![]() ![]() After thorough research on how the problem mentioned above can be streamlined, Lisa implemented the ABC inventory categorization in her business model.She was finally able to allow her business to visualize those areas wherein more profit was expected. She now realizes that this business is seasonal, and she has already invested a lot. Lisa, in search for varieties and additions to her sweater inventory, has filled in 180 types of sweaters instead of just 50 types. Lisa has a business of sweaters, and over time, her business has achieved tremendous success. This will enable you to take actual decisions that will boost your revenue. Instead of the sales figures, drive your perspective more towards the actionable data. Seeing a customer who makes a purchase once or twice a week for a small amount can certainly goof you up into thinking that they are valuable when they are actually not. The sales figures alone can be very misleading when it comes to analyzing your customers. These customers will definitely spend money on your storefront, but will never make much of an impact on your sales and profit. On the other hand, this can also include frequent customers which make a lot of small purchases. Here, the customers are the ones which turn up once in a while and make a purchase. The rest of the customers are automatically included in Category C. However, you can never expect them to be spending much. These customers are loyal ones and they will spend a good amount of money with you at regular intervals. ![]() Now, as these customers are the ones that will bring in a lot of revenue and make up a crucial portion of the contribution margin, ideally, they will be close to the limit in terms of revenue potential.Īnother set of customers, lesser value, but ones that cannot be neglected, fall in Category B. Your most valuable customers will be in Category A. Rank your customers and categorize them into A, B, and C. Once the charts are prepared, compare them, especially the sales revenue and contribution margin charts. Implementation of ABC analysis for your customers can start by creating charts based on the four different categories that are classified above. Implementing the ABC analysis for customers ![]() ABC analysis example for customers can be based on four primary metrics: revenue potential, support costs, sales revenue, and contribution margin. These products will help you to continually run your business, with a fixed and steady income, but don’t individually contribute much value to either the seller or to the business.ĪBC analysis can also be performed for the customer or client base to understand the market and strategize your business plans.
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