As with a product, you also do not have a business unless you have a customer. In the same way you protect your products, your customers are also an asset and, therefore, you also need to know a lot about them. For the same reason, you may be concerned that your business is too dependent on one or two products for revenue or gross profit contribution, and you may have similar concerns about your customer profile. Is your business too dependent on too few customers? Design and build your systems so that you can evaluate this data. Do this regularly. You do not want to discover that a customer purchased enough from you once in six months and became your top customer – why did they not purchase from you after that?
I have told you how important, I believe it is, to evaluate the performance of your products. Now you need to map that product data against that of your customers. With this information, you will find out if your top customer only buys low margin items. You can work out what costs your business incurs, such as delivery and finance charges, to service that top customer? If you ‘do the numbers’, you might well discover that this top customer is actually your worst customer.
This type of data presents you, as the business manager, with valuable analysis on your customers and allows you to develop strategies to optimise contributions from your customers and improve profitability.
Quentin G McCullough