How Profit Analytics Can Help You Plug Margin Leaks

  • Many companies miss out on revenue by not fully capitalizing on existing customer relationships and failing to strategically attract new customers. Additionally, they often do not adjust their pricing to match cost increases, leaving money on the table.
  • The foundation of addressing these issues is having a clear, accurate view of business operations through data. This involves understanding and organizing all relevant data, ensuring its accuracy, and using it to identify growth opportunities.
  • RFM Analysis evaluates customer purchase behaviors to enhance loyalty and identify growth opportunities. Wallet Share Analysis examines customer behavior by product categories to find additional sales opportunities for targeted marketing. Strategic Product Pricing adjusts pricing based on outliers to optimize revenue without impacting sales volume.
  • While companies can attempt to leverage these analytics in-house, partnering with experts like ProfitOptics can be more effective. A partner can help establish a robust data foundation and accelerate the profitability enhancements.
  • ProfitOptics offers the expertise and historical success in boosting profitability, making them a valuable partner for companies looking to optimize their financial operations and stop losing money unnecessarily.

Companies – large and small – leave money on the table every day.

  • They chase new customers without focusing on growing existing customer relationships. 
  • They try to grow with their existing customers but overlook strategic opportunities to acquire new customers. 
  • They are not passing their cost increases onto customers through analogous price increases. 
  • They lack the clarity they need to uncover opportunities.
  • They aren’t taking full advantage of automation to increase efficiencies and decrease errors. 

So, what can you do to overcome these challenges so that you are maximizing revenue and minimizing expenses? It all starts with your data.

Back to Data Basics: The Foundation of Profit Analytics

The single greatest obstacle is visibility to the actual state of business operations. Without that awareness, you won’t have the foundation that you need to move forward. You are missing the traceability and auditability to be educated about and confident in your actual operations.

Start with the right foundation:

Clarify your universe of data. Take stock of what you have and where it lives, including financial, sales, customer, product, and other operational data. Understand what is relevant so you can create a full picture of your profitability. Identify gaps where opportunity exists to improve your data. Also, ensure you have access to the data. 

Evaluate the integrity of the data. Just having the data doesn’t necessarily add value. Is your data incomplete or incorrect? Are there duplicates or even triplicates in your customer data that require consolidation? Is formatting consistent? Make sure to fix all the issues at the source in your master of record so that downstream applications represent accurate information. 

After you’ve identified relevant and ensured clean data, you can now uncover areas for profitable growth. 

Plugging Leaks with Profitability Analytics

Here’s how ProfitOptics has leveraged a solid foundation of data to uncover opportunities for our clients:

Recency, Frequency and Monetary Value (RFM) Analysis

Leveraging your sales history data, RFM Analysis evaluates customer behavior in terms of purchase recency, purchase frequency, and monetary spend. Using this information, you can reward loyalty or identify where you want to grow customer relationships. You can also identify customers who are likely already lost and make a strategic decision about whether you want to invest in chasing those customers.

Wallet Share Analysis 

Using our clients’ customer segmentation rules, we evaluate customer behavior to identify which product categories each customer segment is purchasing in aggregate. By comparing the overall segment behavior with each customer’s behavior, we can identify additional sales opportunities for each customer at the category level. Those are opportunities for meaningful and targeted conversations.

Strategic Product Pricing Analytics

By identifying outliers in catalog or customer-level pricing, we can identify where money is being left on the table at opposite ends of the spectrum. While those unusually low outliers likely mean that there is an opportunity to increase your price without negatively impacting sales volume, unusually high outliers have likely already reduced your sales volume. In those instances, your margin may be stellar, but your overall volume is not meeting its potential.

Profitability Analytics: In-House or with a Partner?

So, where should you start? If you have the data, the experience, and the bandwidth – any one of which may be a challenge – you may be able to uncover these opportunities in-house. But you are likely limited in what you can do and how quickly.

A partner like ProfitOptics can evaluate the current state of your data and work with your teams to create the appropriate data foundation for next-level analytics.  Once your data is available, clean, and understood, we will build on that foundation to elevate your operations and jumpstart your profitability.  

Stop leaving money on the table. At ProfitOptics, we understand these challenges intimately and have worked with industry leaders for decades. Our solutions are designed to boost profitability even in the tightest margin scenarios. Learn more.

Levering the Power of ProfitOptics
Stop chasing the competition and put them in your rearview mirror.
Schedule a P3 session to learn how we can help you do it faster than you think.
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