🎓 Definition
ABC analysis is a method of analysis that divides the Customers up into five categories: A, B, C, D and E. It uses the Pareto perspective and enables to group customers from the most valuable (A segment) to the least valuable (E segment).
The ABC Customer Analysis classifies the customers of a company into A, B, C, D and E customers. This breakdown is based on the spending of the individual customers. The customers with the highest spending contribution fall into category A, the customers with the lowest spending into category E.
The goal of the ABC Customer Analysis is, on the one hand, to keep the investment costs for customers with the lowest turnover (E customers) low and on the other hand to achieve more spending in the long term through intensive support of A customers.
ABC analysis identifies the “sweet spot” where most of a Retailer’s revenue comes from with relatively little effort.
🧪 Example of ABC analysis
ABC Customer Segmentation by Total Spending
Segment A: Loyal Customers who spend the biggest value contribution per trip.
Segment B: The next top 20% of customers which generate revenue at 61%-80% by ranking go into category B.
Segment C: The middle 20% of customers which generate revenue at 41%-60% by ranking go into category C.
Segment D: The second bottom 20% of customers which generate revenue at 21%-40% by ranking go into category D.
Segment E: The last 20% of customers who generate revenue at 0%-20% by ranking go into category E.
Customers' activities and the results of a Retailers' spending on marketing where sales figures alone can't tell you everything you want to know about a customer's value or potential.
For example, customers who make weekly purchases might seem like effective investments, but if they're making small purchases, they might be less valuable than some of the other customers who make big purchases.
âť“What is ABC Analysis used for
- Targeted Marketing: By understanding which Customers are most valuable, Retailers can develop Targeted Offers and personalized promotions that are more likely to resonate with those customers and encourage repeat purchases.
- Resource Allocation: Customer segmentation based on value can help Retailers allocate their resources more effectively, focusing their marketing efforts and resources on their most valuable customers to drive growth and profitability.
- Retention: By identifying Customers who are spending less than usual, Retailers can develop retention strategies to keep them engaged and spendings, such as personalized offers, Loyalty Programs, or improved customer service.
- Pricing: It can also inform pricing strategies, allowing Retailers to adjust prices for different customer segments based on their spending patterns or willingness to pay.
🖥️ Make it happen in Ulys CRM
How to access ABC analysis in Ulys
Step 1: Select Buying Pattern under the Behaviors Menu in the Menu Bar.
Step 2: Select the Option in the Filter Menu and select the frequency and period you want to measure.
And here it is. ABC analysis will appear in the ABC Segment - By Total Spending widget.
You can change the perspective from aggregated performance to monthly evolution performance if you click on the Trend icon.
Customer List is also available to download.
