Visual analytics is a great way to uncover insights in complex financial data while highlighting opportunities for improvements. Today, we will share how to perform a customer profitability analysis to help your business increase profit.
Customer Profitability Analysis Example Charts
There are several ways to help you perform your customer profitability analysis. You can use a Client Profitability Chart or a Profitability Pareto.
Client Profitability Chart
A quick way to visualize profitability is by using the Client Profitability chart. This chart quickly highlights and orders clients by margin as well as contribution to total profits. The chart clearly shows the unprofitable clients and also shows what the profit would be if low performing clients were eliminated.
The second chart, the Profitability Pareto, highlights the percentage profitability improvement that could be achieved by eliminating the low margin clients. It also shows what percentage of customers generate the majority of the profits.
Benefits of using Customer Profitability Analysis Example Charts
The two together emphasize some immediate action items, such as determining:
- What are the key characteristics of our best and worst performing clients?
- Is it pricing? Sales volume? Direct costs? Labor and overhead?
- What can we do to mimic our highest performing clients?
- What can we do to either improve or eliminate our lowest performing clients?
With visual analytics, the clarity achieved allows for decisive action that can quickly generate profit improvement.
Making a client profitability map using a 2 x 2 matrix segments clients by profitability and also business volume. This can give managers a clear course of action as detailed in the chart below. Map volume on the x axis and profit on the y axis. Divide your range of results into low and high quadrants by profit and volume. The next post will show a Client Profitability Map. The quadrants are defined as follows:
We hope you learned from this short customer profitability analysis example. If you want to learn more about data analysis, be sure to check this blog.