Another View to Managing Customer Profitability

Continuing our discussion around managing your customers’ profitability, we will look at a simple matrix.

The vertical access plots profit.  The horizontal axis plots volume.

You then place your customers into one of the boxes based on their specifics in terms of profit and volume.

The matrix illustration shows tactics for each customer/box and is self explanatory.

The first of two extremes are customers with high volume and a high margin – your ideal customer.  The primary goal is to ensure retention of these customers and to look to find more products to sell into them.

The second extreme is customers with low volume and low margins.  Simply put, they must be moved to another box or fired!  They are a drain on your profitability and efforts if they are allowed to stay here.

There is profit and volume to be gained by properly managing your current portfolio of customers!