Accelerating Business Growth

Sunday, January 15, 2006

Are You Dealing With The RIGHT Customers / Clients?

You also need to consider, are you actually targeting and dealing with the right type of customers. There have been numerous studies carried out over the years into customer profitability within business and here is a snippet from a study carried out by KPMG:

“KPMG studies have found that rather than 80%, more like 140% to 170% of your profits come from 20% of your customers. Another interesting twist – 20% of your customers typically generate 80% of your losses while the majority of your customers, approximately 60%, range from mildly profitable to breakeven to unprofitable.”
Source: Customer, Vol 4, 1999, p19

If this is true, and I have no reason to believe that it is not then it raises serious questions about whether we actually want to work with all the clients that we currently have?

In my experience of working with many companies over the years this appears to be correct. In fact my colleagues and myself have done some work with one of the major banks and they themselves carried out an evaluation and established that over 80% of the contribution to their business did in fact come from 20% of their customers.

Maybe you would like to evaluate your own client base to establish how profitable they really are to you.

If you don't understand the profitability of your customers it is difficuelt to truly plan profitable business growth with any certainty.


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