Client value is normally calculated by taking into account order size, frequency, and recency. This is normally relatively easy to calculate, but things begin to get complicated when you also include another metric that is just as important as the ones I mentioned: profitability.
Profitability takes into account the products being sold the most to that client and the margins and costs related to those products. It should also consider the potential working hours that are being used internally to maintain that client (complaints, returns, timely payments, etc.). While you may have a couple of clients that place the largest orders, they might not be your most profitable just because of the ‘hidden costs’ required to maintain them.
Through data and a solid Business Intelligence setup, you can identify potentially more profitable clients that you already have which you may have been undervaluing internally. They might not place the largest orders, but they consume less of your margins. By identifying these clients, you can then prep your sales and marketing teams to more effectively go after this type of high-value client.
Accurate sales forecasts can provide immense value. They can help you answer questions about who you will be selling to, what products you will be selling, and when you will be selling them. This data can help business efficiency through optimising stock and staff levels accordingly. Inaccurate forecasting, on the other hand, can be disastrous. The latter tends to occur when the underlying data being used is either not accurate enough, or the ones doing the forecasting don’t have enough time to parse through all the raw data they have access to.
BI software takes the compiling burden away from forecasters, and allows significantly more time for analysis and strategising.
Just by pulling data into a BI system, your business will have access to fully automated, visual dashboards that can present accurate and detailed information extremely clearly and quickly. These dashboards can then be manipulated and used to simulate certain scenarios, helping your leadership prepare for potential market disruptions or new challenges.
Simplified data dashboards can also help your sales team demonstrate gains achieved by clients to other potential clients, providing a cross-selling tool that uses real-time data.
Finally, BI software can also help track what your marketing efforts are delivering. Efficiency is the key metric here. Marketing effort A may be producing higher overall revenue, but perhaps marketing effort B has a stronger ROI based on the data you’ve been able to collect and analyse on customer behaviour, for example. With this information, you can optimise marketing focus and budget spend based on what is providing the most profitability rather than sheer volume. Once that optimisation is achieved, you can begin to scale up.
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