<\/p>\n
Some customers naturally require more time and resources than others. But when certain relationships consistently consume more of your and your employees\u2019 time than they generate in profit, it may be time to reassess. Taking a closer look at customer\u2011level profitability can help you understand where resources are going and ensure that high\u2011value relationships receive the attention they deserve.<\/p>\n
Estimate their value to your business<\/strong><\/p>\n Before you do anything else, determine individual customer profitability. If your business software tracks customer purchases and your accounting system has adequate cost-accounting or decision-support capabilities, this process will be easier. Even if you don\u2019t maintain cost data, you can sort the good from the bad by reviewing customer purchase volume and average sale price. Often, such data can be supplemented by general knowledge of the relative profitability of different products or services.<\/p>\n Don\u2019t ignore indirect costs. High marketing, handling, service or billing costs for individual customers or customer segments can significantly affect their profitability even if they purchase high-margin products.<\/p>\n Give them a grade <\/strong><\/p>\n After you\u2019ve assigned profitability levels to customers or customer categories, sort them into the following groups:<\/p>\n Group\u00a0A.<\/strong> These customers are highly profitable. To further increase their value to your business, spend time learning what motivates them. Your proprietary products? Your prices? Your customer care? Developing a good understanding of this group will help you grow these relationships and provide insight into attracting similar customers.<\/p>\n Group\u00a0B.<\/strong> Customers in this group may not be extremely profitable, but they positively contribute to your bottom line. There\u2019s a good chance that, with the right mix of product, service and marketing resources, you can turn some of them into A customers. But be sure to monitor them closely to prevent them from slipping into the C\u00a0group.<\/p>\n Group\u00a0C.<\/strong> These customers tend to be unprofitable. They may also be difficult to work with and perpetually dissatisfied. They may expect special pricing or services, or pay invoices late. Fortunately, eliminating C customers probably won\u2019t require a formal breakup. You can start by reducing the level of attention they receive. Remove them from marketing lists and tell your salespeople to stop contacting them. After a while, most C customers who are ignored will leave on their\u00a0own.<\/p>\n When a strategic overhaul is warranted<\/strong><\/p>\n It\u2019s normal for businesses to have a mix of highly and less profitable customers. The key is making intentional<\/em> decisions about where to invest your time and resources. Reallocating attention away from consistently unprofitable customer relationships \u2014 and toward your A and B groups \u2014 can boost your company\u2019s financial performance. However, if C customers make up a large portion of your customer base, you may need to consider broader strategic changes. These could include reviewing pricing, refining service offerings, adjusting processes or rethinking which markets and customer segments you want to serve. Contact us to learn\u00a0more.<\/p>\n \u00a9 2026<\/em><\/p>\n <\/body> Some customers naturally require more time and resources than others. But when certain relationships consistently consume more of your and your employees\u2019 time than they generate in profit, it may be time to reassess. Taking a closer look at customer\u2011level profitability can help you understand where resources are going and ensure that high\u2011value relationships receive […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,14,10],"tags":[8,11,12],"class_list":["post-17507","post","type-post","status-publish","format-standard","hentry","category-articles","category-business","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17507","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=17507"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17507\/revisions"}],"predecessor-version":[{"id":17508,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17507\/revisions\/17508"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=17507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=17507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=17507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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