Bruce Merrifield, President — Merrifield Consulting
•competitive strategy •business model •business analytics •customer profitability analysis •Bruce Merrifield
Wednesday, December 13, 2017—Customer whale curves are a great opportunity to view the overall picture of your customer profitability and apply appropriate sales models to each.
The whale curve is built by taking the number one most profitable customer you have and placing those profits on the grid. Next, add the profit from the second, third and fourth most profitable customers. As you add customers by profitability, the curve rises and eventually gets to a peak, known as the peak internal profits. This is then followed by a long flat sloping curve that represents the small accounts that don't make or lose a lot of money. Then, as you add the decreasingly less profitable accounts there is a sharp plunge, known as the tail of the whale. Big money is being lost on these big accounts.
The whale curve shows you several valuable categories you should be focused on for growth. At the head of the whale are your profitable accounts. This is where you need to focus on penetration and offering these customers even more for more business.
The most important may be the long flat back of the whale. These are accounts where the margin dollars annual spend per year is not enough to support a traditional outside sales, face-to-face model. One option is to try a whole-tail model. This level falls between retail and wholesale; between customers helping themselves and a full-service wholesale model. This type of model can be profitable with fewer orders, the customer paying a little more and an overall decrease in cost to serve. This allows you to free up sales to focus on more profitable business.
The tail of the whale is another place to focus. Only being concerned about product and price misses the opportunity to increase profits by improving processes. To help yourself, and the customer, you need to find solutions that massively reduce both sides of the activity cost. Customers will be grateful when you uncover not only your hidden costs, but theirs.
Using the whale curve to understand your customer mix is a valuable tool for creating and using different models that will address the issues with different types of customers, all with the focus on increasing profitability.
For more information about Bruce Merrifield, visit: www.merrifieldact2.com
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