give you 80% of your quota every quarter or year. Therefore, it makes sense to focus on them and provide a better service to them.

But you need to groom the next 20% of customers so that they grow and fill the top 20% slot as your business grows.

One thing is for sure. You are not for everybody.

Hence, it is better to have a few large clients to meet your sales targets.

Who are those clients, on your list, who will help you meet your targets for the year?

Are you focused on Customer Profitability? If yes, you should focus on that 20% of customers who are giving you 80% revenue every year. They are your profitable customers.

Happy Selling!

#abm #pareto #8020 #b2bsales #kkrocks