How to Make a Customer Profitability Analysis Properly
The profit of your business depends on many factors and one of them is your customer. There are many different types of customer and they may give you different profits. That is why conducting a customer profitability analysis is very important to improve the profit of your business.
How to Write a Customer Profitability Analysis
You have to remember that the purpose of customer’s profitability analysis is to profile the customers of your own business based on how much they contribute to make profits. So, you must know the information of your customers and you can focus on your marketing strategies.
There are some important steps that you need to follow in conducting this analysis. First of all, you have to write down the revenue that is gained from your customers as well as the total costs of unit business. It will help you identify whether you should continue your strategies or not.
Secondly, you will need to subtract the direct costs of the services & products. It will give you a gross margin for each of your customer. Through this information, you will be able to know how big profits you will get from your customers.
Then, it is also important to identify other costs related to your customers. Sometimes, there are other costs to your customers. For example, the costs may relate to sales & marketing campaign and servicing & retention costs. To do this, your consistency is very important in this case.
Writing a customer profitability analysis template also requires you to sort out the customers. You have to sort them out one by one. You can sort them out from the most profitable customer to the least profitable one or vice versa depending on your desire. Anyway, you cannot skip this step.
In creating this kind of analysis, you have also to come up with retention plan. Before you make any decision on what to do with your non-profitable customers, you have to make a retention plan which ensures that your profitable customers will continue becoming your loyal customers later.
It is also very important to understand why some of your customers do not make profits to your business. From the information of your customers gotten, you can learn the factors that make them become non-profitable customers. It can help you find the potential value of them for your business.
In this case, you have to know the reason why they do not purchase your products or services. There are many reasons and your task is to figure it out. To find the answer, you may conduct a survey or directly ask them so that you will understand what they really want about the products & services.
After everything is clear, now you can come up with strategies to build up the customer portfolio. You have to write down your planned strategies to attract more and more customers. So, you can earn profits as many as possible. Now, you can practice writing your customer profitability analysis.
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