B2B Marketing - The ABC analysis

Do you pay an equal attention on each of your customers? If your answer is "Yes", you are probably wrong! It is impossible to pay an equal attention on each of your custommers, and simultaneously to fillful each of their wishes - that cost too much! Probably, the big brands can allow such luxury, but don't forget that as big is one company as many clients it has. So the possibility to pay an equal attention on all of them is about zero.
Depending on the specifics of your business in most of the cases less than 50 % of the clients provide 80 % of your profits. The ABC analysis gives you the opportunity to temporary low the costs for customer service of these clients, that provide the other 20% of your profits, raising the costs for attracting potential customers
The method of determining how valuable is each of the customer for your business, is very simple:
Draw a table with two columns - in the first column add each of your clients, and in the second add the value of their purchases for the current period.Arrange the customers by starting with the one with highest value of purchases and ending to those with lowest ones. Based on that separate them in 3 groups: A, B, C.
Group A -Your "top" customers that give you a total of 50% of your profits.
Group B -Your "middle" customers that give you a total of 35% of your profits.
Group C -Your "bottom" customers that give you a total of 15% of your profits.
What is the percent of customers that bring you over 50% of your profits? In most of the cases they are less than 20%. These are your cash cows. You should keep them as the apple of your eye - they are the core of your business. DO NOT low the quality of customer service for these clients in any case! Remember the Pareto's law - 20% of efforts gives 80% of the result.  This means, that reducing the time and budget on customer service in Group C  about 5 times (from 100% now to 20% in future), the quality of service will drop down by only 20%. Even if you lose half of the customers in Group C, your profits will drop down by only 7.5 percent. It's expensive, but reasonable price to pay for releasing a 40%  budget of your Sales department. You can use this resources either to attract new customers or to increase the quality of service on Group A customers, in order to obtain even greater profits from them.
Furthermore, it is necessary to perform the ABC analysis not only in profits, but also in the volume of sales. As a result of this analysis you can define 9 groups: AA, AB, AC, BA, BB, BC, CA, CB, CC.