How profitable are your customers?


You may be worried about how many customers you have, but perhaps even more important is the question: How profitable are your customers?

How often does each customer buy your product or service? How expensive is the purchase: is it your least profitable product/service, or the offering that you have the highest margin on? How price-sensitive are your customers? Will they run for the competition if you have to raise prices to cope with higher expenses?

Small segments of customers can be very profitable if you identify and meet their needs. They will care about quality more than finding the lowest price. And that will bring in more cash than chasing every potential customer.

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