Revenue Analysis and Customer Profiling

Our manufacturing client has excellent systems in place to track revenue by the year, quarter, month and even by the day. However they have no easy way differentiate between revenue from new as compared to existing customers. Also, they wanted to understand the life cycle purchasing history of a customer.

We performed a Subsequent Years Analysis for them that looked at which products a customer purchases in their first year as a customer and how much they spend, what they purchase in their second year, and so on, without regard to the calendar date when they started being a customer. We did this for every customer and every product.

Some of the several interesting findings were

• Those customers who continued to purchase spent on average over 40% of their first year's purchases in subsequent years, even after five years. This emphasized the importance of continuing customers.
• Some products were either purchased in the initial order or not at all. These products were then identified as part of a "solution sell" and were primary motivators for customer acquisition.
• Revenue from existing customers as compared to revenue from new customers was declining steadily in one product line and not in another, even though total revenue was growing.

With the information from this analysis, combined with their regular loyalty segmentation analysis, our client was able to profile their customers in all the different loyalty segments. They are using this information to systematically target customers for sales of specific products at particular points in their life cycle. To improve sales to existing customers, they are making relationship calls to customers who have been identified as slowing their rate of purchasing or who have been identified as potential defectors. Senior management is now using the new customer revenue / existing customer revenue ratio as a key performance indicator.