Have you ever thought about the amount of profit you’re getting from each of your customers?
There’s a simple way to find this out: it’s called the Customer Profit Contribution calculation.
It’s easy to do. You start by grouping all of your customers by their average monthly purchase amount.
- Less than $100,
- $1001 and up
For each grouping of average monthly purchase, calculate
- the % of customers,
- % contribution of total sales, and
- % contribution of total profit.
(the columns should add up to 100%)
Take a look at this video, where I explain how it works:
It’s often surprising to see which purchase grouping makes the most profit. Customers that buy more from you tend to also generate the highest total sales and profit… and customers who buy the least tend to generate the least sales and profit (the 80/20 Rule!).
This tool is a great way to identify where to focus your marketing efforts and customer engagement for even better outcomes.
Wondering how much your business could be losing to “profit leakage” and what you can do to improve the profit, growth, and value of your company?